Council on Foreign Relations
New York, N.Y.
ANTHONY DEPALMA: [in progress] because we are determined and will guarantee you that we will be done by 2:00, so that you can get back. My name is Anthony DePalma. I’m a correspondent and reporter for the New York Times. Welcome to this session this afternoon.
We are here, and forgive me for just reading this, but I want to make sure that I’ve got all the rules correct, to discuss the conclusion of the Independent Task Force on North America sponsored by the Council on Foreign Relations in association with the Canadian Council of Chief Executives and the Consejo Mexicano de Asuntos Internacionales. You all have details of the Task Force report, which was released today for the first time in your packet, as well as biographies of all the panelists up here. I’d ask you to bear with me as I go over a couple of housekeeping rules. I’ve already turned off my cell phone, so I would ask you all to do the same. Any other iPods, wireless devices, PDAs, whatever it is that you have, secret decoding devices, please turn them off. And in a little bit of a diversion from previous practices, this particular session is on the record, and all the comments that are made today will be on the record.
What we’re going to do— the format is that I will introduce the speakers. They will all speak briefly about an aspect of the Task [Force] report about which they are expert. We’ll begin with a couple of questions here, and then I will open it up to the audience for questions, and we’ll finish up, as I said, precisely at 2:00.
Let me just begin by setting a little bit of the stage. I was a correspondent and bureau chief of the New York Times in Mexico and then later in Canada, so I had the opportunity to live, work, and observe all three countries. It became clear to me pretty quickly as I was doing that, that the countries were going through enormous changes and that our concept of border was changing and needed to be expanded. At the end of my experiences, I put them together in a book called Here that was published in 2001, and I was on a continental book tour that began September 10th, 2001, and ended very early on the morning of September 11th. I was stuck in San Diego with this whole 3,000-plus-mile continent between me and my family, my job, my colleagues, and the biggest story of my life. As I drove back, it gave me lots of opportunity to think about what was happening and how those borders were going to change yet again and what was going to happen to this place called North America and for most of us simply this place called “here.”
The Council sponsored this Independent Task Force and I wanted to point out that they came up with a consensus at the end of the Task Force, along with some dissenting opinions, which you can read in there.
We’re going to begin with Minister Manley, who, as most of you know, in 15 years of public service was deputy prime minister and, following 9/11, was chairman of [the] Public Security and Anti-Terrorism Cabinet Committee. We spoke a lot during those times about what was happening along the borders, and he will make a presentation of about five to seven minutes about how to make North America a safer place. Minister Manley?
JOHN MANLEY: Well, thank you, and perhaps I’ll start with my own 9/11 anecdote because I think it does provide a certain amount of context for what happened on it. When you were in San Diego, I was in Berlin having toured a number of European capitals in preparation for— I was foreign minister at the time— in preparation for Canada’s hosting of the G-8 [Group of Eight] process the following year. And on September 11th, I flew through Frankfurt back to Toronto. And when the twin towers were struck, I was somewhere in an Air Canada plane over the Atlantic Ocean. In fact, I think we had just left European air space. The crew had me go and sit in the cabin. Something, of course, which is unthinkable now, but I sat in the cabin. I listened to the BBC as the story unfolded of what was happening in the United States at the time. And I can say to you that my first reaction was [that] this is going to have a profoundly significant effect on how things move forward in North America, particularly at the borders.
And the second thought that I had was to hope that whoever had perpetrated this act had not, in fact, entered the United States from Canada, something which very rapidly after I allowed that thought to go through my mind was reported widely in the United States, and as recently as about a month ago was reiterated by [former House Speaker] Newt Gingrich in a comment that he gave to the media of the United States. Just for the record, none of the 19 terrorists entered the United States from Canada or from Mexico. They entered from elsewhere. However, as we note in the report, there was an incident— a very well-publicized incident— of a man named Ahmed Ressam who endeavored to enter the United States on the eve of the millennium celebrations on the West Coast with sufficient explosives in his possession to cause quite a bit of havoc at the Los Angeles airport, which was his intention.
That actually turned out to be a fortuitous arrest for a number of reasons, in part because it avoided a calamity, which would have been, although not in proportion to 9/11, a very significant incident, but secondly, because it— through examination of him and questioning of him— it provided security and intelligence forces with a great deal of information about al Qaeda and about what was going on. And from the Canadian point of view, it led to quite a significant change in our approach in a whole number of areas with respect to security and intelligence matters. It also revealed to us that Canada was on the target list for possible terrorist attacks.
All of this is a lead-in to say to you that, in pursuing our work, the conclusion that we came to, the finding that we made as a Task Force, was that the security of North America is essentially indivisible; that it is a primary responsibility of every government to provide for the safety and the security and the protection of its citizens; that on this continent it is impossible for any one of our governments to do without the cooperation of the others.
