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Twenty Years After NAFTA, Obama Must Lead In the Toluca Two Step

Christopher Sands

Twenty years after NAFTA took effect, the United States, Canada and Mexico share more than $1 trillion in trade along tightly integrated supply chains fueled by a dynamic sharing of ideas, research and innovation. Supporting the regional economy are more than 320 million legal border crossings each year.

Governing these cross border flows is complicated under NAFTA. Without delegating authority to North American institutions, NAFTA left the three federal governments to cooperate and coordinate regulation and inspection to make it work.

At the North American Leaders’ Summit in Toluca, Mexico on February 19th, U.S. President Barack Obama and Canadian Prime Minister Stephen Harper were hosted by Mexican President Enrique Peña Nieto. Cooperation and coordination was in evidence, and rightly praised by all three leaders. But something was missing.

Shortly after NAFTA’s tenth anniversary, George W, Bush inaugurated the North American Leaders Summits in 2005 at his ranch in Texas. There, the leaders agreed to a Security and Prosperity Partnership (SPP) comprised of 20 working groups made up of officials from the three countries to address these governance challenges. It was an unwieldy process that sparked fears of secret undertakings and in the end made limited progress.

Obama attended his first leaders’ summit in 2009 in Guadalajara. He and his counterparts scrapped the SPP in favor of a more limited to-do list of ten areas of cooperation. This soon proved insufficient, and the United States in 2010 and 2011 established parallel U.S.-Canadian and U.S.-Mexican working groups on border, regulatory and clean energy cooperation. Reviewing the modest, incremental progress of these groups, and devising ways to get them to do more, was the main agenda in Toluca.

And yet Mexico and Canada wanted more than this from Toluca. They hoped that Obama would signal a way forward on U.S. immigration reform, the Keystone pipeline, and trade promotion authority.

Peña Nieto is concerned about the fate of Obama’s immigration reform plans and what they mean for Mexican citizens in the United States. House Republicans have cooled on moving the legislation this year citing the president’s partisan posturing on the issue.

Harper has called for a decision – yes or no – on the Keystone XL pipeline. Five years after the project was launched, President Obama continues to delay his decision on a presidential permit for the segment of the pipeline that crosses the border. The White House says that it is working toward making a final decision, but it is also milking the issue with environmentalists to help Democrats in 2014 and beyond. A decision by a Nebraska court on the day of the summit re-opened that state’s debate about the pipeline route, allowing Obama more time to stall while blaming the Republican governor of Nebraska for the delay.

Obama’s fellow Democrats in Congress, rather than the Republicans, are the source of concern for Canada and Mexico regarding trade promotion authority. Senate Majority Leader Harry Reid poured cold water on the president’s State of the Union request for congressional authority to negotiate the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). Canada and Mexico are participants in the TPP, and have already negotiated separate deals with the European Union.

Peña Nieto and Harper know that access to key European and Asian markets is key for export growth – preparing for this competition is the reason behind the efforts to improve border, regulatory and clean energy cooperation in North America now. If Congress won’t grant Obama trade promotion authority, Canada and Mexico will be left to seek access to global markets independently, and making concessions in North American cooperation talks a low priority for Ottawa and Mexico City.

At Toluca, the leaders lauded positive steps toward North American prosperity: solid growth in regional trade and investment, improving economic performance in all three countries, and promising advances in cooperation by the three federal governments.

Yet the Toluca Summit revealed what many suspected about North America: the region cannot address the needs of the continental economy without committed U.S. leadership. As a weakening second term president grapples with a wildly unpopular Congress, such leadership was nowhere to be found.

Twenty years ago, NAFTA almost failed to win ratification in the United States under similar circumstances of bitter partisanship. Unless Washington can overcome bitter its divisions, 500 million Canadians, Mexicans and Americans will miss out on the opportunity to thrive in a global economy that NAFTA – and a more impressive group of U.S. leaders – delivered a generation ago.

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