Obama’s Mexican challenge

by JEFF FAUX
July 2009, it was published in Dissent Magazine.

When Barack Obama and Hillary Clinton pledged to Ohio Democrats last spring to renegotiate the North American Free Trade Agreement, they were immediately charged by the mainstream press with pandering to labor, thus re-igniting the simplistic “free-trade vs. protectionism” debate that has dominated the discussion of the U.S. role in the international economy for the last quarter century. It was clearly an over reaction. After all, both candidates merely suggested strengthening the agreement’s labor and environmental protections, which even fierce champions of NAFTA now concede are inadequate. Changing them would have little effect on the rest of the agreement.

The pledge also produced a whiff of the cynicism that has characterized the politics of trade. Obama’s chief economist was alleged to have assured Canadian officials that his candidate, if elected, did not really intend to deliver. And soon after the election, Washington insiders were betting that Obama’s pro–Wall Street economic team would bury the idea—much the way they buried Bill Clinton’s 1992 campaign promise that he would not sign NAFTA unless it had labor and environmental protections with “teeth.” But in a time when unregulated markets— domestic and foreign—have been discredited, Obama may not be as easy to manipulate as was Clinton. At their meeting in January, Obama insisted to Mexican president Felipe Calderón that he wanted to “upgrade” NAFTA. So the ball is still in play.

However, the world has changed dramatically since the treaty came into effect in 1994, making the economic and political assumptions upon which it was based obsolete. What is needed now is not a revision of NAFTA but an entirely new approach to North American integration in light of the two most important changes. One change is the stunning deterioration of Mexico’s social and political order. While U.S. foreign policy pundits fret over the possibility of “failed states” in the Middle East, central Asia, and Africa, they give short shrift to the slow descent toward chaos of a country of almost 110 million people on our border. Yet, in January 2009, Michael Hayden, the outgoing director of the CIA, told the Baltimore Sun that the two top national security priorities for the new president would be the nuclear threat from Iran and the political instability in Mexico. Earlier, a Pentagon report on future security threats concluded that the most worrisome danger was the prospect of the “rapid and sudden collapse” of Pakistan and Mexico. Mexico is in the midst of a bloody and chaotic civil war. The war is both between the government and criminal bands of narcotraffickers and among the drug cartels themselves for control of territory, trade routes, and the state itself.

In the opinion of most Mexicans, the government is losing its war. Every day, the media report dozens of drug-related murders of narcos, of soldiers, of police officials, of judges, of journalists, and of innocent bystanders caught in deadly crossfires. In 2008, there were roughly six thousand drug-related assassinations throughout the country, more than double the number of the previous year. The violence has fed upon itself. Kidnapping has become a fastgrowing industry. The victims are not just rich people or the middle class. The kidnapping epidemic is so widespread that public service billboards in Mexico City warn parents against the latest racket, in which small-time thugs steal cell phones from adolescents and then call their parents and threaten to kill the child—who is not actually in their hands—if ransom is not paid immediately. Mexico is becoming a narco culture. About half of all the police and a good chunk of the army are on the payroll or otherwise compromised by the narco-traffickers. As the economy has flattened and investors move their money northward, the narcos are a growing source of risk capital. Drug money finances small business, farmers, real estate, movies, and even beauty pageants. Exports of illegal drugs are a major—and perhaps the major—earner of hard currency dollars for a Mexican economy that is otherwise not competitive in the global market.

The causes of the rising power of the drug warlords are complex. They include many things beyond Mexico’s control—such as the hugely profitable illegal drug market across its northern border. But there is little doubt that the failure of the economy to provide widely shared growth and to alleviate the maldistribution of income and wealth has played a major role. This brings us to the NAFTA connections.

One effect of NAFTA on the growth of narcotrafficking is that it lowered the barriers to illegal as well as legal commerce. The enormous pressure to speed up the increased volume of trade across the border has made effective inspection of freight impossible, creating a drug superhighway across the border. A measure of the increased supply of narcotics coming into the U.S. market is that the street price of marijuana and powder cocaine in the United States is about half of the price in Western Europe.