Our border procedures find their origins in the 19th century when they were created in order to generate revenue for government. We didn’t have income taxes at the time or a myriad of other taxes. Most government revenue came from collection of tariffs, customs duties. And over the years, as the collection of revenue has become less important, a myriad of other responsibilities have been heaped on the border. And I think what we came to realize was that, if our two borders between Canada and the U.S. and Mexico and the U.S. became a frontline for security, that the impact that that would have on normal relations and economic relations would be very profound. And therefore, it was important to begin our task by looking at how we deal with that security leg of the relationship that exists.
We made a number of important recommendations, I think. The key one is to think in terms of a security perimeter surrounding a zone of security. We make the point that it is important for all three governments to commit themselves to security within that zone, thereby alleviating some of the need to try to build barriers at our mutual borders. That implies a great many things. It implies greater cooperation between our security and intelligence agencies, exchange of information, assistance in keeping track of persons who may be security risks. It implies that we understand the nature of the goods and people that are coming into the continent. With respect to goods, it means cooperation with respect to the inspection of goods coming from overseas.
Certainly, in the case of Canada and the U.S., the extent to which we inspect vessels and particularly container traffic coming into the continent has been sporadic and weak. In fact, as I told my one-time counterpart [former Homeland Security Secretary and] Governor [Tom] Ridge [R-Pa] at one point, you know, you inspect more thoroughly grain cars entering the United States from Saskatchewan than you do container traffic entering the United States from the Middle East, and I think that’s still the case.
So how do we build an approach that is cooperative and supports the common goal of providing security? And how do we then build on that to enhance the mobility of our citizens to engage in commerce and to pursue the natural relationships that have developed among North Americans in relationships of friendship and family as well as business? We think that there should be a North American border pass: a card that we can use to enter any of the three countries without going through the normal procedures for questioning either at airports or at the border with biometric identification. We think that we should be on the fast track to complete labor mobility in North America, first between Canada and the United States, that it no longer makes sense to say to Canadian or U.S. businesses that you may not hire the best people in those two countries. You can only hire nationals of your own country, unless you’re able to get through a complex series of obstacles to enhance what is known as the NAFTA [North American Free Trade Agreement] visa, so that it’s more open and more accessible— more readily accessible. Any of you who do business outside of the United States or across the border will know some of the issues that you have to deal with in trying to explain to an immigration official what it is you’re all about. These are things that really are antiquated in a modern world in which, in North America, we need to move beyond as we begin to be more comfortable with the steps that are taken towards security.
And finally, in a military context, of course, Canada and the United States have a very long history of military cooperation, jointly assisting in the foundation of NATO [North Atlantic Treaty Organization], having fought side by side in many international conflicts. We’ve just noted the 60th anniversary of VE-Day [Victory in Europe Day]. Not many Canadians, let alone citizens of the United States, are aware that at the end of the conflict in World War II, Canada was the fourth-largest military in the world and played a crucial role in the liberation of Europe, both at D-Day and beyond.
That led to very intense cooperation— 1958 the creation of NORAD [North American Aerospace Defense Command], a joint system for North American Air Defense. We’re suggesting that that relationship can also be deepened; that NORAD needs to essentially expand beyond air defense and into other areas of defense. That’s part of our cooperation. It needs to be more clearly focused on the defense needs of North America. These are changing. So in that context, we build a zone of security in which some of the other legs of our report can then be fulfilled. Thank you.
DEPALMA: So the idea is for a security perimeter, border pass, labor mobility, deepen NORAD, and make sure Newt Gingrich gets his facts right?
MANLEY: Well, I know our new ambassador talked to him very quickly after he made those comments, and he withdrew them.
DEPALMA: OK. Thank you, Mr. Manley. The Task Force report spends more time on economic recommendations than on security recommendations for obvious reasons. And to go over some of the details and the specifics of those economic recommendations, Dr. Pedro Aspe. During my time in Mexico, he was secretary of the treasury and— Dr. Aspe.
PEDRO ASPE: Thank you, Anthony. On the economy, we started by reviewing what has happened since we signed NAFTA 11 years ago, and I want to remind all of you the two things that NAFTA wanted to achieve, and it said very, very precisely the two objectives: first, to increase trade among our three nations; and second, to increase investment in our three nations. So I think it has to be judged upon these objectives. And upon these objectives, NAFTA has been a total success. Trade increased by more than double and investment more than tripled in a decade. By any standards, this has been a success.
However, on the economy, we have had new threats, new developments, and we have new challenges, and hence, we need a new vision and we have to weigh these things because the world has changed. And the world has changed in two manners. One is that with the— appeared in the economy— in the global economy, three big competitors: China, of course, No. 1 and by far the most dynamic; India doing extremely good work; and third, the expansion of the European Union. With these countries that— they’re challenging us, and if we do not change our structure and hence do more reforms, we’ll lose competitiveness. And so this is a new challenge.
