Meet NAFTA 2.0
Forget sweeping trade deals. CEOs have a new approach to integration with a long, long list of incremental changes.
LUIZA CH. SAVAGE | Sep 13, 2006
Ron Covais is in a hurry. The president of the Americas for defence giant Lockheed Martin, and a former Pentagon adviser to Dick Cheney, he's one of a cherry-picked group of executives who were whisked to Cancún in March by the leaders of Canada, the U.S. and Mexico, and asked to come up with a plan for taking North American integration beyond NAFTA. Covais figures they've got less than two years of political will to make it happen. That's when the Bush administration exits, and "The clock will stop if the Harper minority government falls or a new government is elected." In Cancún, the executives gathered behind closed doors in a luxury hotel and vented about slow borders, duplicate regulations and the competitive threat from the European Union and Asia. "It was an intimate discussion. It was a lot of fun, there were no reporters, just a freewheeling discussion on the things that drive you crazy," recalls Annette Verschuren, the president of Home Depot Canada, who flew in on Harper's jet and said the PM was "very engaged."
The leaders organized the CEOs into a formal advisory body, the North American Competitiveness Council. In June, they met in Washington, with U.S. Secretary of Commerce Carlos Gutierrez, Mexican Economy Minister Sergio Garcia de Alba, and Canada's Industry Minister Maxime Bernier, who asked for help in solving the "bottlenecks" created by laws and regulations. "The guidance from the ministers was, 'tell us what we need to do and we'll make it happen,' " recalls Covais, who chairs the U.S. section of the council, which includes 10 CEOs of big companies like Wal-Mart, General Motors and Merck. The Canadian section, chaired by Linda Hasenfratz, CEO of Guelph-based autoparts maker Linamar Corp., includes executives from such heavyweights as Bell Canada, Suncor, CN, Power Corp., and Scotiabank.
The executives have boiled their priorities down to three: the Canadian CEOs are focusing on "border crossing facilitation," the Americans have taken on "regulatory convergence," and the Mexicans are looking at "energy integration" in everything from electrical grids to the locating of liquid natural gas terminals. They plan to present recommendations to the ministers in October.
This is how the future of North America now promises to be written: not in a sweeping trade agreement on which elections will turn, but by the accretion of hundreds of incremental changes implemented by executive agencies, bureaucracies and regulators. "We've decided not to recommend any things that would require legislative changes," says Covais. "Because we won't get anywhere."
In his Crystal City, Va., office, Covais keeps a black binder of proposals from American business. Some are specific: the adoption of American container sizes for baby food; a common list of "hazardous substances"; continental standards for food labelling. Others are sweeping: everyone should follow the U.S. lead of requiring federal regulators to base their regulations on the voluntary standards of private industry.
Regulatory harmonization has long been championed by the Canadian Council of Chief Executives, and was endorsed by a task force co-chaired by former Liberal industry minister John Manley in 2005. But critics fear the current approach will mean lowest-common-denominator regulations, a process dominated by U.S. interests, and an enlargement of NAFTA by stealth. "These are issues that need to be discussed, but not resolved behind closed doors with input only from big business," says Jean-Yves Lefort, trade campaigner for the Council of Canadians.
Bernier told Maclean's he's pleased so far. "We have many of Canada's key business leaders at the table. They are working hard to represent the interests of Canadian business and all Canadians." Their recommendations will be considered along with "other advice and input," he said, as the three governments move forward on the "Security and Prosperity Partnership" launched in 2005.
Still others complain the approach is too timid. Robert Pastor, director of the Center for North American Studies at American University in Washington, said the leaders should launch broad consultations on major moves, like a common external tariff and a continental transportation network. "None of these big issues are being discussed. Instead we have a CEO council that is looking at the issue one regulation at a time," he said. But the CEOs say they have a strategy. "Let's get some low-hanging fruit to give the thing some momentum," says Hasenfratz. "But let's not lose sight of bigger-ticket items."
Read Luiza Ch. Savage's weblog, Savage Washington
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