By Carlo Dade and Carl Meacham
In Embassy Magazine

Feb. 19, 2014


On February 19, U.S. president Barack Obama, Mexican president Enrique Peña Nieto, and Canadian prime minister Stephen Harper will meet in Toluca, Mexico for the 2014 North American Leaders Summit. And though the agenda for the summit has not been released, recent talks between Obama and Peña Nieto suggest a desire to focus less on security concerns, which have traditionally played a key role in trilateral talks, focusing instead on economic competitiveness, entrepreneurship, trade and investment.

And given recent developments throughout the Americas, not to mention looming competition from and for markets in Asia, this distinctly economic focus is certainly timely.

On the heels of education, telecommunications, and tax system overhauls, President Peña Nieto is in the process of passing sweeping (and deeply controversial) energy reforms. For the first time in more than half a century, Mexican law will greatly expand private investment in the country’s energy industry—a move that’s could set the stage to make North America one of the world’s largest producers of oil and natural gas.

Just last month, the North American Free Trade Agreement (NAFTA) celebrated its twentieth anniversary. The agreement, which entered into force in 1994, created the world’s largest free trade zone—and spurred explosive growth in North American productivity and commerce. In 2012, intra-North American trade reached an all-time high, topping US$1 trillion.

Even as the North American economy has liberalized, the continent’s attention to the rest of the hemisphere has steadily grown as well. As Mexico’s economy opened up and began looking for opportunities abroad, the United States—and, to a smaller extent, Canada—found opportunities in Central and South America as well—largely in the form of an expansion of regional free trade.

In this context of an increasingly dynamic North America, though, Canadian efforts are falling short.

Trade talks between Canada and CARICOM have sputtered along for the better part of a decade, with grim prospects for finalizing a deal by the June 30 deadline. Earlier this year, Mexico’s ambassador to Canada noted that the bilateral relationship had “lost dynamism” and “become stagnant” in recent years—perhaps addressing perceptions of Canada’s hesitance to fully include Mexico in North American efforts. And though NAFTA’s benchmark might seem like an ideal time to revitalize and update the partnership, Canada, arguably the best-positioned of the three to push for change in the framework, has remained quiet.

And in this context, the world is awash in new, dynamic trade arrangements—among them the Trans-Pacific Partnership, the Pacific Alliance, and the Trans-Atlantic Trade and Investment Partnership, all of which are more advanced, more ambitious, and more modern than NAFTA.

The fact that things are working “well enough” in North America on various levels may well have blinded the continent’s leaders to the coming challenges from our neighbors, who are ahead in their innovative and fresh approaches to regional issues. In this regard Canada and Mexico may have more to lose than does the United States. Mexico has shown some awareness of this challenge by pushing the idea of an eventual NAFTA-EU trade agreement—but Canada has remained largely silent.

Canada clearly could take on a distinct and productive role in the region. So what, then, could Canada do to realize its full potential?

Traditionally, Canada’s economic objectives have relied on maintaining stability and ensuring free access to global markets. In this area, in particular, there is ample opportunity for Canada to expand its regional presence—through, perhaps, the participation in institutional frameworks and the expansion of trade, cooperation, and investment diversification.

One of these opportunities is the emerging Pacific Alliance, an economic integration agreement among Chile, Colombia, Mexico, and Peru. Canada already has free trade agreements with all members and is an observer in the framework, which accounts for more than one-third of Latin America’s gross domestic product (GDP) and about half of the region’s trade. And with unofficial nods of approval for full membership from the alliance’s founders, Canada could seize the opportunity to establish itself as a regional leader in economic integration.

And in its more immediate neighborhood, Canada must reengage and bring some new ideas and leadership to contribute toward developing an agenda for a more competitive North America. This will necessitate looking beyond the government’s immediate (and very real) grievances over the delays in approval for the KeystoneXL pipeline, instead focusing on the bigger picture that is North America.

Current challenges in the region—spanning citizen security, economic resilience, democratic consolidation, energy security, and the respect for human rights, among others—point to a need for broader and deeper involvement. And should it reinforce its dedication to concerns distinctly relevant to the North America, the continent can further its hemispheric leadership and effect positive change throughout the region.

This week’s iteration of the so-called “three amigos” summit, then, could be the perfect occasion for Canada to work with two of its biggest partners toward strengthening North American unity—an important step in contributing to stability in the Americas. Will Canada step up?

Carlo Dade is director of the Centre for Trade & Investment Policy at the Calgary-based Canada West Foundation. Carl Meacham is director of the Americas program at the Washington-based Center for Strategic and International Studies.