North American 21st Century?

Yesterday DCFR had the honor of receiving Dr. Robert Pastor, professor and director of the Center for North American Studies, American University and author of “The North American Idea: A Vision of a Continental Future.” Pastor’s message was that North America —the U.S., Canada and Mexico— is more than a geographic expression. If we imbibed the North American idea into the public’s consciousness, the 21st century might just be a North American century versus an Asian one. A big obstacle to this reality is a lack of leadership and mountains of special interests blocking regulatory reforms between the three parties to streamline trade.  A lack of political will in infrastructure development to allow for trade flows has hampered NAFTA’s growth and development as well.

The U.S.’s largest trading partners are Canada and Mexico. The middle class in Mexico is growing faster than that of China’s. And Mexico is sporting an evolving high valued-added manufacturing industry. Our energy interdependencies that already exist could be harnessed further in creative ways that benefit all three countries individually, collectively, and on the world stage. Pastor noted that the “pivot to Asia” could be made more sensible by strengthening the North American bloc first. Within the Trans-Pacific Partnership (TPP) countries, the three countries actually comprise the largest amounts of trade flows relative to the other TPP countries.

Pastor’s book outlines these ideas and more in full. Also read a shorter version: american-interest-rp-beyond-cont-divide-july-20121.pdf

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In today’s WSJ, Bob Zoellick echoes Pastor’s ideas in an op ed: “First, this country should strengthen its continental base by building on the North American Free Trade Agreement with Canada and Mexico. Together, the three partners could boost energy security, improve productivity, and give North Americans an edge in manufacturing and other industries that are already experiencing rising wages in East Asia. A politically acceptable immigration policy, and a push for educational innovation using new technologies and competition, could lead to a more prosperous, populous, integrated and democratic future for the hemisphere.”

On another note: “Mexico Central Banker Warns of Bubbles”

Governor of the Bank of Mexico Agustin Carstens, who spoke to DCFR in February 2011, was recently quoted in the Wall Street Journal (Feb 5, 2013). Speaking in Singapore on Tuesday, Governor Carstens suggested that some emerging markets and advanced economies could face a “major financial stability challenge” with large capital inflows raising the risk of asset-price bubbles.”

“Today my fear is that a perfect storm might be forming as the result of massive capital flows to some emerging-market economies and some strong performing advanced economies,” Mr. Carstens said in his speech. “This could lead to bubbles characterized by asset mispricing. [Countries could] then face a reversal in flows as the major advanced economies start exiting their accommodative monetary policy stance.”

…Emerging market officials have taken steps to mitigate the impact on their economies from capital flows, spurred by the asset-buying policies of large industrialized nations like the U.S. and Japan and low global interest rates.

Mexico has also seen its share of capital inflows, with stocks hitting record highs this year and bond yields at or near record lows. The peso tends to be more vulnerable than some of its peers, however, to swings in investor moods on risk, as it is one of the most heavily traded of the emerging-market currencies.

For the full article, click here.