In the spirit of free trade, the Mexican drug lords use the dollars they have earned from their exports to import guns, grenades, missile launchers, and other arms from the United States—the world’s largest seller of lethal weapons.

The Bush administration’s response was to provide Mexico with roughly a billion and a half dollars worth of guns, military equipment, and training to fight the narcos. The assumption, of course, is that the United States, which has been unable to deal with its own criminal drug industry and has spent six billion dollars in a failed effort to solve the problem in Colombia, has the answer for Mexico. Moreover, given the high level of narco infiltration in the military and police, it is a safe bet that a fair share of the U.S. arms have ended up in the hands of the cartels.

A second effect was the failure of the economic model upon which NAFTA was based to reduce the poverty, inequality, and lack of opportunity that feeds the culture of violence and corruption.
The debate over NAFTA was carried out largely over the abstract, polarizing question of “free trade vs. protectionism.” But, if the agreement had been just about free trade, it would have needed only a few pages. Instead, it is a thousand pages promoting deregulation, privatization, patent protections, and a wide variety of other investor privileges. This was hardly what Adam Smith or David Ricardo had in mind. Rather, as Jorge Castañeda, who later became foreign minister, observed at the time; it was “an agreement for the rich and powerful in the United States, Mexico and Canada, an agreement effectively excluding ordinary people in all three societies.”

By providing extraordinary protections for capital mobility and undermining the governments’ capacity to protect the social contract, NAFTA reduced the bargaining power of workers, farmers, small businesses, and other “ordinary” people in the new continental market that the agreement created. So it is not surprising that whatever growth in Mexico that did occur after NAFTA further imbalanced the already uneven distribution of income among sub-regions and income classes.

Raising Mexico’s living standards through faster growth was the central economic rationale for NAFTA. Free trade, it was said, would close the wage gap between Mexico and its two North American neighbors, much the way wages in Spain, Ireland, and Portugal responded to Western European integration. Mexicans would become middle class, and Americans and Canadians would become richer because of privileged access to this vast new market.

The U.S. undersecretary of commerce at the time predicted that Mexico’s growth for the foreseeable future would be “between a supercharged six percent a year, worthy of Asia’s tigers, and a startling 12 percent per year,” comparable to China. Bill Clinton assured Americans that under NAFTA, “There will be less illegal immigration because more Mexicans will be able to support their children by staying home.”

Because of this promised piñata of prosperity, the people of the three nations were told that social protections were unneeded in this new continental economy. Mexico’s rapid growth would more than compensate for dislocations in Mexican agriculture, the undercutting of wages in the United States and Canada, erosion of control over borders, and other concerns of NAFTA’s opponents. The “side agreements” ostensibly protecting labor and the environment were widely understood to be cosmetic, aimed simply at giving political cover to members of the U.S. Congress.

Fifteen years later, Mexico’s growth has been far too small to provide jobs for its people. Since the beginning of this decade—way before the 2008 financial crisis—its economy has been virtually stagnant. Outward migration, of course, has increased, not decreased. NAFTA opened up Mexico’s rural economy to competition with highly subsidized U.S. and Canadian grain, virtually decimating Mexican rural areas and adding several millions to the stream of migrants heading north for work. Before NAFTA, illegal migration from Mexico was a minor problem for the United States. Now it is a major political headache. But it works for elites on both sides of the border. Mexico gets rid of large numbers of frustrated workers who might contribute to political unrest and receives the benefit of hard currency remittances. U.S. business gets the benefit of docile, low-wage labor that helps keep down labor costs. It is, of course, an odd conception of economic development that encourages the out-migration of ambitious, working-class risk takers—precisely the kind of people that Mexico needs if it is to build the strong middle-class economy that was supposed to be the goal of NAFTA. As someone who did not support NAFTA when it was proposed, I had nevertheless thought that the strongest argument for the agreement was that economic integration among the three nations would create a continental economy more capable of competing with Europe and the rising economies of Japan and China. As it turned out, few if any of the important promoters of NAFTA, in the United States at least, took that idea seriously.

