“The three Amigos” where is NAFTA now?

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Last February 19th, the 9th North American Leader´s Summit, better known as the “Three Amigos Summit”, took place in Toluca, the capital of Mexico state. The “Amigos” present were: Prime Minister of Canada Stephen Harper, President of the United States of America Barack Obama, and President of Mexico Enrique Peña Nieto.  The term “Amigos”, which in English means friends, has everything but what a friendship involves.

 

Now, 20 years after the signing of NAFTA, friction rather than collaboration has characterized trade relations and agreements between the countries. Key topics like immigration reforms and the recent disapproval of the Keystone XL pipeline by U.S. President Barack Obama set the tone to this last summit. Despite of the fact that the trade relations have not been developed within a friendly environment, after these 20 years NAFTA became the world’s largest trading bloc, with a combined GDP of roughly $19-trillion (U.S.). Accounting together for almost $7-trillion in exports and imports.

 

Mexico and Canada relation has not yet reflected the potential of it and has been in a backward direction since 2009, the main reason of it was the implementation of a visa that limit Mexican people travel to Canada. The effects of this, is that tourism from Mexico to Canada dropped from $365 million in 2008 to under $200 million in 2012 and has certainly discouraged foreign investment in country of the maple leaf.  In terms of trade the numbers are also very low: Canada’s trade with Mexico as a percentage of its total global trade remains at just under 3.5%. In comparison, the United States in 2013 accounted for 75.08% of total Canadian exports and 52.1% of its total imports.

 

Other of the main topics during this last summit was the Keystone XL Pipeline. This ambitious project pretends a 1,179-miles, 36-inch-diameter crude oil pipeline beginning in Hardisty, Alberta, and extending south to Steele City, Nebraska. With no doubt, this pipeline will tremendously benefit Mexico now that energy reforms are approved in this country. Unfortunately, many issues come along with this project: the first one and the most important, is the environmental impact and according to Mr. Obama, this is the main reason why this pipeline has been rejected by his government. As it can be inferred, Mr. Harper does not agree with the U.S. failure to approve the project and above of the environmental impact he is considering the $172 billion to America’s gross domestic product by 2035 and the creation of an additional 1.8 million person-years of employment in the United States over the next 22 years. Mr. Harper is yet optimistic and willing to wait out Obama´s term in 2017 to get the project built.

 

On the same topic of energy projects, with the energy reforms above mentioned, President Peña Nieto took advantage of this discussion and said that Mexico will attract a much as $20 billion annually in extra foreign investment by allowing companies such as Exxon Mobil Corp. and Chevron Corp. to develop the largest unexplored crude area after the Arctic Circle. Which is now more encouraged with the credit upgrading from Moody´s to A3.

 NAFTA has still a lot to offer to these countries, which might be more if side agreements like TPP are successful. On the other hand, NAFTA won´t be a friendly environment but this won´t impact at all the biggest trade relation between them as it has been shown for 20 years. But it is true that how better they would be as a united bloc using their three economies, their labor of almost 500-million people and their abundance of energy and agriculture as leverage to contend with China and other major economies.

 

Sources: 

1. http://www.transcanada.com/keystone.html

2. http://thepoliticalbouillon.com/en/nafta-ceta-and-canadas-growing-neglect-of-mexican-trade-relations/

3. http://www.theglobeandmail.com/globe-debate/three-amigos-must-revive-the-spirit-of-nafta/article16930004/

4. http://www.cnn.com/2014/02/19/politics/us-mexico-canada-summit-issues/

5. http://www.bloomberg.com/news/2014-02-18/obama-heads-to-mexico-meeting-with-amigos-strained-by-keystone.html

6. http://laborrightsblog.typepad.com/international_labor_right/2011/04/nafta-labor-and-immigration-a-package-deal.html

7. http://www.nafta-mexico.org/ls23al.php?s=15&p=3&l=2#

8. http://www.nytimes.com/2014/02/20/world/americas/in-obama-trip-to-mexico-a-show-of-friendship-with-little-results-on-issues.html?ref=northamericanfreetradeagreement&_r=0

 

 

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