The North American Leaders’ Summit (NALS) in Guadalajara earlier this week (August 9–10, 2009) dealt with both political and economic challenges facing the three members of the North American Free Trade Agreement (NAFTA)—United States, Canada, and Mexico. The headlines focused on what to do about Honduras, how to prepare for the next wave of the H1N1 flu, how to help Mexico deal with drug-related violence, and Obama’s views on US immigration reform. NAFTA issues were relegated to the backburner.
That said, some economic matters received attention. The NALS talks reiterated the importance of working together to promote recovery from the global economic crisis, a central theme of the frequent meetings the three leaders already have had this year in the G-20 and other economic summits. To that end, they issued the standard hortatory pledge “to abide by our international responsibilities and avoid protectionist measures.” However, the leaders’ statement glossed over nagging bilateral trade frictions over Mexican trucking and Buy American procurement restrictions. Similarly, on energy and the environment, they finessed the key issue of how to reconcile interrelated and possibly conflicting demands to reduce greenhouse gases (GHGs) and to ensure “reliable energy supplies across North America” (including from the Canadian oil sands)—even though they did instruct their officials to develop a work program on climate change for consideration at next year’s summit.
Not surprisingly, the leaders kicked the can down the road with regard to the NAFTA side accords on labor and the environment. Their declaration calls for a “dialogue” on the side pacts in which the three countries would seek “mutually agreeable and cooperative activities.” In other words, they basically said no to the renegotiation and no to the integration of the accords into the main treaty text as was done in more recent US free trade pacts with Peru and other Latin American countries.
Prospectively, the decisions on climate change could have the biggest impact over time. In essence, the leaders agreed to legislate nationally and cooperate regionally. As a practical matter, this means that Canada and Mexico recognized that they will have to adapt to the evolving US policies. To that end, the three countries agreed to develop a Trilateral Working Plan on climate change and clean energy that would be considered at the NALS in 2010. The plan is supposed to foster inter alia the following notable actions:
- financing mechanisms to support mitigation and adaptation actions, including Mexico’s “Green Fund”;
- comparable approaches to measuring, reporting, and verifying emissions reductions, a prerequisite for any future North American emissions trading regime;
- collaboration on “building a smart grid in North America” and cooperation on carbon capture and storage projects;
- aligning national energy efficiency standards;
- reducing GHG emissions in the oil and gas and transportation sectors (which account for a large share of GHG emissions in Mexico); and
- cooperation on “protecting and enhancing our forests, wetlands, croplands, and other carbon sinks.”
While not as comprehensive as the North American agenda on climate change that Meera Fickling and I propose in a recent PIIE policy brief, if the NALS climate change agenda can be implemented, the Guadalajara meeting may prove to be an important decision point in the evolution of North American economic integration.