Several years ago, I had a discussion about NAFTA with a group of Mexican businessmen. To my surprise, some of them expressed bitter disappointment with the agreement. It seems that they had expected NAFTA to create a partnership between businesses producing in the United States and Mexico to meet the growing global competition—especially from Asia. But, they complained, a few years after NAFTA went into effect, the United States opened up its markets to China. At that point, they realized that Mexico—and Mexican businesses— would not have the privileged place in the formation of U.S. economic policies that they thought they had been promised.

A few months later, I mentioned the episode to a prominent Wall Street investment banker, who had been the person most responsible for convincing Bill Clinton to approve the NAFTA treaty. He acknowledged that during the negotiations there had been some vague talk about a “partnership” with Mexico. But “things changed,” he shrugged, explaining that the opportunities for profitable investment in China dwarfed anything that Mexico had to offer.

His response reflected the prevailing view in Washington that the goal of trade policy is to provide maximum opportunities for cross-border investment. All other benefits—jobs, rising living standards, public services—would eventually follow. Not only did he and his colleagues have little interest in a North American competitiveness strategy, they had little interest in a U.S. competitiveness strategy. The result was that NAFTA was not so much a step toward the creation of a continental economic community as it was a step toward a global economy governed by rules that freed the corporate investor from labor, environmental, and other social constraints enforced by national governments.

Although the more honest promoters of NAFTA acknowledge these disappointments, they argue that, on net, it was good economic policy. One argument is that Mexico would have been worse off without NAFTA. Perhaps, but it is an unverifiable assertion. Another is that consumers in all countries have benefited
from lower prices. Certainly that is true. But, whether this was “worth” the costs of dislocation, a more unequal distribution of income and wealth, and social deterioration is a value judgment, not an economic fact. The polls suggest that most voters across the continent are not convinced.

The third and perhaps most important connection between NAFTA and Mexico’s woes is political. Despite the overwhelming support for NAFTA among the governing class and the establishment media, the economic case was weak. Indeed, it is instructive that while Bill Clinton was promising the country that NAFTA would create a bonanza of new high quality American jobs, the three members of his Council of Economic Advisers—concerned about their own professional reputations—never provided an estimate of the jobs that NAFTA would create.

For many in the Washington policy class, NAFTA was not principally an economic issue. Rather, its primary purpose was to keep the Mexican populist Left out of power. The presidential election of 1988—which the ruling Partido Revolucionario Institucional (PRI) had to steal in order to win—shocked the establishment on both sides of the border. The people in effect had rejected the “neoliberal” free market policies being imposed by a new generation of oligarchs dedicated to economic deregulation, privatization, and the repeal of social protections. NAFTA was a deliberate effort by the U.S. policy establishment to strengthen these “reformers” and, at the very least, to enshrine their reforms in an international treaty with the United States that would be difficult if not impossible for a future leftist government to change. As one corporate lobbyist said to me during the debate over NAFTA, we had to support Mexico’s new president Carlos Salinas because he was “one of us.”

But Salinas and his cronies were not quite as advertised in Washington-especially as regards the narcotics trade. Smuggling marijuana into the United States was a modest-sized enterprise before the 1980s. The “old” PRI in effect had a live-and-let-live deal with the smugglers; keep it within bounds, out of the public’s eye, no violence— and we will look the other way. Why should the Mexican government risk political turmoil because the U.S. government can’t deal realistically with its drug problems?

But when the Mexican free-market reformers came to power in the administration of Miguel de la Madrid (Salinas’s patron) in 1982, they invited the cash rich narco-traffickers into their circles. Protected by the government, the Mexican gangsters muscled out the Colombians who had previously dominated the routes to the United States. In 1989, the first year of Salinas’s term, the chief of the national police was found with $2.4 million of drug money in the trunk of his car. At the time NAFTA was being negotiated, the Salinas family itself was up to its neck in the narcotics trade—an item that the Clinton administration conveniently suppressed in its effort to sell Salinas as a champion of democracy, modernization, and clean government.

