CSIS Simon Chair Blog
June 18, 2010
by Christopher Sands
North America’s trade infrastructure is not keeping pace with continental trade, and as a result, the United States and its neighbors are at a growing competitive disadvantage to rival economies in Asia and Europe.
At the 2010 annual meeting of the North American Super Corridor Coalition [www.nascocorridor.com] in Des Moines, Iowa this week, I had the chance to meet with business and community leaders who have coalesced around the need for better linkages between central Mexico and Manitoba running through the heartland of the United States like a parallel Mississippi River made of concrete and steel. They are concerned that economic opportunities that could help boost the NAFTA partners out of recession are being lost through a failure of vision and leadership in all three countries.
Some 70 percent of North American trade – that is, trade between Canada, Mexico and the United States – is transported by land, principally by truck and rail, from bulk commodities to retail goods to automobiles. This figure does not account for the additional value of energy trade moved by pipelines and powerlines across our borders.
It is not a surprise that Canadians and Mexicans are concerned about North American transportation infrastructure. For each country, the United States is their largest export market, accounting for roughly three-quarters of their exports. And while governments in Canada and Mexico have invested billions in recent years to improve infrastructure connecting to the United States, by virtue of its central location, Canadians and Mexicans must rely on U.S. investments in infrastructure to complete the connection.
That does not suggest that U.S. investments in infrastructure, both public and private and sometimes both, are for the benefit of Canadians and Mexicans. In fact, Canada and Mexico are the largest export markets for U.S. companies as well, and Canadians and Mexicans like U.S. products and brands. China has been growing rapidly as a U.S. trading partner, but the relationship flows mainly in one direction: U.S. consumers buy Chinese products, but Chinese consumers do not buy much from the United States.
In his 2010 State of the Union Address [http://www.whitehouse.gov/the-press-office/remarks-president-state-union-address] President Obama set an ambitious goal: to double U.S. exports over 5 years and to create 2 million new U.S. jobs in the process. Where better to start than with the countries that have a high propensity to buy American?
Yet the challenge for U.S. companies will not only be winning new sales in Canada and Mexico, but getting their products to customers there in a timely manner. And that is where groups like the North American Super Corridor Coalition come in.
Planning, designing, siting and permitting new infrastructure is a long process. Highways, including new lanes on existing interstates, are important. North-south rail trackage, already in short supply, is crucial and expensive – particularly in more densely populated areas where grade separations are required. Airport facilities for air cargo as well as passenger flights are necessary to support the shipment of small packages and the movement of individuals involved in the growing service trade among the three North American countries: including everything from consulting engineers to architects, laboratory researchers and software programmers who need to meet clients and visit job sites.
These types of infrastructure are interrelated, and interconnected by intermodal facilities designed to transfer goods quickly from rail to truck, from plane to rail, and so forth. Across the continent, intermodal inland ports are being built to facilitate traffic and cut shipping costs and times. The Kansas City Smart Port, CentrePort in Winnipeg, and Interpuerto Monterrey are already operational, as just three examples. Intermodal inland ports, like intermodal seaports, have become popular tools for economic development authorities across North America because they can become a hub of economic activity and jobs. Goods stuck in traffic or stored on a loading dock are unproductive; by keeping them in motion and not sitting idle, a company’s inventories are reduced and its productivity is improved – that is the insight that led companies around the world to adopt just-in-time (JIT) logistics in recent years.
A similar concept is on the horizon in energy infrastructure. The electrical transmission grid that connects generators to consumers in all three countries is undergoing new investment to expand capacity and to allow access to the grid for alternative generation. Wind, tidal and solar energy can fluctuate and the grid must be prepared to handle variable supplies while sending commercial and household consumers a steady flow of electricity. Technology to upgrade electrical transmission systems into a “smart grid” will allow the system to act as a hub for electricity delivered by a variety of modes to reach consumers.
Infrastructure investments for clean energy and transportation were a key part of President Obama’s 2010 State of the Union Address, too. U.S Transportation Secretary Ray LaHood spoke at the North American Super Corridor Coalition conference and emphasized the importance of high-speed passenger rail between cities along the corridor, and light rail for passengers within major metropolitan areas to reduce congestion and pollution. LaHood made rail projects the priority for U.S. Department of Transportation grants using stimulus funds from the American Recovery and Reinvestment Act of 2009.
