Keep NAFTA’s momentum going

President Obama, after wrapping up a summit on economic cooperation with Canadian Prime Minister Stephen Harper and Mexico’s President Enrique Peña Nieto.
President Obama, after wrapping up a summit on economic cooperation with Canadian Prime Minister Stephen Harper and Mexico’s President Enrique Peña Nieto.

Nearly two decades after Canada, Mexico and the United States created the world’s largest free-trade zone with NAFTA, there are two simple, overarching testimonies to its resounding success.

First, much of the rest of the world has scrambled to craft and emulate what we did in North America. They see a good thing and want it for themselves. Second, the past two decades have served as a catapult of momentum for the three NAFTA nations to surge forward and lead the world as they become more economically integrated, wily and potent.

In short, we are just getting started. The just-completed North American Leaders Summit with President Obama, Canadian Prime Minister Stephen Harper and Mexican President Enrique Peña Nieto was the perfect showcase to fuel this momentum and give it revitalized direction.

As Mexican Foreign Secretary Jose Antonio Meade said in January at the North American Ministerial meeting, “We do not think it is necessary to reopen NAFTA, but we think we have to build on it to construct and revitalize the idea of a dynamic North America.”

That is exactly on point. Reforms taken in all three nations — most recently Mexico’s newly passed energy reform allowing private investment in the country’s oil and gas sectors — have put the partnership on the path to make the continent energy independent as well.

Each country has had its turn at reform and enhancement across the spectrum — and that has added to the NAFTA punch. For example, in Mexico, in just over a year, several structural reforms were passed under the leadership of its new government, which reached a landmark political agreement with the main opposition parties.

Major reform was achieved in labor markets, education, telecommunications, economic competition, banking, tax, government, transparency and energy. Quite simply, 20 years after NAFTA took hold, it is working and it is succeeding.

Not all has been perfect. Outsourcing and lower wages have hurt some parts of the U.S. economy, and some of Mexico’s rural industries have been destabilized. Yet these aberrations are small issues that can be adjusted as we infuse new opportunities to build on NAFTA’s momentum.

Numbers underscore some of the more obvious successes. For example, according to the Congressional Research Service and others:

• U.S. trade with its NAFTA partners has more than tripled since the agreement took effect.

• In 2011, trilateral trade among NAFTA partners reached the $1-trillion threshold.

• Between 1993 and 2012, total U.S. trade with Mexico increased by 506 percent

• In 2012, Canada was the leading market for U.S. exports, while Mexico ranked second.

• Today, Mexico produces more manufactures than the rest of Latin America taken together. Overall, its exports are worth more than those of the entire region.

That said, the future of North America has much more to do with the realities of today and the future than the simple math of the past decades. The formation of a single, integrated North American manufacturing platform has tied together the economic fates of each NAFTA partner while the rise of China and other economies around the world has raised the level of competition faced by companies in the United States, Mexico and Canada. A new strategy must reflect this new reality.

Last year, business leaders from across North America released a set of policy recommendations designed to increase continental economic integration and competitiveness. They called for greater action in the areas of intelligent border systems, regulatory standards and practices, as well as North American energy security and sustainability. Others have cited the need for development of human capital.

We are poised to heed those recommendations and act decisively. North America is in the midst of an energy revolution, which promises to drive economic growth and keep electricity prices (an important input for many manufacturers) low for years to come. High levels of human capital, strong intellectual property protection, a relatively robust web of transportation infrastructure, and the presence of three stable democratic governments are among the other strengths of the region.

A window of opportunity is rare. One is open for us now. We need to move through it.

Cris Arcos is a former U.S. ambassador to Honduras, a fellow of the Inter-American Dialogue and a former Assistant Secretary of State and Homeland Security.

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