Shine NAFTA’s Light on the Darker Corners

Like many of his predecessors, President Bush wisely decided that his first meetings with foreign leaders should be with our two neighbors--Canadian Prime Minister Jean Chretien, who he met last week, and Mexican President Vicente Fox, who he meets on Friday. The meetings should lay the foundation for a North American community that corrects the mistakes and omissions of NAFTA.

The North American Free Trade Agreement, which began six years ago, succeeded in what it was designed to do. It reduced trade barriers, and today the United States exports nearly four times more to our two neighbors than to Japan and China and 40% more than to the 15-nation European Union. U.S. firms have become continental and more competitive; our continent, more integrated.

NAFTA’s failure has come from what it omitted. The peso crisis of 1995, which reduced Mexico’s economy by 6% and left the United States disenchanted with NAFTA, occurred because we had no institutional capacity to anticipate problems or coordinate policy. Duplicating bureaucracies and weak infrastructure at both borders have raised the cost of doing business.

All three leaders, who won elections in 2000, should begin by agreeing on principles to guide the relationship and the goals North America should pursue. Without such an understanding, the partnership implicit in NAFTA’s spirit will continue to be sabotaged by the U.S. penchant for unilateralism and the Canadian and Mexican preference for bilateralism. The United States angers its neighbors when it acts on issues like drug trafficking without consulting them, and our neighbors miss an important opportunity when each of them deals with Washington without the other.

The three North American countries should learn from the Continent’s experiment on integration. The European Union’s mistake was to over-bureaucratize. NAFTA’s was the opposite--it has no serious institutions. Chretien, Bush and Fox should each appoint five distinguished individuals outside of government to lead a North American Commission, or NAC. Unlike the European Commission--the EU’s executive body--which is bureaucratic and executive, the NAC would be lean and advisory. Its mandate would be to define an agenda for the summit meetings of the three leaders and to provide a continental perspective, offering plans and options for North American infrastructure and transportation, uniform rules for customs and immigration and trilateral approaches to handle integration’s dark side (drugs, illegal arms sales, etc.) without impeding the legitimate flow of people and goods.

Of the three leaders, Mexico’s Fox has been the boldest in proposing a common market within 20 years. Bush and Chretien have been cautious, but there is evidence that the public’s mind is open to such an idea.

The three leaders should agree to raise the lagging regions of North America, particularly the poorest areas of Mexico. The EU provides loans that represent 2% to 4% of the gross domestic product of the four poorest countries to improve their infrastructure and education. In just 15 years, these funds, good economic policies and the single market significantly reduced the disparities between the rich and poor countries of the EU. It would be hard to find a better investment in North America.

This is an auspicious moment for the three leaders to step beyond the nasty disputes on drugs, immigration or softwood lumber and agree to a set of goals for all North Americans. Such an initiative would not only be good for all North Americans, it would also illuminate a path for other regions to emulate.