And the second challenge is that, although the three countries have benefited from the expansion of trade and investment and they have grown, the southern part of Mexico has lagged behind, and we have to recognize that we have a very uneven development, and we have a development gap. And it’s concentrated in the center and the south of Mexico. Let me just give you the hard-core figures. In 11 years, the northern part of Mexico grew more than 50 percent. So you could have— if you looked at the, you know, Nuevo Leon, Monterrey, or you looked in [inaudible] Sonora, you have convergence with some and convergence with [inaudible] and convergence with the south of Texas and the south of Arizona. But it’s not true on the center and the south of Mexico. You take the same period; the south grew only 22 percent in that period, less than half than the northern part of Mexico. No wonder the bulk of the migrations that we’re facing and that you are facing here comes from the south.
Why the north took advantage so much of NAFTA? The reason is because two very good frameworks. It has fairly good, fairly decent physical infrastructure— that’s roads, telecommunications— but they were not as good as in the U.S., but they were OK, and they’re improving very, very fast. They’re converging to the south of the U.S., but it is not so on the south. On the south we have terrible growth. We don’t have bridges. Telephone communications are pretty bad, et cetera, et cetera, so we have really lack of infrastructure, but also the most important thing of following development, which is lack of good training and human capital formation. We do not have as good universities as in the north and the south of the country, et cetera, so we’re lagging in that.
So you look at the trilateral [inaudible], you see Canada and the U.S. expanding, the northern part of Mexico standing and converging, and the center and the south of Mexico being left behind, and this is clearly a problem. It’s not a problem of NAFTA, but NAFTA by increasing the capacity of the incomes of the northern part of Mexico has increased the disparity, and that we have to recognize. It’s a problem of development; it’s not a problem of NAFTA.
And to address this thing we have to do three things. First, we have to change our own economic policy. We have innovative fiscal and budgetary policies. We have big problems on energy. We have very low productivity on energy, and the energy comes— the bulk of them from the south of the country. But when you have on energy one-seventh or one-eighth of U.S. and Canadian productivity, they do have a problem, and you have to face it. You want to face it from the right, you have to face it from the left, you want to face it from the center, that’s OK, but you have to face it. And we have very low productivity growth and the gap in energy is widening, so we do have a problem.
So what to do with this challenge. Well, we have to do three things. First, we in Mexico have to put our house in order in this in reform. But second, the Task Force has been putting forward these three ideas, which I think they are very good. First, the extension of NAFTA to the sector that was not included at the time— which, by the way, at least from the Mexican point of view, the sectors that were not included are the ones whose relative productivity have fallen the most. No wonder. It is not a surprise for many of us. Second, we have to increase infrastructure linked to trade. Since the expansion of trade has been so successful, our infrastructure linked to trade has fallen short in part in highways, et cetera.
Third, we have to bring equity— capital— private capital to the south— to the center and to the south of the country. And there we propose that the three countries get together and create an investment fund for bringing infrastructure— physical infrastructure and human capital formation to the southern parts of Mexico, and this would only be done if we in Mexico do our homework and get together with all political parties for this big, big road to the south— the big road to equalize the opportunities across the country.
Finally, we need convergence in certain areas that were not included in NAFTA; for instance, regulatory convergence. We need to be careful, but we need to start doing this convergence. It’s a pity that we do not harmonize a lot of these regulations. And of course, each bureaucracy wants to do the same thing and in addition to have— you need leadership to homogenize this. Many of the systems can move on one day to the next, but they can be done. And the important word is convergence. You can have two speeds: Maybe Mexico, which is less developed, will have slower speed in some things, but convergence. And Canada and the U.S., they should move also faster on convergence on regulatory things.
One last thing: We need to advance in a common external time. We need to have a customs union which is a bit— that North America should have. And start with application of the lowest types, because you can converge to the one external [inaudible] it will be a disaster. We should converge to the lowest of the three and move on that front for a customs union.
I think that the recommendations on the economy that are divided in the very short term and the long term should be attended, and I think this would raise the discussion— the level of discussion in our countries to have a most prosperous and a more evenly distributed benefits of opportunities in North America. Thank you.
DEPALMA: Thank you, Dr. Aspe. So common tariff or a customs union and opening up those sectors that had been closed under NAFTA to be covered by NAFTA. All right. And the third speaker is Governor William Weld. As you all know, he was governor of Massachusetts 1991 to 1997. He will talk about the political framework of those development decisions that have to be made.
WILLIAM WELD: The Task Force very rapidly identified spreading the benefits of economic development throughout the continent as a major goal for all three countries and a matter of necessity. And this finding, this recommendation, really cut across the two halves of the report: the prosperity considerations and the security considerations. It implicates both of those mandates.
As Minister Aspe mentioned, the northern states of Mexico have been growing much faster than the central and south, and the principal reason appears to be better connectedness to the northern markets, which means physical infrastructure and probably an edge up on primary and secondary education as well. And many members of the Task Force, myself included, are pleased that our final report states that the progress of the poorest among us will be a major measure of our success. We felt that there was a moral element here in a continent as rich as North America in making sure that those benefits are spread geographically.
