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The North American Moment

October 7, 2014 by Daniel Fisk and Machir Stull

This is the North American moment. 

The energy revolution ignited by hydraulic fracturing (fracking), President Enrique Peña Nieto’s reform agenda in Mexico, and Canada’s continued strong economic performance and expansion of trade relationships under Prime Minister Stephen Harper, undergirded by the North American Free Trade Agreement (NAFTA), provide the foundation for a new era of prosperity and security for the continent’s citizens. 

The three democracies of North America – Canada, Mexico and the United States – comprise the world’s largest free-trade zone, with a total population exceeding 460 million and an aggregate GDP approaching $20 trillion in U.S. dollars.  Since NAFTA went into effect in 1994, trilateral trade has gone from $370 billion to $1.1 trillion. 

NAFTA and the respective domestic policies of the three countries have sustained North America as a global leader in innovation and ingenuity:  entrepreneurs form companies at unparalleled rates; more patents are issued across the continent than anywhere in the world; top talent from all corners of the globe, particularly in math and science, find employment here; and the continent boasts the world’s top universities. 

While the process initiated by NAFTA has been significant, much remains to be done. The global marketplace is increasingly competitive, particularly with the emergence of new economic actors and the establishment of new economic regions and trade blocs.  To remain the global economic leader, Canada, Mexico and the United States – North America – must collectively identify and leverage key drivers of growth, including taking steps to streamline the movement of people, goods and services across our shared borders. 

This is the recommendation of an independent task force on North America whose report was released last week.  “Recent developments have created opportunities for the North American countries to build on past work and to advance their partnership to a new stage” and to “shape world affairs for generations to come,” conclude the task force members.

Focusing on a U.S. audience, the task force emphasized that attention be placed on four specific areas:  energy, economic competitiveness, continental security, and the building of a North American community (a “made-in-North-America” approach), while maintaining respect for the national sovereignty of each country. 

The task force correctly points out that the concept of “North America” rests on “an integrated economy within a global system, not as a protected bloc or experiment in shared sovereignty, as was the case with the European Union [emphasis added].” 

In Mexico, the efforts of the governments of Vicente Fox and Felipe Calderon to reform economic and social programs, while addressing security, have been significantly enhanced by President Enrique Peña Nieto.  Not yet two years into his six-year presidency, President Peña Nieto has passed an unprecedented number of structural reforms that could fundamentally transform Mexico.

These include the historic energy reform, political reform, and changes to the education, labor, telecommunications, legal, and fiscal systems.  All were long overdue and represent fundamental changes in Mexico’s operating model.  As the president succinctly summed it up in a recent Washington Post interview, “we had to change.”

Our northern neighbor, Canada, continues to show strong economic performance, including creating over a million jobs since the downturn of 2008 and projections to bring the deficit down to zero in 2015.  The prime minister also has continued to pursue free trade agreements (FTAs).

Most recently, on September 22, Canada and South Korea signed an FTA, marking Canada’s first agreement with an Asia-Pacific partner.  During Harper’s tenure, Canada has brought six FTAs into force, with another ten pending.

For Texas, increased North American economic integration further enhances the future prosperity of this dynamic state.  Its strong history of fostering entrepreneurs and innovation, the state’s cultural, familial and economic ties with Mexico and its $40 billion trade relationship with Canada put Texas at the center of North America. 

Arguably, this also makes Dallas the capital of NAFTA.  As Shannon O’Neil of the Council on Foreign Relations and director of its North America task force, told the Dallas Morning News, “The road to North America’s global dynamism runs through Texas – whether through trade and economic competitiveness, new energy production and integration, or mutual defense against common threats.”

With the continent’s human capital; its proven and probable natural resources; the deployment of new technologies to tap into and benefit from those resources; increasing efficiencies in production and service-provider models and supply chains; and the power of today’s communications, North America is poised to become the centerpiece of the global economy, driving growth and innovation across the world.  But such a future is only possible with a resilient private sector empowered by discerning government policies.

Daniel Fisk is Director of the Bush Institute’s economic growth initiative and Machir Stull is Program Manager for the economic growth initiative.