The Rise, Fall and Reinvigora2on of North America Dr. Robert A. Pastor Professor and Director Center for North American Studies American University Washington, D.C October 31, 2013 American University Washington, D.C. Panel I: CompeGGveness in a World of Three Regions •  In 1994, 81% of world product in three regions •  In 2001, 83% of world product in three regions •  In 2011, 75% of world product in three regions Trillions of dollars, official exchange rates. UN Stats Division, National Accounts Estimates of Main Aggregates, World Bank World Databank, CIA World Factbook .
Intraregional Trade as a Percentage of Total North American Trade, 1988-­‐2011 Source: WTO Database, "ʺSelected Regional Trade Agreements.”
NAFTA succeeded… but it peaked in 2000 What explains… The rise of North America The fall of North America —  A conGnental market —  9/11/2001 —  Proximity —  No investment in infrastructure —  Complementary economies —  China —  Joint and just-­‐in-­‐Gme producGon —  No strategy / reversion to dual bilateralism —  Lack of leadership/inerGa and domesGc interests —  A QuesGon of Trade PrioriGes-­‐ TPP & TTIP 9/11: The Cost of Security •  From 1992-­‐2009, the number of border patrol agents increased by 15,980 agents U.S. Border Patrol Agents, 1992–2009 •  The budget for U.S. Border Patrol increased by $2,520 million from 2000 to 2011 •  Since 9/11 $186 billion has been spent on border security alone •  The U.S. government spends more on immigraGon enforcement, at nearly $18 billion in FY 2012 than on any other federal law enforcement combined •  A biparGsan Senate immigraGon reform measure (approved in June) provides for doubling the size of the U.S. border patrol and the construcGon of a 700 mile fence along the U.S.-­‐Mexico border totaling $46 billion Source: Chad C. Haddal, “Border Security,” Congressional Research Service, August 2010; Customs and Border ProtecGon.; Doris Meissener et. al. “ImmigraGon Enforcement in the United States: The Rise of Formidable Machinery,” MigraGon Policy InsGtute, January 2013; Ed O’Keefe, “In poll, big majority back forGfying Mexican border,” Washington Post, July 19, 2013, p. A11. Border Patrol Budget AppropriaGons, 2000-­‐2011 Cost of Delays & Missed OpportuniGes —  Annual cost of delays and border security restricGons: $27 billion (2.7% of trade in 2008) —  Border transfer cost of ‘drayage’ (prohibiGng trucks) $616 million in 2008 (or 15% of volume of trade) —  Cost of building a wall on the southern border: $2.1 billion —  Annual cost of cabotage (Jones Act): $656 million —  Annual Cost of “rules of origin” procedures approx. $35.7 billion —  Annual cost of divergent regulaGons totals 2-­‐10 % of produc2on costs Sources: Robert A. Pastor, The North American Idea (New York: Oxford University Press, 2011); Alex James Appiah, Applied General Equilibrium Model of North American Integra>on with Rules of Origin, Doctoral DissertaGon for Simon Fraser University, November 1999; Michael Hart, “Trading Up: The Prospect of Greater Regulatory Convergence in North America,” (U.N. Economic Commission for LaGn America and the Caribbean, April 2007). China —  Chinese exports to the United States overtook Mexico’s in 2003, and Canada’s in 2008 Source: U.S. Bureau of Economic Analysis. U.S. InternaGonal TransacGons Accounts Data. Available at: hlp://www.bea.gov/internaGonal/bp_web/filter.cfm?anon=71&table_id=10 New Trade Issues: Small Differences in RegulaGons Have a Large Impact —  Cheerios & Jelly Beans —  Lips2ck (with and without SPF): As a cosmeGc product in both the U.S. and Canada, the cost of exporGng from the U.S. to Canada is about $1000 for each product line, but if it includes SPF (sunscreen), it is classified as a drug by Canada, so the costs of exporGng a single product line climb to $170,000
—  Crash Tests for New Vehicles: Can cost from $120,000 -­‐ $150,000 in the United States, but that cost is doubled when we export it to Canada. Do we need to crash the same car twice? —  Pharmaceu2cals: AddiGonal costs of recerGfying and duplicaGve tesGng adds millions of dollars to the cost of bringing a drug to market. Source: Canada-­‐U.S. Regulatory CooperaGon Council Stakeholder Dialogue Session, June 20, 2013, Washington, D.C. Reversion to Dual-­‐Bilateralism & BureaucraGc Scrabble —
Smart Border Accord (U.S.-­‐Canada) 2001 & U.S. Mexico Border Partnership Agreement “Smart Borders”, 2002 —
Security and Prosperity Partnership (2005)– success measured by the number of meeGngs, rather than results. —
Rep. Kim Kolbe proposed merging the U.S.-­‐Mexican parliamentary commilee with its U.S.-­‐Canadian counterpart into a North American parliamentary commilee, but Canada declined. —
Canada was invited to join the North American Development Bank but declined. —
Joint DeclaraGon on 21st Century Border Management (U.S.-­‐Mexico) 2010 & Beyond the Border AcGon Plan (U.S.-­‐
Canada) 2011 —
U.S.-­‐Canada Regulatory CooperaGon Council (2011) & U.S.-­‐