But I don’t think anybody, even the hardest-hearted economist, would take the view that helping the population in the central and southern parts of Mexico is a zero-sum game; that anybody who goes in there to help is— if we help you, we’re losing. That’s clearly the opposite of the case. We’re all neighbors. We’re in a single economy, like it or not, and I do like it. We share security concerns, as John Manley explained. So altogether, apart from any notion of [political philosopher] John Rawls’ “justice is fairness,” if we have major geographic areas within our continent that have a tremendous lack of economic opportunity, we found that that is going to produce instability— economic, political, and social. It can [lead] and has led in many countries, not just Mexico, to corruption, narcotics, violent crime, and as Minister Aspe indicated, it has been a contributor to unauthorized migration between Mexico and the United States.
The way to address that issue is not to build a fence like the Berlin Wall; it’s to solve the problem. And we made a few recommendations to solve the problem. We recommended the establishment of a North American development fund with U.S. and Canadian participation, which would address the twin needs of physical infrastructure and improvements in education available for the local populace. This would involve technical training for states, for municipalities, even for public utilities that want to get their projects— their infrastructure projects to market to help them access the international capital markets. We do believe that there are long-term dollars and pesos out there, given the right mechanisms, that want to support the long-term projects, and this is going to be a big step towards solving the problem. I’m just talking about the credit worthiness of the projects and licking them into shape so they can access those markets.
Second, we recommended that the North American Development Bank, NAD Bank, which has been operating on environmental projects just within first 100 miles and now 300 miles of the border, have its mission expanded, particularly to the transportation sector and that they be further authorized to provide technical assistance to governmental entities and utilities to help them out, as I mentioned a moment ago. Third, and I think this happens under the same heading, we recommended educational exchanges, scholarships, teacher exchanges, sister-school programs, which I think would be a helpful means of ventilating these issues.
And on the immigration point specifically, we recommended the development of a North America preference, which would make it easier for employees to move and employers to recruit across borders within the continent. We recommended the expansion of temporary migrant-worker programs that are already existing, and for me at least, legislation along the lines recently filed by Senator [John] McCain [R-Ariz.]. The [inaudible] visa could be part of the solution as well. I think everyone agrees that Mexican immigrants in this country and in Canada are very hard-working, they’re very devout. As a political matter, I would think that social conservatives in the United States should welcome the normalization of their very substantial contributions to the economic and political life of the United States.
DEPALMA: Thank you very much. To summarize, the North America Development Bank being more active, educational exchanges, immigration reform, and the expansion of the North American preference in giving out visas. The final speaker on the panel is Dr. Robert Pastor, now director of the Center for North American Studies at American University, former member of the National Security Council, and long-time connection with the Carter Center. Dr. Pastor will speak about institutions, how to create those institutions without creating bureaucracy. And I’d just like to take this opportunity to point out that this was a Task Force that came up with a consensus, but there were dissenting opinions, including an opinion by Dr. Pastor about several of those issues, and a customs union, which is not actually in the report, but your dissenting opinion asked for it to be there in five years.
ROBERT PASTOR: Well, that may be a bit esoteric and perhaps we’ll leave that for questions. Winston Churchill once said that people create institutions and then institutions then shape people. This is an idea that’s not very popular in the United States or in North America. North American integration, which as we’ve heard, has advanced very rapidly over the last decade, indeed, if you measure integration as intraregional trade as a percentage of world trade, North America after one decade is as integrated as Europe is after five decades. Social and economic integration has proceeded very rapidly. What has not happened is governance has not followed this in a large market.
We have made the opposite mistake of Europe. Europe over-institutionalized. It created very supranational, very intrusive— too many institutions, and North America created almost no credible institutions. So it was the consensus of our group that, if we are going to translate the very specific recommendations on how to achieve a North American community into real policy, it would require institutions to put the ideas forward and institutions to make sure that they’re fully implemented. It’s the absence of institutions today that allows individual summits to stand as photo opportunities, rather than as opportunities for furthering integration.
So what we decided to do is we made several recommendations. The most important was, there is no interest in North America to replicate the European experience. We don’t want to create large supranational institutions that are as intrusive as that of Europe. On the other hand, we did feel that some lean institutions were absolutely essential.
The first critical institution is the annual summit. The North American summit that occurred in Texas on March 23rd is a very important statement. But if it’s to be more than a photo opportunity, we felt that a second institution was essential, and that would be a North American advisory council made up of eminent individuals from all three countries, appointed for terms that are longer than those of the governments, and staggered over time. This council would propose ideas for dealing with North American challenges, whether they be regulatory or transportation or infrastructure or education, and put forth options to the three leaders to consider ways to adopt a North American approach. It would be a public voice for North America and, therefore, a symbol. It would ensure that not only the agenda that went before the summit meeting would be publicly known and debated, but would be monitored and implemented. And hopefully, the three leaders would turn to this North American council and say, “Look, we’re getting wonderful advice on what our government should do. We’re not getting very good advice on what we should do about North America as a whole. Why don’t you prepare a plan for us on education, on agriculture, on the environment, and we could consider that even as we consider the advice of our government.”
