There Is No "Beyond NAFTA"
In 1994, NAFTA represented as much integration as the needs and politics of its three member countries could afford. Twenty years later, current politics are less amenable than they were to deeper integration and the needs substantially fewer. Treaties are tougher to undo than to create and NAFTA certainly won't disappear. But a sequel – better, bigger, deeper – will simply not happen. We are back to bilateral agendas and we should focus on them rather than seeking unworkable integration.
North American integration had two pillars: the auto industry, with truly North American production chains and the dependence of the United States on its two neighbours for its energy. Only the first was really a trilateral agenda and as the industry is now reconsolidating along a U.S.-Mexico axis, with Canada an increasingly marginal partner, a core rationale for regional integration is withering. Energy proved crucial to the Canada-U.S. deal, but was left out of NAFTA because of nationalist qualms in Mexico. Still, the United States’ unquenchable thirst for energy as well as the reserves and investment needs of its neighbours created a sense of regional interdependence. Now, this second pillar is crumbling as shale oil and gas transform the United States into a self-sufficient energy behemoth.
Twenty years ago, there was also no “China factor.” Yes "Asia-Pacific" was seen as the world's forthcoming engine of growth, but nobody could sensibly bet the house on Asian markets or see them as a credible alternative to America's. How things have changed. China's share of Canada's trade is increasing as fast as the United States’ share is declining. The simple fact that Obama could dither for so long on Keystone shows how weak Canada's hand has become on what used to be the central strategic vulnerability of its neighbour. Obviously, killing Keystone will precipitate Canada's turn to Asia, but approving it would do little to alter the fundamentals: the two countries' economies are drifting apart and soon, the old joke about Canada getting the flu each time the United States coughs will need to be "chinezed."
Mexico has been moving in the same direction, as China has become the country's second largest trade partner. The movement, however, is much slower and likely to be less radical than for Canada. The degree of economic, social and cultural integration of the U.S.-Mexico border area, now reinforced by the redeployment of the auto-industry, has created a level of interdependence between the Mexican and American economies that has never existed between Canada and the United States.
With trilateral stakes so low, there is no logical reason for current administrations to spend scarce political capital on deeper integration and, surprise, surprise, they don't. Meanwhile, bilateral agendas pile up: infrastructure, security, environment, water, migration, visas, standards, and so on. The best way to address those challenges is to frame them from the outset as bilateral issues.
In that new landscape, the United States remains Canada's most important partner: the two countries’ economies are still deeply enmeshed, their security profoundly intertwined and there continues to be an incomparable ease and natural quality to personal, business and, yes, official relationships across the border. A sound relationship with the United States is especially important to Canada’s global bargaining position now that its increasingly resource-dependent economy is hooked – both literally and figuratively – on China. Mexico also matters, and it is simply ridiculous that some progress on travel restrictions had to wait for a trilateral meeting to take place. As a significant trade partner, an important link in the value chains of major Canadian companies, and a society with which increasingly close links have been built over the years, it merits more attention from "the Centre" than it has received. The nonchalance with which Mexican qualms have been treated in recent years simply do not mesh with the importance of that country for Canada, with its growing weight in the world and with the influence it wages in the Americas and in the world.
Future attention to both the United States and Mexico should be freed from the trilateral shackles of NAFTA. Put simply, continentalism and North American integration made lots of sense a generation ago and clever political leaders seized the day. The very same ideas have now become blinders. We should drop them.