The end of North American trilaterism

From MACLEAN'S: Harmonization was once all the rage, but under Obama the initiative appears dead

On a sunny August morning in 2007, while protesters were cordoned off by a security perimeter and reporters corralled into a side room, a high-powered meeting took place inside Quebec’s woodsy Ch?teau Montebello. On one side of a square meeting table sat Prime Minister Stephen Harper and his aides. On another sat then-U.S. president George W. Bush and his entourage, and on a third, the delegation of Mexican President Felipe Calder??n. On the fourth side, in a rare position to hold the simultaneous attention of all three leaders of North America, sat the CEOs of corporate titans like Wal-Mart, Lockheed Martin, the Campbell Soup Co. and Procter & Gamble???each armed with a wish list of ways to change economic and trade regulations to increase profit and efficiency.

The occasion was the annual ???three amigos??? summit, a ritual that had begun in 2005 when Bush invited his counterparts to meet and address concerns that security had trumped trade in the years since 9/11. The three leaders created 20 working groups of bureaucrats, hammering away on issues from harmonizing regulations to developing pandemic preparedness plans. The effort, called the Security and Prosperity Partnership (SPP), was meant to continue North American economic integration where NAFTA had left off.

But after the reports were written and communiqu?s issued, a funny thing happened: that is to say, not much. Or, rather, something big happened: the election of Barack Obama. The SPP had withstood the transition from Paul Martin to Stephen Harper and from Vicente Fox to Felipe Calder??n. But at the first trilateral summit attended by Obama last summer in Guadalajara, Mexico, the leaders shut it down. The 20 working groups were disbanded; Obama declared the process should be left to individual cabinet secretaries and ministers, and opened to the public and other interest groups such as his allies in the labour unions. Although the leaders identified 10 priority areas, the results of the ad hoc process, if it can be called a process at all, have been negligible, according to Chris Sands, a senior fellow at the Hudson Institute, a Washington think tank, and Greg Anderson, a political scientist at the University of Alberta in Edmonton, who have concluded that little headway has been made on any of the 10 agenda items.

This year would have marked Harper’s turn to host another trilateral summit, but no date has been announced. Washington wasn’t interested and absent a senior White House point person on the issue, there is no momentum. ???The thing that is really damaging if we don’t have a summit is the signalling to the bureaucracy that North America can wait,??? said Anderson, ???that there are other fish to be fried.???

What killed the SPP? Perhaps the leaders’ desire to avoid igniting fresh debates about trade at a time when, on Capitol Hill, numerous trade agreements languish in limbo. Or maybe the alarm over big business writing lists for governments. There was so much corporate interest in the project that in 2006, the leaders had formally invited the CEOs to come together and present a prioritized to-do list. Dozens of corporations wanted to get involved???each with different priorities. They formed a committee called the North American Competitiveness Council (NACC), and began putting together a common list of recommendations for the leaders. This alarmed those on the outside looking in. Members of Congress complained they were denied oversight. Canadian environmentalists and labour unions feared a secret deal to sell out Canadian water and workers. Canadian nationalists suspected a plot for a U.S. takeover of Canada, while American nationalists suspected a plot for a takeover of the U.S. by a ???North American union??? and a mythical common currency called the ???Amero.???

At Montebello, the discussions were decidedly less grandiose, but still ambitious. Against a backdrop of around $800 billion in annual trilateral merchandise trade, the CEOs took turns making presentations about how to fine-tune the continent’s economic engine. They spoke about the impact of duplicative regulations and mounting red tape; the self-effacing Lee Scott, then president of Wal-Mart, talked about the hurdles to business posed by growing paperwork at the border. David Ganong, then president of New Brunswick’s Ganong Chocolates, discussed the compliance costs imposed by multiple food and labelling regimes???which require the firm to separate inventories because the two countries can’t agree on what constitutes a jelly bean. The confectioner’s woes in particular made an impression. Harper later told reporters, ???Is the sovereignty of Canada going to fall apart if we standardize the jelly bean? I don’t think so.???

Three years later, however, the dream of a quick path to a grand unified jelly-bean regulation???and to countless other harmonization measures???appears to have been as delusional as the paranoid fantasies of the conspiracy theorists. The most progress, Sands and Anderson say, was on the energy and climate agenda: there is an agreement to talk about it. There was also co-operation on pandemic preparedness in the wake of the H1N1 flu outbreak. And the leaders’ promise to avoid protectionism was arguably fulfilled???if you don’t count the Buy American provisions attached by Congress to American government stimulus spending, from which Canada was eventually given a waiver???after almost all the money was allocated. But there’s been little progress on other SPP agenda items, such as regulatory harmonization and improvements to border efficiency. ???There has been a lot of talking and some incremental progress,??? said Sands. But without leadership from the top, ???We are now captive to a bureaucratically driven process. If anyone in the bureaucracy wants to block it, there is no one to push it.???

If the leaders’ agenda is progressing slowly, that of the CEOs is essentially frozen. ???The whole issue has fallen onto the back burner, if not off the shelf completely,??? says Kelly Johnston, vice-president of government affairs for the Campbell Soup Co. There is no one in the Obama administration who is charged with thinking about the future of North American competitiveness, and, in contrast to the former front-row seat, the CEOs, said Johnston, now have ???no place to go??? to discuss their wish list for reform. ???We hoped [the SPP] would re-emerge in some new form with more inclusion and transparency and some significant White House leadership,??? said Johnston. But instead, ???There is no focus on this issue. It’s like it’s gone back to before the North American Competitiveness Council even happened.???