The third institution would be an inter-parliamentary group on North America. So much of the agenda on North America today is domestic, which is another way of saying that our parliaments have a very important role to play, and yet our parliaments are mostly pulled backwards by their constituencies, rather than forwards to looking at how their constituencies relate across borders. And perhaps the only way to compensate for that would be to have our parliamentary leaders meet every other year in a North American context addressing an agenda very similar to the one that the North American advisory council would develop for the summit meeting.
The fourth institution is one that would replace the ad hoc dispute settlement mechanisms that were in NAFTA. I think these have functioned well, but their credibility is increasingly questioned not only by an inability to assure compliance by the governments to such problems and challenges like softwood lumber, but more importantly there— because they are ad hoc, there is always a problem of conflict of interest, and there’s a problem of a lack of precedent. We have now reached the point where we should have a permanent tribunal that deals with trade and investment issues.
A fifth institution is to deal with trade-remedy problems: countervailing duties, problems of predatory pricing, if you will, as we deal with this in large market, and to do so with the tri-national competition commission. This tri-national competition commission can deal— can be in effect a North American anti-trust agency reflecting the fact that the markets now are continental. They’re no longer simply national.
A sixth institution that was mentioned both by Pedro Aspe and Bill Weld is a North American investment fund to narrow this development gap between Mexico and its neighbors.
Seventh, to encourage an identity and to encourage research and to encourage our students to recognize that they are not only citizens of each country, but residents of North America; to sponsor Centers for North America Studies in all three countries very similar to what the European Union does in all of our countries, but which none of our countries do for ourselves.
So these are the institutions that we recommend. We believe they should be lean, they should be few, they should be un-bureaucratic, they should be responding to the more pragmatic approach that reflects the North American as contrasted with the European model, but they are essential.
There are other ideas that were developed in the report, too, that deal with, for example, an alternative to [the] Kyoto [Protocol on climate change] on a North American basis, to reduce emissions; a North American testing center, which could be used to insure that regulations are convergent with each other; and of course, a North American resource accord that would deal with some remaining problem. So the short is that we need to think beyond the recommendations to institutions that would ensure that these recommendations would be implemented and that we foster a North American approach.
Lilly Tomlin once said, “Together, we are in this alone.” And that may very well have defined NAFTA a decade ago, but for the next decade we need to redefine Lilly Tomlin’s advice and think about that we are in this together, and we are in this to try to define the North American community.
DEPALMA: Thank you, Bob. I won’t go over all seven of those recommendations, but among them are the North American advisory council, the creation of an inter-parliamentary group, and a permanent tribunal to deal with NAFTA disputes.
Now we’ll go to questions. While you prepare your questions, I’ll begin with one here. This way, you can all be set. But I did— knowing that I was going to come here, I did want to— I went back, because I thought I remembered something that Mr. Manley said when he was the foreign minister back in 2001, and I did find it.
MANLEY: Uh-oh. [Laughter]
DEPALMA: And you said— when asked about the concept of a security perimeter at that time, as it was originally thrown out by the U.S. ambassador to Canada, you said, “I’m concerned that the perimeter concept is something that is not well defined and it lies out there somewhere.” Basically, you were saying not now, not yet; let’s go on to something else.
The question that I have as a journalist listening to all the recommendations in this Task Force is one that I supposed most people who read the Task Force will have: Is it only something that can be said when you’re not in office any longer? [Laughter]
MANLEY: There are quite a few of those things. [Laughter] I’ve been making a habit of saying many of them. You know, when we dealt with this in 2001, the immediate interpretation of perimeter was elimination of border, and at that particular point in time, we were engaged in what I think was a very comprehensive discussion with the team led by Governor Ridge— he was not yet Secretary of Homeland Security— around an action plan based on the border. We, in December 2001, signed the 30-point smart border action plan. At that point, to try to get into a discussion about something that moved the security issues essentially offshore and said from our point of view to the United States, “Don’t worry about the border, we’re going to work elsewhere,” was to my mind going to be counterproductive; that in the immediate aftermath of 9/11 there were and there in fact now continue to be very real concerns about the security implications of the border.
I think we’ve dealt with a lot of those, and I think the time has now come when it’s important to say, “OK, we’re no longer in the months and even the years following 9/11. We’ve moved a long way. Much of our exchange of information is taken care of.” Some of the issues that we have— the U.S. has introduced a U.S. visitor program, which quite frankly doesn’t make a lot of sense until you bring your neighbors into it, given the volume of land crossings that occur, and I think now is the time. I think the time that I said that, I would never claimed to have been misquoted by the New York Times. It was not the right time, and we moved on.
DEPALMA: If I can just ask Governor Weld, how you flip the situation around and get from the sort of top-down recommendations to some sort of a bottom-up demand for these changes— I mean, it’s one thing for the Task Force to suggest and recommend, but who out there is demanding that these things happen?
