Beyond Trade: Reframing the North American conversation

Border and trade issues are important to the continent, but they tend to limit our thinking when it comes to collaboration.

By: /
19 June, 2015
By: Stephen Blank

 Senior fellow, University of Ottawa 

Some Canadians are talking again about Canada-U.S. (and even North American) issues beyond tub-thumping about Keystone XL.  Colin Robertson and Jeremy Kinsman, both distinguished thought leaders, have recently circulated interesting and important essays. But neither confronts the largest issues our nations face.

Both commentaries (found here and here) focus on trade and border issues, and underline the post-9/11 thickening of the border and changed U.S. attitudes toward the relationship.

Of course.

But two matters need to be clarified, and further considered. First, we should look at the border in a broader perspective, instead of reinforcing the idea that it has only thickened since 9/11. Second, we have to understand that, as important as border issues are, still bigger problems are roaring down our road. To even begin to confront these new threats, we have to abandon the NAFTA/free-trade model that structures most conversations on North America – like Robertson’s and Kinsman’s – and think in more continental terms.

Rethinking about the border

Yes, it’s much less convenient now for individuals to cross the border. It’s more difficult for companies to move their goods across as well. But there are a lot of shades here: Freight trains continue to cross the border with little difficulty. Larger companies that put full loads on trucks and those that qualify for FAST (Free and Secure Trade), C-TPAT (Customs-Trade Partnership Against Terrorism) or PIP (Partners in Protection) cross the border without too much trouble.  Many companies outsource these tasks to specialized firms. The Canada-U.S. Regulatory Cooperation Council has continued to chip away at a basket of regulatory inhibitions to trade.

Moreover, energy flows are not affected by borders. Exports of Albertan crude to the U.S. have increased dramatically over the past few years (lack of Keystone notwithstanding) as have U.S. exports of lighter Bakken crude to Eastern Canada. Financial markets continue to integrate (“TD  Bank” which calls itself “America’s Most Convenient Bank” is the 11th largest bank in the country). We’ve done pretty well together cleaning up the Great Lakes.

Obviously the post-9/11 border is scarcely unimportant. But simply to reiterate the “9/11-thickening” mantra is not a very useful way of discussing what goes on at the border.

Going beyond trade

More important, border and trade issues are not the most urgent matters that face us now. If the core paradigm in discussions of our relationship is two fully sovereign nations united by a trade agreement and divided by a contentious border then we miss the real potholes. We are not Europe. But we are also most assuredly not two (or three) fully sovereign nations either. We are nations that are deeply interconnected and profoundly interdependent, and we have to begin our discussions at this point.

Much of the North American economy is structured by complex, cross border supply chains — from automobiles and electronics to all sorts of agricultural products. They can be disrupted, for example, when Robertson explains how the U.S.’s Country-of-origin labeling mandate has disrupted our beef trade. But these supply chains seem also to have been remarkably resilient since 9/11. What is alarming is how little we know about how these systems actually work when we depend so heavily upon them. To oversimplify (just a bit), we know how many containers cross the border (because they are counted at the border) but we don’t know what’s inside them, or how all of the bits and pieces that cross the border fit into coherent production and marketing arrangements (because we no long do in-depth case studies).

This means that the old border-bound trade models no longer apply. Things Canadians manufacture (or services Canadian provide) are embedded in products exported from the U.S. (or Mexico) and visa versa. To get a more accurate picture of our role in the international economy, we need new detailed maps of North American supply chains.

Now we face big emerging problems.

Patching potholes

If “we don’t sell stuff to each other, but make it together” and if the North American economy is knit together by complex, often extended supply chains, then we must be very concerned about the state of our transportation infrastructure.  Several decades of deferred maintenance and chronic underinvest­ment have left much of our freight transport system – highways and waterways in particular – incapable of keeping up with routine maintenance, let alone able to increase capacity to accommodate forecasted growth. Monies required simply to get up to code are enormous: the U.S. Federal Highway Administration estimates that to eliminate backlog of deficient U.S. bridges by 2028 would require annual investment of $20.5 billion, almost double current investment.

Moreover, the bar has been raised on all of this. Traditionally, freight infrastructure has been evaluated by efficiency. After 9/11, infrastructure had to be secure. And now, sustainable. Infrastructure has become more contentious in many communities. NIMBY has morphed into BANANA (“Build Absolutely Nothing Anywhere Near Anything”).

Our attention is directed at catching up — at filling potholes and fixing collapsing bridges, projects that provide new “shovel ready” jobs. But even here we are stymied by a governance model that puts greater weight on eliminating debt and cutting taxes than on investment in infrastructure. The infrastructure crisis has many dimensions.

The greater problem is that in the midst of arguing over how to deal with today’s infrastructure crisis we have lost focus on the clear fact that even restoring our 20th century freight infrastructure will not provide a foundation for North American global competitiveness in the 21st century. We can no longer think in terms of national freight, highway, ports or rail systems.

One example, our freight railroads.  North America’s railroads perform well in terms of maintenance and investment. They are environmentally concerned. But they are still running out of space on existing lines, particularly as competition for capacity increases among users. More problematic is the problem of Chicago. Our freight railroads run on an economic geography of the late 19th century, opening the West, with Chicago as the hub. Much of the goods entering Prince Rupert Port, Delta Port, Vancouver or Halifax on the way to the U.S. will wind up chugging painfully through Chicago and few believe that efforts to improve the situation will keep up with increasing quantities.

Volumes of freight moving in North America will surely increase (experts say by 50 percent or so by 2040). Trucks will carry most of this, particularly that moving north and south. Question: how can North America’s more-efficient, less-polluting railroads absorb a larger share of this movement? How do we build a North American rail system for the 21st century?

New opportunities exist. Is this, finally, the moment for creating new short sea shipping links? But almost surely these opportunities must be viewed in a continental perspective.

Dealing with a changing climate, and changing demographics

Climate change will accelerate the deterioration of all types of infrastructure. Rising ocean levels will force large-scale transformations of ports and waterways. We will very likely see significant changes in our production map. Will California, for example, cease to be the U.S.’s main source of fruits and vegetables? If so, what might a new map look like? We can bet that climate change will heighten cross border integration of our agricultural systems.

A U.S. Department of Energy report on “U.S. Energy Sector Vulnerabilities to Climate Change and Extreme Weather” does not make much sense, given the deeply inter-connected North American energy systems. Climate change is not a national issue and responses cannot be conceived in national terms.

Change in demographics will heighten integration. More Canadian and American seniors will retire in Mexico, intensifying the demand for greater portability of medical insurance and, as well, the deeper integration of our health systems. At the same time, demand for Mexican workers (for example, as truck drivers) will increase as Canadians age out.  Changing demographics rewrite the issue of labor mobility, widening the range of involved groups and perhaps opening new North American conversations.

The greatest tasks that confront us — such as maintaining (hopefully enhancing) competitiveness, coping with climate change, adapting to demographic change — are North American in scope and require continent-wide responses. Border and trade issues are important, too, and can inhibit our ability to deal with these broader issues. But we should not be so distracted by them that we overlook the whole tribe of 600-pound gorillas sitting in our parlors.

More important, we must not allow border and trade issues to force our conversations into the traditional sovereignty based framework — and fail to understand that we must think now of new forms of collaboration — not like Europe’s but appropriate to North America.

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