Jim Hoagland on NAFTA's growing importance

By Jim Hoagland
Sunday, October 25, 2009


Candidate Barack Obama made the North American Free Trade Agreement an early target. He promised union leaders to force a renegotiation of NAFTA on his terms. Back then, I thought Obama went too far. Now I think he did not go nearly far enough.

Canada, the United States and Mexico must form a more perfect economic union to deal with a lingering international financial crisis that drains the U.S. dollar of value and credibility and that fuels rising unemployment. Regional integration is a rare effective response to faltering globalization, dangerously volatile petroleum markets, and U.S. economic and military overextension.

So, yes, Mr. President, renegotiate NAFTA. But move its trade liberalization successes forward into a broad regional pact that more tightly links North America's energy resources, currencies, security policies, and other economic and political assets. Do not move the three nations backward -- toward protectionism -- as you originally proposed.

I visited Canada this month to explore this theme after hearing much about the growing importance of regional integration from officials in Russia and in Western Europe. I had heard Prime Minister Vladimir Putin express hope that Russia's ruble would soon become one of five or six regional reserve currencies that would in effect replace the U.S. dollar as the primary international means of exchange.

Putin also praised a German government decision in September to push General Motors to accept a Russian-backed bid for its Opel subsidiary. This was a "strategic" move toward establishing an eastward-looking regional marketplace, Putin suggested in remarks to the Valdai Discussion Club.

French and British government ministers told me in their capitals that only a rejuvenated European Union can prevent the United States and China from forming a G-2 to dominate international economic policymaking. And the new Japanese government is pushing the notion of an East Asian community.

North America lags behind conceptually in addressing regionalization as the next important global economic cycle, even as NAFTA has led to major changes on the ground. No surprise: Both Canada and Mexico routinely emphasize their differences with and independence from the behemoth on their borders, and U.S. citizens have been proud of their God-given right to be indifferent to their immediate neighbors.

But that is changing, for good reasons and some not-so-good ones, as I learned at the annual North American Forum meeting here. This group of Canadian, American and Mexican entrepreneurs, politicians and academic experts has been working quietly for five years to identify and advance regional understanding, with former secretary of state George P. Shultz guiding the U.S. contribution.

In their initial meetings, the Mexican representatives shied away from being identified as "North Americans." That was certainly not the case this year. And Canadian officials who once expressed fears of diluting their special links to the United States by bringing Mexico into security and economic discussions now welcome the triangular dialogue.

What accounts for this psychological change, which has affected U.S. delegates as well? "Events" is as good an answer as any. Certainly, the shooting drug war in Mexico that is fueled by U.S. cash and guns, the threat of international terrorism, and U.S. addiction to foreign borrowing and foreign oil, which is reintroducing transportation costs as a significant factor in international trade, have drawn bright lines under the need to look closer to home for answers.

After 20 years, globalization's push-and-pull of goods, capital, technology, people and ideas across borders has been forced to pause, and it is far from certain it will ever again resume that frantic, far-flung march.

"If Mexico has swine flu, we know the U.S. and Canada are also going to be exposed to it," said one Canadian official. "If the U.S. is in the sights of terrorists, Canada is in the sights of terrorists."

Such generalized sentiments were supported by reams of statistics about Canada's significant shale oil deposits; about commercial traffic across the Ambassador Bridge (linking Detroit and Windsor, Ontario) equaling all U.S. exports to Japan; about the 400 million crossings, 1 million arrests and 500 deaths that occur annually on the Mexican-U.S. border.

It was eye- and ear-opening to this foreign reporter who has spent more time in, and studying about, Guinea-Bissau or the Czech Republic than Canada or Mexico. But an aging leopard can change his spots when the times demand.

So can young presidents, I assume. Once in office, Obama quickly said it was not time to mess with NAFTA. Look again, Mr. President. It is time to think about a super-NAFTA.


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