WELD: Well, there’s surely demand for spreading the benefits of economic development. There’s surely a demand for addressing the situation of unauthorized immigration, principally from Mexico and the United States now. That’s a huge issue in Washington. And in answer to your next previous question, I always said these dreadfully politically incorrect things even when I was in office. [Laughter] That’s why [inaudible] an enfant terrible. I declared— at one point, I declared myself a liberal on immigration and my interlocutor said, gasp, “What?” So it’s— my answer was: “Melting pot, love it or leave it, baby.” And that’s the divide that’s going on principally within the Republican Party right now between the social conservatives, to whom I had reference twice in my earlier remarks, and the enterprise wing of the Republican Party.
DEPALMA: But isn’t that wall a response to that bottom-up—
WELD: Oh, yeah. I mean, it’s— as I say, I think it’s just dead wrong. It has a constituency in the Congress, but if people who think it’s dead wrong don’t rear up on their hind legs and say so, it will get more momentum than it deserves, but I don’t think there’s going to be any problem getting these issues front and center in Washington, because they’re already there.
DEPALMA: OK. Now we’ll open it up to questions. I need to ask you to please wait for the microphone, identify yourself, and remember that it is on the record. So let’s say right here. And please stand up, if you can.
QUESTIONER: I can. Ralph Buultjens, New York University. This is a two-part question, one to Mr. Aspe and one to Dr. Pastor. Mr. Aspe, in your consideration of the economies, did you all discuss the possibility of a common currency, considering what it has done for Europe and the fact that arbitrating areas like Southeast Asia are giving consideration to it? And Dr. Pastor, did you consider the possibility of a North American energy pool, because you have two big supply— energy countries and one country short of energy, and how can that be adjusted?
ASPE: OK. I go first?
ASPE: On the currency, yes, we did discuss it. And let me tell you why we— in the report— we don’t say much about it, because— and you can correct me, John, if I say something wrong. For Canadians, it’s a non-starter, and for Mexicans we cannot even discuss it. Before that, we have to discuss what we’re going to do with a fiscal deficit, what we’re going to do with all these sort of things. So when we said, “OK, eventually if these things are corrected”--and at least from the Mexican point of view, if these things were corrected on energy, on productivity, on the fiscal deficit, et cetera— “then we’ll discuss currency, not before.” There’s no way that you can just enter into civil discussion of currency when you have not discussed the way to balance the budget and things to correct on productivity growth and the opening up of the energy sector, so we have to solve those things first.
So I think the correct answer, given the independence of the group, was we did discuss it, but the bulk of the group felt that we did not reach consensus and it was better to discuss the other things.
ASPE: I will, I will, I will. But it will not be on the top of my priority list. You know, let me tell you my view. It’s a very conservative view, maybe, but I think you have to earn it; it cannot be a give-away. If you’re given to that when you have your fiscal balance out of order, when you have all these mismatches in relative prices, et cetera, then when are you going to correct those, since the currency is so important that then people try to postpone it? So that’s what happened a lot— in some cases, as you know better than me.
DEPALMA: Was there support in the group for the idea of a common currency?
ASPE: No. No. People— they said it was an important point, yes, but on the priority it will not be. That’s why it’s not in the priority.
MANLEY: Could I jump in?
MANLEY: Europe has preceded America in the development of institutions, and quite frankly, when we talk about a common currency in North America, we’re talking about the U.S. dollar. And when the chairman of the Fed [Reserve Board Alan Greenspan] is prepared to come for confirmation hearings in the Canadian parliament, maybe we can start to talk. But in the meantime, in the last two years, we’ve had a 25 percent adjustment in the relative value of the Canadian and U.S. dollars. That would never have happened had there been a common currency, and I don’t think policy-makers in Canada have at this point been persuaded that, essentially, the loss of any kind of independence in monetary policy is worth the gains of the certainty of the exchange rate.
DEPALMA: Bob, an energy pool, was that discussed?
PASTOR: Yes, we discussed energy at great length, and I think there is recognition on the part of all three peoples of the sensitivity of the issue, particularly in Mexico. The history of the nationalization of petroleum in 1938 is a very important holiday in Mexico and constrains debate and imagination on this issue, despite the fact that Mexicans led by Dr. Aspe acknowledged that Pemex [Petroleos Mexicanos] is extremely inefficient, which we wrote about in the report, and then Mexico is importing 25 percent of its natural gas from the United States, which itself is importing natural gas from Canada and that, therefore, this is not a terribly functional entity right now of North America.
I think we went further than the three leaders have, though they’ve had an energy working group since 2001, in saying that oil should be part of the mix in the discussion, that we should do something about reducing emissions, at least on a regional basis. Unfortunately, Canada is the only signatory of Kyoto and clearly something should be done within North America as a whole. And that— we should be thinking about North American energy security in a way that we really haven’t taken it very far, and that Mexico, however, should take steps within its own constitution and with its own debate that would make full use of the tremendous resources they have. I think this was about as far as we could take it.
QUESTIONER: Thank you.