Today, Mexican politics is floating on a sea of drug money. As journalist Alma Guillermoprieto reported in her November 10, 2008, article in the New Yorker, the introduction of U.S.-style media campaigns to Mexico requires enormous levels of campaign spending-up to sixteen or seventeen million dollars for a congressional campaign. Where is the money to come from in such an impoverished country? The answer is the narcos. Guillermoprieto quotes a retired PRI politician: “When I see how these people [the traffickers] are climbing right up into the beard of the state, I think, Holy fuck! This country could really collapse.”

Mexico is not yet a “failed state.” But it is already a place where few citizens dare to trust he local police, who are widely assumed to be incompetent, abusive, and part of the criminal class. Mexico’s chief law enforcement officer told the New York Times in early 2008, “Corruption among police officers is part of their everyday life.” The U.S. Department of Homeland Security now says it needs the wall along the Mexican border to contain the spillover of drug violence as well as illegal immigrants. Contingency plans call for quick-response border patrol teams with armored vehicles, aircraft, and heavy weaponry to respond to large-scale violence along the frontier.

Already, the out-migration of unskilled and semiskilled Mexican workers is being joined by that of middle-class professionals and businesspeople increasingly concerned about lack of physical security. Analysts say that the U.S. recession has brought back fewer Mexicans from the United States than expected, in part because returnees are assumed to have more money and are therefore targets of violent robbery. At some tipping point, a combination of no work and rising violence could swell out-migration to a flood, creating a much more severe anti-immigrant reaction in the United States than we’ve seen so far. A counter reaction from the growing political power of Latinos could create some ugly politics. Lack of security could in turn disrupt the production lines that now cross the border, and further shift low-wage jobs to China. Not to mention the strengthening of U.S.-based criminal groups that are the business partners of Mexico’s drug lords.

The alternative to a failing state might be a return to the authoritarian past. The army and police are notoriously brutal, and the incidents of civil rights violations in their war on the narcos is rising. With the current conservative government discredited by the violence that its hard-line strategy has generated, and the leftwing party that was again cheated out of the presidency in 2006 now consumed by internal bickering, many Mexicans see the old corrupt PRI as the only political institution that can deal—that is, “make a deal”—for peace with the narco bosses.

NAFTA’S CRUMBLING ECONOMICS

NAFTA was conceived and born in a world in which the United States was the financial stabilizer and engine of market growth for the globe. In the post-Bretton Woods era, the American economy was a substitute for the absence of global institutions of fiscal and monetary policy. As the U.S. market opened up in the 1990s, its growing trade deficit was financed by recycled dollar earnings of the Chinese and other surplus nations, supporting a debt-fueled mass consumer market that absorbed even more imports. Central to this financial recycling system was the faith of global investors in the honesty, transparency, and integrity of American financial markets.

With easy credit and low interest rates, consumption steadily rose as a share of U.S. GDP and was primarily satisfied by imports, not domestic production. A large share of the recycled dollars was funneled into the speculative finance and over leveraged “buyouts” that left companies deep in debt and even less competitive. The special status of the dollar as the world’s reserve currency along with “exchangerate protectionism” in Asia kept the dollar strong, adding to the deterioration in U.S. competitiveness.

So long as the world was willing to finance the U.S. debt, it made sense for Mexico and Canada to take advantage of their neighbor’s ballooning market. Americans could ignore their own deteriorating competitiveness and enjoy the dot com and housing bubbles, while the nation’s savings rate fell, and its current account deficit and foreign debt rose relentlessly. Those who understood that this state of economic affairs could not last forever were consoled by the expectation that when the day of reckoning came, market forces would increase demand in the surplus countries to compensate for a slowdown in the United States.

With the financial crash, the assumption that the United States can continue to borrow cheaply for consumption has been shattered. The reputation of Wall Street as the world’s most trustworthy financial market is now discredited with the revelations of widespread deceit, fraud, and incompetence. Today, even the U.S. Treasury cannot put a value on the securities it has acquired and guaranteed as a result of the massive bailouts.

