North American Regional Meeting
Toronto, Ontario - Nov. 1-2, 2002
Opening Session

THE FUTURE OF NORTH AMERICAN INTEGRATION:
A summary of three perspectives

Three papers (download here) have been prepared by authors from Canada (Wendy Dobson), Mexico (Luis Rubio) and the United States (Robert Pastor) to provide a framework for discussion at the opening session of our November 1-2 meeting. None of the papers purports to represent the positions of the three governments or even a sense of the debate on the issue of integration within each of the countries. Nonetheless, in their own way, each represents the distinct style of each country while offering personal ideas on ways to deepen integration among the three. The authors encourage members to read the three papers to get a flavor of their different arguments, but they have summarized these perspectives in this short paper and pose questions that Commissioners may wish to address in their discussions.

Starting Points
During the past two decades, the three North American economies have become increasingly integrated. Rising trade and investment flows were both policy-driven by the two free trade agreements (Canada-US FTA implemented in 1989 and NAFTA in 1994) and by market forces. Today, this deeper integration can be measured in part by the fact that the United States exports nearly forty percent more to its two neighbors than to the 15-nation European Union. But there is also marked asymmetry: the smaller Mexican and Canadian economies now rely on the US market for nearly 90 percent of their exports.

This asymmetric interdependence makes access to the US market a significant issue in the smaller economies. The September 11 attacks and border closings have heightened this concern as US preoccupations shifted from the promise of globalization to the vulnerability of openness.

The three authors agree that deeper economic integration is necessary and desirable. It is not a matter of whether, but how, to proceed.

Deeper Integration - How to proceed?
Their differing starting points, however, lead to differential emphasis on how to proceed. Dobson and Rubio provide two pragmatic approaches to deepen NAFTA, but short of a customs union or a common market that would require unacceptable infringement of national sovereignty. Pastor proposes a longer-term perspective with new institutions to forge North American approaches to continental problems and opportunities.

Dobson observes that a common project to deepen economic integration will depend on either or both Canadians and Mexicans exercising their sovereignty by taking the initiative. Canadians, she suggests, should take a bilateral approach, including Mexico when it makes sense to do so.

She proposes a shared goal of a secure North American economic space. This goal should be sought in ways that respect national sovereignty, using as a platform the unprecedented level of cooperation within and across governments that underpins the Smart Border Plan to produce a four-pillar package:

… A security initiative that would focus on creating an efficient seamless border for low risk cargo and NAFTA travelers and NAFTA visas for retirees; agreement on common procedures and shared intelligence to handle third country migrants and inspect third country cargo;
… A natural resources area based on the premise that Middle East uncertainty or conflict will shift US focus to North American energy security. Create this area by changing rules of the game relying more heavily, for example, on mutual recognition of domestic regulatory and environmental regimes in energy, but also in forest products and agriculture.
… Promote economic efficiency through greater labor mobility (by broadening eligibility of the NAFTA TN visa) and by creating a common competition policy committed to in NAFTA;
… Canada to make a specialized contribution to North American defense.

Rubio proposes to extend the NAFTA rules of the game for market-based investment and trade to other regional economic activity, in ways that preserve sovereignty through common policies and standards and new institutions, if necessary, in five areas:

… Economic measures including a common competition policy, a North American stability pact and stabilization fund, and a task force to develop a framework for common policy approaches in agriculture, industry and regional development.
… Security measures that apply the Canada-US border plan to the southern border; create a North American police force; upgrade customs houses better to enforce rules of origin; create common migration controls through common standards and IT infrastructure; and enhance drug enforcement capabilities
… Environmental cooperation that accelerates the convergence in standards initiated by NAFTA through added funding for Mexican cleanup and water supplies, technical assistance to Mexican regulators and water management, plus programs to improve air quality on the Mexican-US border.
… Greater cross-border mobility of labor facilitated by enhanced visa arrangements and staged market-based arrangements to regulate border crossings.
… Energy market integration through expanded use of performance clauses in service contracts for oil exploration and production; more bilateral exchange in gas and electricity; and a North American plan for energy integration involving infrastructure and resources development.

Pastor proposes several North American institutions to advance a continental vision and propose practical policies toward shared problems:

… A lean, advisory North American Commission that would gather data and develop proposals to help leaders think continentally. The Commission could propose, for example, a continental plan for transportation and infrastructure to reduce significantly transaction costs. It could re-examine the softwood lumber problem in terms of harmonizing regulatory polices of the forestry sector.
… A North American parliamentary group to reduce misunderstanding among legislators of the three countries and promote common policies.
… A Permanent Court on Trade and Investment to replace the ad hoc NAFTA dispute settlement panels and thus eliminate potential conflicts of interest.
… A North American Development Fund to reduce the development gap that separates Mexico from its two northern neighbors. Adapting the experience of the EU, such a fund would invest in infrastructure and education in Mexico, and in exchange for significant aid, Mexico would increase its own contribution by genuine fiscal reform - reducing the gap in tax rates with its neighbors.
… A single North American Customs and Immigration Service, trained at a single school. North American passports for frequent travelers.
… A customs union and serious consideration of a common currency.
… Centers for North American Studies with support by the three governments.

In summary the three approaches, while based on differing premises, nevertheless converge on a common project to deepen North American integration through pragmatic short run initiatives and long run proposals shaped around common institutions.

Is there public support for such initiatives? Dobson notes that some surveys indicate that as economic integration deepens, measures of national identity are rising in North America. For example, Canadians prefer the Canadian health care system and Canadian gun laws, but they would like the strength of the US dollar, US innovative zeal and its prosperity. Pastor argues that public opinion surveys indicate that people in the three countries are quite pragmatic and are beginning to think of themselves as part of a larger community. But since governments tend to stress the differences, there is less discussion of what we have in common or what we should do together. In short, there is a common desire for deeper integration to improve standards of living and the environment, provided that their culture was not threatened and their national identity was not diluted.

Questions for Commissioners
1. What do we mean by North American integration?
2. What are the attitudes to sovereignty in the three countries?
3. Are there sequences of change that make sense? How much emphasis should be placed on improving the "rules of the game" relative to developing common institutions?
4. What are the alternatives to deeper integration put forward in the three countries?
5. Are there coherent views of the past and the future of North America? If there are a variety of views, what are they?
6. Are existing institutions adequate to support integration?
7. Is it possible to pursue deeper integration among three partners when such a wide developmental gap exists among them? What can or should be done about it?
8. Should we proceed on the basis of a grand vision or by a series of incremental steps?
9. In the light of Commissioners' traditional focus on global issues and problems, what emphasis do they wish to give to North American integration?

The 2002 North American Regional Meeting Background Papers by Wendy Dobson, Luis Rubio and Dr. Robert Pastor are in Adobe Acrobat Portable Document Format (PDF).

To read a PDF file, you must have the Adobe Acrobat Reader. To download a free copy see "Steps to Downloading the Free Acrobat Reader" at Adobe's Web site.

THE FUTURE OF NORTH AMERICAN INTEGRATION (PDF 96kb/7pp)
Background Paper for The Trilateral Commission
Toronto, Ontario, Canada
November 1-2, 2002
By Wendy Dobson