QUESTIONER: Steve Handelman, Time magazine. I really want to continue Tony’s line of questioning. A month and a half ago, you released— a month and a half ago or so an interim report which received less than overwhelming support. And if anything, the atmosphere since then has grown chillier. We have now talked about vigilantes on both borders— protectionism, if anything, has increased, certainly if the CAFTA [Central American Free Trade Agreement] debate is any sign of it. All three of you have held distinguished positions or the three politicians, the— distinguished positions in each of your governments. I wonder if you could tell us, first of all, what your reading is— although you can’t speak for the governments, of course, now— but what your reading is of the receptivity for your ideas at this stage in the bureaucracies of your respective countries, if not the leadership.
And second, to continue a bit of Tony’s questioning, what are the political steps that have to happen in order for all or any part of your ideas to actually make it to reality? What’s needed? What is there— is it a question of conditions or atmosphere that has to be created? Do we need another crisis, another 9/11, another chaos? Where do you see this going in the next year to five years?
DEPALMA: Governor Weld? Dr. Aspe?
ASPE: Yes. Let’s take the hot subject just for Mexico, which is energy in general. We discuss it a lot. The group is— the Mexican group— part of your groups was a group from all spectrums of political parties and all views. And I think the way we came to have a common sense was to get at the hard data and to say, “OK, let us not start with the proposals to privatize, to open up, et cetera. Let us not talk about that. Let’s talk about the hard facts.” The hard facts is that, in order to produce one barrel of oil for Pemex, it takes exactly ten times more hours of work than for the average Canadian and for the average American company, and this is— I mean, the productivity is one-tenth, so we have to discuss this. And if you are from the left, you are either going to say, “Well, this is terrible and”--well, proposal is X and Y. If you are from the center you will say it’s terrible and another type of proposal, but at least we are starting to discuss. So the first thing I will say is express the true information. People are not stupid when you spread information and you say, “Look, we have a problem.”
Second, let’s take gas. We change because of ecology. We changed the regulation ten years ago, and we started producing gas in most of the urban areas, so we opened up the demand for gas. And the big problem is that we have been discussing the last 11 years and we have not opened the supply, so no wonder when you open the demand and you do not open the supply, you import.
Now, we are importing from a [inaudible] country, which is the U.S., so the U.S. is up to here of the problems of being a deficit country in gas and Mexico being importing, when we have a lot of gas, but we have not been able to gather this information to how we solve the problem. So in the report you will see how much imports are growing. They’re growing at 40 percent per annum in Mexico. And production is growing only at 2 percent, so we’re heading for more and more trouble, and we say we’re going to lose our independence on energy. Well, on gas we already lost it. And these are the things— the way I think the way to help the thing is to discuss it, bring people from all the sides of the political parties and say, “This is the problem, this is a challenge. How do we face it?” Then, “How would you solve it?” That’s a different thing, but at least we’re discussing the true problems.
DEPALMA: OK. Governor Weld?
WELD: Well, I sort of agree with what Pedro said about telling the truth as a way to getting to solve the puzzle. I mean, in the political dimension, I would say the answer to your question is we have to encourage members of Congress to stop waving the bloody shirt, by which I mean thinly disguised appeals to xenophobia. I would trust the Bush administration to be on the right side of virtually all of these issues. I’ve discussed them with then-Governor Bush. He and I and Governor [James] Hunt [D-N.C.] of North Carolina, when Congress refused to go along with the peso loan guarantee matter in February of 1995, the governors were meeting in Washington at that week and Bush and I and Hunt circulated a petition which was signed by all 50 governors calling on President [Bill] Clinton, who was not a member of Bush’s and my party, “Please do this administratively,” and he did it in about one day.
Maybe that’s part of the puzzle. Go to the governors who are running operations. Go to business leaders who want to see this immigration issue addressed; people who are actually operating units of either government or industry.
DEPALMA: Yeah, bottom up doesn’t necessarily always mean just on the street corner. Yes? Microphone.
QUESTIONER: Thanks. I’m Ted Sorensen of Paul, Weiss. There’s one issue that I don’t think I heard discussed much, which is in some ways a tough one, and I wondered what the Task Force had to say about it. Energy, economics, governance are all important, but if you’re truly talking about community, you see the unified culture, and that’s a sensitive issue. And particularly among the Canadians who have kept out of American magazines and television and sometimes in sports and so forth— is a unified community culture of all of North America possible?
DEPALMA: Well, on the interests of time, I’m not going to put you on the spot to answer that question, but—
MANLEY: Oh, wait a minute.
DEPALMA: --did you consider dealing with culture? And if you want to take a shot at it in two minutes— the North American unified culture— go ahead.
MANLEY: Well, first I’d say 94 percent of English-language drama on television is from the United States. It’s hard to know how well we do at keeping it out, but we— culture is essentially— is en masse. If you choose to use a cultural exemption, there are retaliatory rights that unfold, and I think that it’s indisputable that for Canada the sensitivity around being— particularly in the English-language sectors— quite different in the French part of Canada, but for English-language Canadians, just think about the economics of promoting television broadcasting or magazines that serve a Canadian— a uniquely Canadian market. It’s very difficult when the cost for a Canadian network of an episode of CSI might be a couple hundred thousand dollars, whereas it costs several tens of millions to produce it. Producing a Canadian program for uniquely Canadian consumption on that scale is just simply impossible.