Similarly, the assumption that expansion of the world’s surplus economies would compensate for the bursting of the U.S. credit bubbles has proved to be an illusion. Markets in Europe, Asia, and elsewhere are contracting, not expanding. Their leaders show little enthusiasm for collective international action and none for stimulating their economies to generate more imports. Chinese leaders, for example, have explicitly rejected the idea that they might use their $1.9 trillion in foreign reserves to help “save” the world; “China can only save herself,” said one high Chinese official in early December.

Whatever confidence remains in the U.S. economy at the moment is not in its private sector financial markets but, ironically, in its public sector. Specifically, the U.S. Treasury is still seen as a safe haven for capital fleeing from countries vulnerable to the global credit crunch. (Among other consequences has been a substantial depreciation of the Mexican peso.) But as the debts of the Treasury pile up it is hard to believe that the world’s investors will not begin to piece together other safe havens and to demand significant risk premiums for recycling dollars back into the U.S. economy.

No one knows the future. We may be on the brink of a worldwide deflation or simply a long and deep recession. The latest forecasts show negative growth in all three NAFTA countries. Mexican president Felipe Calderón, who spent much of 2008 assuring his people that they were immune from the U.S. financial implosion, is faced with accelerating unemployment, widespread bankruptcies, and a peso that has lost 80 percent of its value in the last six months. He has gotten a thirty billion dollar line of credit from the U.S. Treasury, which has a few problems of its own, to intervene in currency markets in order to keep the peso afloat.
However long and through whatever means it will take for the markets to recover, we are unlikely to go back to the world in which NAFTA was created. The United States will finally be forced to deal with its trade/current account deficit and its degenerating competitiveness. In the absence of policies deliberately designed to reverse the trade deficit, the market will demand some form of austerity through a substantially lower dollar, lower wages, and a shift from consumption to internal savings. Such an adjustment is likely to produce economic pain, dislocation, and political anxiety, including increased demands to protect U.S. jobs and incomes from more foreign competition.

For Mexico and Canada, whose export markets depend on the United States, this is not good news. The issue is particularly stark for Mexico. Put bluntly, if Mexico could not grow fast enough to employ all of its people during fifteen years of access to a bloated U.S. consumer market, it is hard to believe that conditions there will not get worse when that market deflates and decelerates.

The economic crisis has also brought a crisis in the policy regime that created and supported NAFTA. It is no accident that Ronald Reagan was the initial proponent of NAFTA. Ideologically, NAFTA was a part of a general shift among developed capitalist nations to market deregulation as the governing paradigm for economic policy. John Maynard Keynes’s arguments for government guidance and management of the economy were replaced by Milton Friedman’s arguments for the strict separation of market and state. The deregulation of trade and investment through NAFTA, the World Trade Organization (WTO), and the structural adjustment programs of the international agencies was an extension of the deregulation of domestic markets. Competition, it was argued, is a sufficient regulator. The financier George Soros called it “free-market fundamentalism.”

The failure of competition to self-regulate financial markets in the United States and elsewhere and the subsequent massive state bailouts of the financial sectors have revealed, once again, that competent state intervention is a condition for healthy markets. The U.S. government has already had to commit some $7.7 trillion—half of the country’s GDP— to guarantee against losses from the financial debacle. Governments in Europe, Asia, and elsewhere have ramped up spending. Once again, as Richard Nixon quipped a quarter-century ago, “We are all Keynesians.”

The shift away from “free-market fundamentalism” is not just a consequence of the current macroeconomic and credit crisis. For several years, economists and development specialists have been questioning the notion that all governments had to do to promote prosperity was to “get out of the way” of the animal spirits of private entrepreneurs and investors. The socalled “Washington Consensus” was unraveling even before the financial market crash. Today, the neoliberal piñata is busted and empty.