At Guadalajara in August of 2009, President Obama met with Mexican President Felipe Calderón and Canadian Prime Minister Stephen Harper. Together, the three leaders pledged to coordinate federal economic stimulus efforts and infrastructure investments. Stimulus coordination was hampered by a squabble over “Buy American” provisions in the U.S. stimulus legislation, and the extent of coordination of U.S. infrastructure investment was an emphasis on continuing the upgrade of border infrastructure, including giving a push to important projects such as the Detroit River International Crossing.
What is missing in all of this is any kind of transportation vision to enhance North American competitiveness. Improving the capacity and efficiency of border gateways is crucial, but the transportation corridors that connect these gateways with the interior economies of the three countries have not been given adequate priority. Intermodal hubs are emerging as important logistics resources for North American supply chains, but these receive little attention when the three federal governments plan for the future. Additional energy infrastructure is sorely needed, but has been slow to develop due to state/provincial and local permitting processes.
As of this writing, it is unclear whether or not the three North American leaders will have a joint summit in 2010 – it is Canada’s turn to host, and yet planning for the G-8 and G-20 meetings that are also being held in Canada later this month has eclipsed the North American summit, and none is scheduled. 2010 could be the first year since 2005 that the leaders have not met, and the agenda for coordination and cooperation set out in Guadalajara risks being lost amidst competing domestic and international priorities.
How then can we expect the three countries to focus on enhancing regional competitiveness through much-needed infrastructure investments if they lack a continental vision and don’t meet to forge one?
Listening to the speakers in Des Moines this week, I am convinced that it is time for the three leaders to consider the establishment of a North American Infrastructure Planning Commission. It could be modeled on the highly-respected and successful U.S.-Canada International Joint Commission (IJC), which for the last century has aided the two governments to develop policy solutions for shared environmental challenges. The IJC has three members from each country, and does not act without a reference from both of the federal governments, who must agree to assign a problem to the commission. Once engaged, the IJC will commission new scientific studies and review the extant literature to define and assess specific problems and develop recommended solutions. The IJC process includes extensive local consultations, with hearings in large and small communities that draw university professors, specialists from nongovernmental organizations, public sector regulators, private sector experts and concerned citizens who testify about the problem and the proposed solutions.
The findings and recommendations of the IJC are sent to the executive agencies and legislatures in Washington and Ottawa, but are not binding. What makes the IJC so valuable is that it can sort through the competing interests and present a scientifically sound proposal or set of options for moving forward. It then enters the political sphere for debate, decision and eventually action – yet the deliberative and substantive process of the IJC makes the political debate less contentious by identifying the outlines of a consensus among the stakeholders about how to address a critical shared problem.
If the three leaders created a North American Infrastructure Planning Commission at their next meeting, they would be able to subsequently undertake a serious study of the transportation needs of the continental economy, overcoming the absence of shared vision that persists today and considering the views of civil engineers, energy specialists, firms and NGOs – as well as community leaders hoping to attract investment and employment.
The participants in the North American Super Corridor Coalition often wince when someone makes reference to the “NAFTA Superhighway,” a proposal developed by a group in Texas for a multilane highway with rail, pipelines and powerlines running in the central median. It was a Texas-sized idea that went nowhere, but became a staple of critics of NAFTA and North American cooperation including Congressman and former presidential candidate Ron Paul. The stigma of the NAFTA Superhighway is raised to accuse those who argue for infrastructure investments to link the U.S., Canadian and Mexican markets of plotting something sinister.
It was evident in Des Moines that there is nothing sinister going on among the ordinary citizens, local businesses, and community leaders who have recognized the need for better infrastructure to connect the heartland to America’s largest export markets. Taking President Obama’s export vision seriously, they ask only for the tools to achieve it.
They have the vision. It is one of many competing proposals. A North American Infrastructure Planning Commission could help President Obama and his counterparts in Canada and Mexico to act on their pledge to coordinate investments in stimulus and infrastructure beyond the border gateways to strengthen continental trade corridors in a manner transparent enough to refute even the most paranoid conspiracist.
Unless something is done to address the trade infrastructure needs of North America, Asia and Europe will leave our businesses and workers behind on the road to economic recovery and competitiveness.
Christopher Sands is a Senior Fellow at Hudson Institute.
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