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Carlo Dade on Integrating the North American Economies

November 18, 2015 by Carlo Dade

When some Americans hear talk about integrating the economies of Mexico, Canada and the United States, they think, “Uh-oh, there goes my job.”

In reality, the opposite is true.

What North America really means is jobs, and the potential of growing many more of them. The appearance of the new Pacific Rim trade agreement, the Trans-Pacific Partnership, makes this even more true and attention to this reality even more urgent.

Policy experts often don’t explain these realities very well. When we start talking about “competitiveness,” we think of systems becoming more efficient, which we understand is the foundation of prosperity.

Joe or Jane Six-Pack hears something else. When talk turns to “competitiveness,” they hear “job and wage cuts” and “race to the bottom.” You have folks who, arguably, have been traumatized by shocks to the economy, who live in constant worry over their jobs and who are afraid they don’t have the skills and knowledge to compete.

But here is the case: There is a pretty good chance their job, as well as those of many other North Americans, is tied up in the $2.5 billion in goods that cross our three borders every day. Many jobs across North America are linked to our ability to produce things together and move them back and forth.

As an example, when we import a finished car part from Mexico, a significant share of that product was probably first made in the United States. The U.S.-made portion of that car part was sent to Mexico for finishing, or some other added-value.

The reality sometimes gets obscured, but of every dollar in goods that the U.S. imports from Mexico, 40 cents are U.S. components. Similarly, for every dollar of goods imported from Canada, 25 cents of that dollar in goods contains U.S. components.

In fact, when fighting for your job with China, Canada and Mexico are your best friends. They might be your only friends, and a key to keeping your job.

The same is true in my country — Canada — as well as in Mexico. We need to keep working together as the exciting new Pacific Rim trade pact unfolds. A strong North America will be needed to compete with the many nations that make up the Trans-Pacific Partnership.

Increasingly, jobs are linked to the ability to move stuff around. That’s certainly true in China. Your competitor’s job in China is tied to the ability of her country to move goods around in Asia. And China, as well as other Asian nations, does not hesitate to make investments in the roads, bridges and ports that facilitate the movement of products.

We make investments in North America, too. But we need to do that better. The next time you hear talk about infrastructure investment, remember they are really talking about your job. And if your government leaders aren’t willing to make those investments, they really don’t have your back.

Making sure we have the right infrastructure is important in another way, too. When we talk about moving goods efficiently through a system, such as moving a car part from Mexico to Canada and back to the U.S. without interruption, we are talking about reducing costs elsewhere in the system. When that happens, the pressure on your wage is reduced and you can keep your job.

Of course, many people think about the North American Free Trade Agreement when they think about North America. And when people think about NAFTA, they often think about government.

But NAFTA is the companies that have made a business of selling within the North American market and building products together to sell abroad. NAFTA also is the workers who make those products together. We simply hand them off to the next part of the supply chain to finish the product. Along the way, jobs are created and sustained in a way that does not happen with any other partners outside North America.

Malaysia is the next country that shares production of goods with the U.S. But only 8 cents of the dollar value of a Malaysian-made good contains U.S. components. When it comes to China, the number is an even more paltry 4 cents.

That the U.S. buys more goods and services from Canada and Mexico means simply that more jobs than we realize are tied to our ability to build things together. Whether China or Europe rises or falls is of interest; whether North America rises or falls is your job.

These days, the only place a country competes alone on the international stage is in the Olympics. In trade, countries compete together. If we are to have any chance, it will have to be together.

Carlo Dade is director of the Canada West Foundation’s Centre for Trade & Investment Policy. Twitter: @carlodade

This article was originally published in the Dallas Morning News as a part of their coverage of the Bush Institute's North America Initiative.