Ron Covais, president for the Americas section of Lockheed Martin, who chaired the U.S. section of the NACC, said there appears to be little interest in either capital. ???I have talked to a number of people in both governments, and no one is there reviving it, and frankly I don’t see a lot of interest in this administration in doing it,??? he told??Maclean’s. As for the work of the CEOs, ???It’s been catalogued and it’s on somebody’s shelf,??? says Covais. ???When I mention it to the administration it runs the gamut from, ???Really? I didn’t know that,’ to, ???Good to know, we’ll have to look at it someday.’ ???

Analysts had warned from the outset that a process that offered little transparency, no communications strategy and appeared to be carried out by faceless bureaucrats without parliamentary or congressional oversight???and consulted only with the business community???was doomed to fail. ???The perception that the NACC had privileged access to the summits and other stakeholders did not was the death of the whole thing,??? said Anderson. ???It was radioactive for the governments.???

Another lesson learned, say business leaders who were involved, was that the trilateral approach itself didn’t work. Initially, the three-amigos arrangement served everyone’s political purpose. Martin and then Harper did not have to appear to be consorting one-on-one with the unpopular Bush. It fit Bush’s agenda to not just be seen talking to Mexico about the Mexican border and immigration reform, which had become a hot-button issue. And it fit Mexico’s needs to be seen as a full partner in a North American club. But it turned out that the trilateral process made it difficult to move forward. Canadian border issues were overshadowed by the issue of illegal immigration and drug violence on the southern border, for example.

Within the Obama administration, the exercise was seen as a partisan Bush-era project. And the President has been, well, busy. ???There is summit fatigue. Obama is running around to all kinds of meetings all the time,??? said Anderson. ???In terms of letting the North American summit slip, it’s because there just isn’t enough to talk about.???

There were doubts in Ottawa, too. Harper, who had inherited the process from Martin, saw it as too unfocused, with long to-do lists of seemingly unrelated items. The process came to a head in Montebello, when after listening to the CEOs, Bush declined to commit to any major changes to border management. Harper was frustrated, according to a witness, and Calder??n, who had failed to make progress with Bush on the immigration issue, cancelled the second day of meetings and headed to Mexico, where a hurricane had struck. By that point, the Bush administration was winding down, and the to-do lists were left for discussions with the new administration.

But flawed as the trilateral process was, nothing has taken its place. By the summer of 2008, prior to the U.S. election, the Privy Council Office in Ottawa had instructed all Canadian embassies and consulates to establish political contacts with all the campaigns. The plan was to use contacts on the foreign service side to lay the groundwork for a bilateral post-SPP discussion. But in the wake of NAFTA-gate, in which a Canadian diplomat caused a political furor by reporting that an Obama adviser called his candidate’s campaign promise to renegotiate NAFTA mere political ???manoeuvring,??? the effort faded.

???It all went into a black hole,??? said Colin Robertson, a former Canadian diplomat in the U.S. and senior research fellow at the Canadian Defence & Foreign Affairs Institute in Ottawa. ???The Security and Prosperity Partnership was 300 little flowers seeking to bloom, but they got their heads cut off. There were some useful blooms there that should have been cultivated.???

The bigger question is, where, if anywhere, does North American integration go from here? For the time being it appears that bilateral issues will continue to be managed sector by sector, crisis by crisis???such as the bilateral auto-sector bailout or co-operation on H1N1???without an overarching strategy for the future of North America. The corporate executives, too, will lobby for their individual interests. And Canada will have to compete for Washington’s attention.

Some in the business community are calling for a new ???big idea??? on North American competitiveness. ???We need an Ottawa-Washington grand plan that brings us into the next decade,??? said Birgit Matthiesen, an adviser on U.S. affairs for the Canadian Manufacturers & Exporters (CNE). The CNE and the U.S. Chamber of Commerce last week co-signed a letter to both governments asking for regulatory harmonization in priority areas. ???That would be a huge help and a huge cost and compliance advantage for us,??? said Matthiesen. ???Once you get the different standards harmonized, that is when the R & D money starts flying and the efficiencies of scale start flowing, and it reduces cost to consumers.???

Scott Miller of Procter & Gamble???which has a major plant in Belleville, Ont., and sends 40,000 truckloads across the border each year???said Canada and the U.S. should work bilaterally to do what the three countries could not accomplish. ???North America is becoming less integrated commercially. We are not operating in a way that brings our economies together and takes advantage of the basic efficiency of getting things to market???which saves energy, reduces the carbon footprint, and does a lot of things that are part of the economic objectives of our countries.???

Anderson says that despite its demise, the continental exercise offers a blueprint. ???The agenda-setting process was enormous and quite useful. It was a comprehensive effort to say: what are the issues confronting us in this common space of North America? It’s a permanent agenda that is sitting there, if someone is willing to pick up the torch and run with it.???

Meanwhile, the business leaders are hoping that if a certain hole gets plugged at the bottom of the Gulf of Mexico, and if the U.S. economy rebounds, the White House may take an interest in North America as one path to meeting Obama’s stated goal of doubling U.S. exports in the next five years. ???I don’t see it as a rejection,??? said Johnston of the Campbell Soup Company.
???[Administration officials] are like parents with 12 kids???some of the kids just have to wait. So we are waiting our turn.???