The annual North American Leaders Summit was held in August in Guadalajara, Mexico, with President Obama, Canadian Prime Minister Stephen Harper and Mexican President Felipe Calderon. As I speak to audiences around the United States, I repeatedly hear the same question: “What was accomplished during the summit?” My short answer: not much.

In my opinion, this was a missed opportunity to improve North American competitiveness and to address the needs of our two very important friends and allies.

What Wasn’t Discussed

From this summit, you wouldn’t know that Canada and Mexico are America’s largest export markets by far. You wouldn’t know that Canada is the top export market for 38 out of our 50 great states. And you certainly wouldn’t know that North American global competitiveness is at stake due to border restrictions that are stifling the very efficiencies that make our products so attractive worldwide. Why? Because these issues weren’t discussed.

North American Competitiveness

Today, supply chains spanning national borders have become an increasingly important factor in a country’s ability to achieve high levels of competitiveness and economic growth. And nowhere is this more true than among the United States, Canada and Mexico. Long gone are the days when trucks crossing our borders were filled with finished products destined for each other’s retail shelves. Now, trucks are filled with components and parts heading for assembly lines, demonstrating a high level of economic integration. In this dynamic business environment, the U.S., Canada and Mexico don’t just make goods for one another. Together we make goods for the world.

Consequently, it’s not uncommon for product components to begin their manufacturing process in the United States, next be trucked to a plant in Canada for refinement and testing, and then be shipped to a Mexican plant for assembly. But the speed and efficiency at which these supply chains operate—critical factors impacting product cost—are being challenged. In turn, this could severely handicap North American competitiveness and economic growth.

Unfortunately, border concerns weren’t addressed at the summit.

Mexican Trucking

The Mexican trucking dispute has caused problems for decades. But recently things have gotten worse.

Under the North American Free Trade Agreement (NAFTA), in 1995 Mexican carriers were authorized to deliver their cargo to any U.S. border state, and by 2000 to anywhere in the U.S. But under pressure from the Teamsters, in 1995 Mexican trucks were denied this, citing safety concerns. In 1998, Mexico filed a complaint under a NAFTA panel. In 2001, the panel ruled unanimously in favor of Mexico. The U.S. didn’t comply. In 2002 the U.S. established a list of 22 new safety requirements, and years later, added more.

Mexican trucking in the U.S. is not new. More than 800 Mexican carriers have been allowed to operate in the U.S. under a grandfathered ruling for more than 20 years. And interestingly, according to a Department of Transportation study, Mexican trucks were found to be slightly safer than U.S. trucks during the studied period of 2003 through 2006.

In 2007, President Bush established a pilot program that allowed 26 Mexican carriers, which managed 103 trucks, to operate in the U.S. This effort, again, revealed that Mexican trucks had a good safety record. Unfortunately, after 18 months of operation, the program recently terminated. In turn, in March 2009 Mexico made the decision to retaliate and raise tariffs on 90 U.S. agricultural and industrial products from 40 states that account for $2.4 billion in trade.

According to the National Association of Manufacturers, due to the additional costs, denying Mexican trucks access to their U.S. destinations is putting 15,000 American jobs at risk. This apparently wasn’t discussed at the summit and certainly doesn’t enhance regional competitiveness.

Other Issues

The out-of-control drug war in Mexico—which is based on growing U.S. demand—has taken thousands of lives of drug officials, police officers and others south of the border in recent years. Yet, the United States has delayed very important financial aid under the Merida Initiative due to allegations of human rights abuses. This, too, wasn’t discussed at the summit.

In a recent issue of Impact Analysis, I noted how the “Buy American” provision in the stimulus package is likely to eliminate more American jobs than it creates. In addition, I hear many complaints from Canadian companies about this provision and how it’s complicating U.S.-Canadian integrated manufacturing. I’m also hearing that Canadian municipalities are threatening to stop buying U.S.-made products. This apparently wasn’t discussed at the summit, either.

Immigration reform—an extremely important issue—also wasn’t addressed. The bottom line: North America needs to continue to enhance its level of global competitiveness and the summit was the perfect venue to discuss how.

Interestingly, upon completion of the summit, Canadian Prime Minister Stephen Harper flew to Panama to sign a free trade accord with that country—the fastest growing Central American nation; the United States has a similar accord with Panama waiting for Congressional approval. The Department of Commerce and the U.S. Trade Representative say, if passed, the accord will expand bilateral trade by $5.25 billion and level the playing field for U.S. firms eager to do business there. However, due to the unpopularity of this trade deal, and the other important issues noted above, they are not being addressed.

This article appeared in Impact Analysis, September-October 2009.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.

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