So no, we didn’t spend a lot of our time trying to figure out whether there was a new paradigm around that one. It would be toxic to the process, quite frankly, as far as getting it advanced in Canada’s concern, and having had to deal with government with a lot of decisions related to investments in the cultural sector, I don’t think the current rules are a very serious impediment to American interests wanting to sell their products in Canada, anyway.
DEPALMA: OK. I’d like to see if I can get a couple more questions in. Just to let you know that Dr. Aspe and Governor Weld have to leave right afterwards, but Mr. Manley and Dr. Pastor have agreed to stay behind. Yes.
QUESTIONER: Dr. Aspe, Sean McCarthy from the Globe and Mail in Toronto. Staying on the theme of politics and particularly immigration, how do you counter the arguments heard from what Governor Weld suggests may be the xenophobes in Washington that a huge influx of Mexican immigration is not bidding down labor prices, is not taking jobs at the bottom end? And can you comment at all on [Mexican] President [Vicente] Fox’s perhaps misstatement this weekend that has angered a lot of the African-American leaders in this country?
ASPE: Yeah, well, let me tell you about the immigration. In immigration, what we see is that if you want to go to the root of the problem, the root of the problem lies in the center and the south of Mexico, where I think I mentioned the 3 percent to 6 percent of those coming north as illegal immigrants come basically from the south, so this is really a southern problem. And it specifically is of the state of Guerrero, the state of Oaxaca, Chiapas, and parts of Tabasco and Veracruz. That’s the bulk of the migration.
Now, building a wall will not solve the problem. The border is huge. I don’t know if you have been on the border, but it’s huge. And what is terrible is that this is the state of affairs that we have, where some of my compatriots died in the desert and, you know, the violations of human rights, all these things. This is really a terrible state of affairs.
Now, we have to do two things. We have to do the big reforms in the south of the country to make it competitive by bringing investment in infrastructure and education and training, et cetera. That’s one part, but that alone will not solve the problem. We need to have short-term flexibility and what we think is that we have to review how these problems like we have with Canada of temporary migration is working. And I do see— like the Mexican-Canadian program— it works extremely well. I think it works extremely well for Canada. It works extremely well for the Mexican families, and for Mexico, and I think we should expand.
So you need to do two things: Structural reforms, which will take time and they’re always slow, but you have to initiate. And at the same time the short term has to be confronted by these temporary workers.
DEPALMA: Was President Fox expressing a view that’s widely held in Mexico? [Laughter]
ASPE: That’s a tough one, huh? That’s a tough one.
UNKNOWN: They have diplomats to deal with it.
DEPALMA: Yeah. All right. We have time for one more question, and then I’ll just bid everyone goodbye. Now we’ll take the question.
QUESTIONER: I’m David Brooks of La Jornada newspaper. One of the questions is in terms of the success of NAFTA, which it seems like this proposal is built around that supposition, and that the further recommendations are deepening and amplifying of it. The problem with it is that, on one level, you can measure the success of it. On the other, if you look at the World Bank reports for the last 10 years, if you look at the U.N.’s reports for last 10 years, the real measure of development is, how are the people doing? And in that case, almost by any measure, at least in Mexico it’s not getting better. And by some measures, in the United States it’s stagnant. And so the question is, how do you convince people who are very wary of trade agreements in the United States, some of it based on real concrete evidence, and especially in a country like Mexico and further south, where in fact there are— in Brazil and Argentina and Uruguay— there is actually a reaction against or trying to redefine which was once the Washington consensus, which is what all this was based— there’s more increased skepticism about this? So how do you deepen this— how do you convince, I guess, one of my readers about why this should—
QUESTIONER: Why this time it’s going to work?
PASTOR: Well, there is a lot of opposition to trade right now, and the debate on CAFTA is an example of it. I think that it’s not very well understood, that really, what you’re talking about when you create a free-trade area is you’re enlarging competition. And enlarged competition, as we know in the greatest single market in the world, the United States, leads to a lot of winners and losers; a lot of changes very quickly.
And the problem is that the losers have a greater incentive to protest than the winners, who believe that their success is due to their own genius. And so you need to build institutional mechanisms to compensate for that kind of thing. You can do it, to a certain extent within the United States, but I think the real point about the North American investment fund is precisely to lift all of Mexico and to close the development gap between Mexico and its two northern neighbors. Absent something like that, I think it will be 100 years before that gap is closed.
That doesn’t mean that NAFTA is not working. As Pedro pointed out, it’s working very well for those parts of Mexico that are connected to the northern market. It’s growing— they’re growing very well. It’s not working for those areas that are not connected, so actually what you need is more NAFTA, not less.
DEPALMA: OK. I think that’s all the time we have. It’s 2:00, but Dr. Pastor will stay and Mr. Manley will stay. Thanks, everyone. [Applause]
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