Mexico High Level Regulatory CooperaGon Council (2011) “The expansion of personnel [on the borders] coincided with a proliferaGon of programs– each with its own acronym. It wasn’t long before the bureaucrats had enough acronyms to design a new game of North American Scrabble.” Robert Pastor, The North American Idea: A Vision of a Con>nental Future (2011). If the NAFTA Promise had Been Realized —  If a customs union had been established, we might have saved $400 billion in indirect taxes. A common external tariff would have yielded roughly $45 billion a year, which could have been invested in a North American infrastructure fund and narrowed the income gap between Mexico and the United States by more than 20% —  If the amount of money spent on thickening the border ater 9/11 had been spent on improving conGnental infrastructure, trade would have expanded much more quickly. —  If growth in trade from 1992-­‐2000 had been maintained through 2012, it would have added $1.9 trillion to total U.S. trade with North America. If strong growth in FDI had conGnued, an addiGonal $797.8 billion could have been invested. —  If U.S. exports to Canada and Mexico conGnued at the 1992-­‐2000 growth rate, there could have been an addiGonal $470.2 billion in U.S. exports to both countries, which would have represented 1/8th of the exports Pres. Obama set as his goal for the NaGonal Export IniGaGve A QuesGon of Trade PrioriGes —  USTR Froman: “The United States exports more than a trillion dollars of goods and services to APEC countries, and that’s more than 50 percent of total U.S. exports.” (October 5, 2013, Indonesia) —  “Between 2009 and 2011…U.S. goods exports to the world grew by about $370 billion. Canada and Mexico accounted for $118 billion of this, or just under 1/3 of the total.” (U.S. Chamber of Commerce, 2013) In 2010, Canada and Mexico accounted for 32% of all U.S. exports (export.gov) —  USTR Froman: “Today, the U.S. and the European Union are each other’s largest economic partners, with $2.6 billion dollars worth of goods and services flowing between us each day…” (September 30, 2013, Brussels) —  He is incorrect. Trade between the United States and its North American neighbors amounts to $3.2 billion every day U.S. Chamber of Commerce, “ NAFTA Triumphant: Assessing Two Decades of Gains in Trade, Growth and Jobs” (2013). Comparing North America with TPP and TTIP: What should be our priority, strategically and tacGcally? —  In 2010, the three North American countries accounted for 90% of the gross domes2c product of TPP countries excluding Japan, and 82% of U.S. exports to TPP countries go to our two neighbors, Mexico and Canada Trans Pacific Partnership (TPP) includes Australia, Brunei Darsussalam, Canada, Chile, Malaysia ,Mexico, New Zealand, Peru, Singapore, Vietnam and the United States.Note: TPP GDP without the U.S. is $2.594 trillion Sources: APEC and North America data from StatsAPEC, GDP and total trade for Western Hemisphere and TPP from World Bank dataBank, US exports data from US Census Foreign Trade division The Importance of North America to the U.S. —  In 2011, 48% of North America’s merchandise exports went to the three NAFTA partners, for a total of $1.1 trillion —  This is twice the total of merchandise exports to Asia ($476 billion) and almost triple what we export to Europe ($382 billion) —  Trade with Canada and Mexico is also qualitaGvely different than U.S. trade with the rest of the world: value of U.S. content in imports is 40% from Mexico and 25% from Canada, as contrasted with 4% from China and 3% from Brazil and 2% from the European Union Source: WTO InternaGonal Trade StaGsGcs, 2012; Robert Koopman, William Powers, Zhi Wang and Shang-­‐Jin Wei, Give Credit Where Credit Is Due: Tracing Value Added In Global ProducGon Chains, NaGonal Bureau of Economic Research Working Paper No. 16426, Cambridge, Massachusels (September 2010). The Government Gives Priority to Asia and Europe– North America is an Aterthought The Public Gives Priority to North America The Public Prefers North America for TacGcal and Strategic Reasons Public Wants More CooperaGon on TransnaGonal Policy Issues U.S. Support for Common Border Policies QuesGons/ proposals —
Should the United States pursue TPP, TTIP, or deeper integraGon with North America? —
Bilateral or conGnental? —
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New approaches to regulatory convergence/ w congress; twinning ImmigraGon and labor mobility North American caucus for the TPP and TTIP negoGaGons Economic compeGGveness and leverage vis-­‐à-­‐vis Asia and Europe: Vision/ leadership/will Commilee chaired by the Vice-­‐President-­‐ quesGon of implementaGon SubnaGonal governance; NGO network Security Community Judicial reform, integrate law enforcement NORTHCOM Governance —
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Seamless conGnental market -­‐ Customs Union North American plan for infrastructure and transportaGon -­‐Investment Fund Organize the U.S. government to give priority to North American issues – —
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Involve all three legislatures: Merge U.S.-­‐Canadian and U.S.-­‐Mexican inter-­‐parliamentary commilees. Priority and strategy: —
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Merge the two bilateral commilees on regulatory harmonizaGon and border management into North American commilees NALS Independent Commission –research Commission on Environmental CooperaGon Permanent tribunal on trade and investment disputes First, Symbolic steps: —
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Merge parallel commilees; Announce NALS Summit; Shit from a Buy American strategy to a Buy North American strategy; A QuesGon of PrioriGes: U.S. Support for Regional Study Centers It would cost $5 million a year to fund just 10 regional study centers