NAFTA SUMMIT

The top leaders of the U.S., Canada and Mexico hold a trilateral North American Leaders’ Summit at the White House today to thrash out conflicts in energy and regulations to boost economic competitiveness and increase jobs.

President Barack Obama hosts Prime Minister Stephen Harper of Canada and President Felipe Calderon of Mexico for talks on economic growth and competitiveness, citizen security against terrorism, energy and climate change, according to the White House.

“There are no relationships in the world more important than our relationships with Mexico and Canada from an economic and security standpoint,” said Robert A. Pastor, director of the Center for North American Studies at American University in Washington. “They are our two largest markets by far.”

Canada and Mexico, partners with the U.S. in the 1994 North American Free Trade Agreement, or Nafta, account for 19 percent and 13 percent, respectively, of all goods sold abroad last year, according to U.S. Census Bureau data. Put another way, sales to those two markets, at $479 billion, are more than four times the U.S. exports to China (TBEXCHNA).

“These are three of the largest economies in the world, three countries that now increasingly see things eye-to-eye,” said Steve Johnson, director of the Americas program at the Center for Strategic and International Studies, a Washington policy research group. “Economic competitiveness could be the one thing that could sort of be the deliverable.”

Keystone Pipeline

TransCanada Corp. (TRP)’s planned $7 billion Keystone XL pipeline may also come up during the day-long summit, as well as a U.S.- proposed Trans-Pacific Partnership trade deal, which currently excludes Canada and Mexico, analysts said.

Obama has scheduled two hours of closed-door talks with Calderon and Harper, stretching through a working lunch and concluding with a press conference in the White House Rose Garden at 1:15 p.m. Washington time.

The three leaders last met for the North American Summit in Mexico in 2009. A meeting set for last November in Hawaii was postponed after a helicopter crash took the life of Francisco Blake Mora, Mexico’s interior minister and a key presidential confidant. Calderon announced yesterday that former President Miguel de la Madrid had died at age 77.

The summit may yield more progress on two separate studies aimed at harmonizing border-crossing issues that hamper the movement of commerce, analysts said. Increased “speed bumps” at borders that resulted from the Sept. 11 terrorist attacks has eroded many of the trade benefits from Nafta.

After Sept. 11

“In many ways, North American economic integration peaked in 2001,” said Pastor, former national security adviser for Latin America during the Carter administration. After that, trade slowed, manufacturing jobs shrunk and illegal migration and drug violence rose.

“None of the countries can really address effectively” railroad and truck-crossing restrictions “without a new form of collaboration with each other,” Pastor said.

The fastest way “to create jobs and double exports is for the three governments to work together on continental plans for transportation, education and infrastructure” Pastor wrote in the Miami Herald on Nov. 15.

The trilateral meeting may produce further steps toward a “seamless market,” a transcontinental infrastructure of eased regulatory burdens governing the flow of commerce among the three nations, he said.

“We started doing that after Nafta, but with 9/11 we in some ways moved backwards,” Pastor said. “Our ability to compete with East Asia really depends on widening our continental markets” and “flattening” rules, rather than raising barriers.

Trilateral Cooperation

There were fresh signs of trilateral cooperation in Canada last week, as U.S., Canadian and Mexican defense ministers meeting in Ottawa promised for the first time to increase military cooperation.

U.S. Defense Secretary Leon Panetta, Canadian Defense Minister Peter MacKay and two Mexican officials, Defense Secretary General Guillermo Galván Galván and Navy Secretary Admiral Mariano Saynez, pledged to forge a new partnership in battling narcotics and transnational criminal organizations while improving public security and responses to natural disasters in the Western hemisphere.

The meeting was “remarkable,” according to Johnson, a former assistant defense secretary for Western hemisphere affairs.

Diplomatically ‘Prickly’

“Mexico, diplomatically, had been traditionally a very prickly country to deal with,” he said in a telephone interview. “It has maintained its distance and was very sensitive over sovereignty issues about any kind of encroachment by the U.S.”

“A decade ago, such a meeting that included Mexico would have been unthinkable,” Johnson said.

Until now, Canadians have shown very little interest in Mexico. “That one statement suggests they are prepared to play a more effective role,” Pastor said.

On the energy front, Canada, the world’s 10th-largest economy, is planning to sell more oil and gas to Asia after Obama denied a permit for construction of the Keystone XL pipeline, which would deliver 700,000 barrels a day of crude from Alberta’s oil sands to U.S. refineries near the Gulf of Mexico. The permit was denied based on environmental concerns in Nebraska; the company is developing a new route to avoid environmentally sensitive areas in the state.

Presidential Election Stakes

“The common belief is that this will all change after the presidential election, so I think that’s still where the investor community is,” Alberta Finance Minister Ron Liepert said in February. “The U.S. needs the product. Canada has the product. It just makes no sense that it’s not coming to the U.S.”

Calderon and Harper may also pressure Obama to let Canada and Mexico join the Trans-Pacific Partnership that the U.S. is negotiating with eight nations.

The U.S., which is leading the talks, hasn’t said yet if it will let Canada and Mexico into the proposed free-trade deal that involves Chile, Vietnam, Australia, Peru, Singapore, Malaysia, New Zealand and Brunei. Japan is also interested.

The nine nations already involved in the discussions would need to reach consensus on any new members joining the talks.

Pacific Trade

The Obama administration is aiming to complete negotiations on the Pacific trade deal this year, U.S. Trade Representative Ron Kirk told Congress March 7.

The Trans-Pacific Partnership, which would be the biggest trade accord for the U.S. since 1994, when Nafta took effect, is “a top priority” for the administration.

Obama has “got to come up with something that’s a deliverable that shows how the three countries are cooperating on something,” Johnson said.

The president, who is facing re-election this year, may also show interest in overhauling U.S. immigration laws, though he has said that will require cooperation from Congress. In three years, there will be almost as many Mexican residents and Mexican-origin U.S. citizens as the entire Canadian population, about 35 million, according to Johnson.

“I think he wants to show Mexicans — and the Hispanic vote is going to be quite keen in this election — that he does want to pursue immigration reform” and deeper collaboration with both Mexico and Canada, Johnson said.

Organized Crime

The three leaders may use today’s summit meeting to lay the groundwork on unified positions on immigration, drugs and the war on organized crime in Mexico as they prepare for the 34- nation Summit of the Americas in Cartagena, Colombia, in mid- April.

There are increasing calls from Latin American leaders to debate decriminalization or legalizing the consumption of drugs as frustration with a U.S.-led crackdown grows. It’s “a delicate issue to raise” during Obama’s re-election campaign, Johnson said.

Vice President Joe Biden, on a trip to Central America in March, said that while such debates are “totally” legitimate for the Colombian summit, there’s “no possibility” the Obama administration will retreat from its opposition.

To contact the reporter on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

 

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