North American Trade Vision

By Michael R. Czinkota

When the leaders of Mexico, Canada and the United States met for a summit in Mexico last weekend, the agenda included a largely predictable list of topics ranging from the presidency of Honduras to swine flu.

In order to take on a defining dimension, however, this regular summit must, in the future, focus on the creation of a regional trade policy.

At the meeting, Mexican President Felipe Calderon protested the U.S. administration's failure to honor its North American Free Trade Agreement (NAFTA) commitment (now 14 years overdue) and permit Mexican trucks to operate on U.S. highways.

Canadian Prime Minister Stephen Harper pressed U.S. President Barack Obama on ``Buy America'' provisions in the U.S. stimulus package that discriminate against non-U.S. suppliers and violate a host of U.S. international commitments ― from the Word Trade Organization (WTO) to the NAFTA.

These are certainly important issues, but what really matters for the future is whether or not there will be a new vision and consensus for a North American trade policy.

The past decades have seen many bilateral agreements, and perhaps a bit of neglect of those closest to and most interdependent with each other. Increasingly, however, the problems to be addressed exceed individual country capabilities.

Each of the three governments has important plans. The goals range from improved energy independence, leadership in green technologies, migration and drug control, and health care reform. All of these issues require close cooperation between the North American partners.

A regional consensus must develop an overarching focus on trade policy and, specifically, how trade liberalization and open markets can build a new kind of competitiveness. In the past, any definition of competitiveness depended on whether the perspective taken was that of government, the firm, or the individual.

Typically, the government was mainly concerned about tax revenue, companies worried about profitability, and individuals focused on their jobs and wages. Globalization and factor mobility resulted eventually in totally different and even conflicting competitiveness outcomes for each party.

That is why today, we need a new definition of competitiveness which reflects the overlapping interests of government, firms and workers, and also includes the concerns and needs of one's neighbors.

Even though such trans-border perspective may initially be difficult to accept, we need to recognize that geographic proximity affects prices, trust, risk and prosperity. If several houses in a neighborhood go up for public auction, prices of all other houses suffer.

Collaboration creates jobs, promotes energy independence and environmental sustainability, and makes use of the economic power of the world's largest regional market. Proximity matters.

It is time to articulate a new vision of global competitiveness based on a North American platform. Major elements should include:

• A credible commitment to reject protectionist measures. One step in this direction would be a solution to unjustified restrictions against the Mexican trucking industry and to ``Buy American" issues.

It is time to overcome political parochialism and accept a definition of ``local'' which is inclusive of one's neighbors. Complementary human, capital and technological resources should deepen economic integration, not raise barriers.

• Recognition of the critical role that energy plays in the collective competitiveness through an action plan which eliminates distribution inefficiencies, and creates a more effective integration of the North American energy grid.

• A plan for a North American-wide effort for clean energy development, a common approach to carbon offsets, and the use of energy leadership as a key joint competitive tool.

• Joint leadership in the creation and enforcement of global standards for corporate veracity, public trust, and the decision of what's for sale and what shouldn't be.

• An acknowledgement that migration flows and economic success are linked. Doing so will re-calibrate return on investment calculations for investments into economic development and security.

• Options for health care treatment for patients on a North American basis. We need to maintain quality of care standards while giving proper consideration to variations in cost structure within the region.

Though one does not want to see the emergence of unregulated and unrestricted global medical tourism, it is important to make use of existing regional health technology assets and capabilities.

Competitiveness issues have grown in size. We need a cluster of collaboration that enables solutions which are reflective of North American needs, accepted by the local culture, and affordable with regional resources. A tie-in between North American neighbors will broaden the horizon of possible improvements in society.

Michael R. Czinkota researches international business and marketing at Georgetown University and the University of Birmingham (U.K.). He served in trade policy positions in the Ronald Reagan and George H.W. Bush administrations and can be reached at czinkotm@georgetown.edu.