In Washington, a new paradigm, although certainly not a complete consensus, is emerging. It recognizes that in order to avoid major longterm reductions in living standards the United States will need new policies that put it on a “high road” to increased competitiveness, as opposed to the “low road” of competing on the basis of lower labor costs, consumer austerity, and a depreciated currency.

Under Barack Obama we will surely see a much stronger role for government as both a guide and nurturer of long-term economic development, a regulator of the market, and an enforcer of the social contract. In his plan for economic recovery, without using the phrase, Obama has already signaled his intention to pursue forms of “industrial policy.” It involves massive new investments in physical and human infrastructure and research and development as well as expanded market regulation and new tax policies in order to create new “green” industries and a much more energy-efficient economy. In effect, it is an acknowledgment that government can and should pick “winners and losers.”

The re-regulation of the domestic economy is bound to affect U.S. trade policy as well. Trade is increasingly likely to be seen—as it was throughout most of America’s history—not as an end unto itself, but as an instrument to achieve national economic redevelopment goals.
These ideas are not just as a reaction to the current short-term emergency but represent a permanent change in the way U.S. policy makers must now think about the country’s economic future. Up until now, the prevailing assumption of U.S. economic policy has been that globalization involves a one-time transition. Thus the costs of dislocation—however painful—are short term and eventually are eclipsed by the long-term benefits of a more efficient meconomy. In arguing for NAFTA and subsequently for the opening up of the U.S. market to China through the WTO, Bill Clinton assured Americans that enduring a short period of sacrifice would enable them to reach a new stable prosperous equilibrium at the other side of the “transition.”

But in a world of 6.5 billion people and more than 200 national economies each seeking to create competitive advantage, the twin problems of creating comparative advantage and adjusting to change are permanent and cannot be left to unregulated market forces alone.

DOES NORTH AMERICA HAVE AN ECONOMIC FUTURE?

In an era in which the U.S. consumption of imports will likely slow down substantially, and foreign competition will become more intense, NAFTA is becoming irrelevant. The central question now is, will the three countries of North America compete and develop separately or develop together?

There is a good argument for a coordinated continental economic redevelopment program. All three nations are being challenged by global competition. Both the United States and Mexico run chronic trade deficits, and Canada’s surplus depends entirely on the U.S. market. In the coming era, the pressures for sending production, technology, and jobs offshore will increase. It is no longer sensible to assume that a majority of Americans and Canadians can maintain their living standards competing in an unregulated global economy that can hire computer engineers, designers, and accountants in India and China for a fraction of their North American cost or that Mexican workers can prosper in direct market competition with low-cost labor in poorer developing nations.

But, if further integration of North America is a reasonable response to the new economic era, it must be based on a broader, more credible and inspiring vision than NAFTA. The case must be made that a more unified North America will make each country more competitive and make the vast majority of its citizens better off. This requires more than renegotiating NAFTA, it requires an economic redefinition of North America.

The European Union, for all it problems, has put itself on the road to an integrated society. North America, in contrast, never confronted that question, and its leaders never engaged their own populations in a serious discussion of their collective future. The result is that North America has no real identity among the people of the three countries. Even among the continent’s elites, it is a vague and confused idea. In Winston Churchill’s famous metaphor, the political pudding named NAFTA “has no theme.”

The absence of North American identity also encourages the illusion that major cross-border problems can be resolved by national policies alone. Thus, the United States is attempting to treat illegal immigration from Mexico simply by changing laws in the United States without reference to the problem of inadequate and unequal growth in Mexico. Mexico is forced to deal with the immense problems of narcotrafficking without reference to the demand for drugs in the United States.

A first step is to define North America’s economic boundaries, that is, what is inside and what is outside, and what are the special privileges and obligations of people who are inside the definition. On this issue, the policies of all three countries are contradictory and confused.

On the one hand, the governments continue to promote the “deepening” of the more or less common market for goods, services, and money. Despite the post–September 11 tightening of the U.S. borders and increased pressure against undocumented immigrants, a huge amount of cross-border mobility is accepted, and people continue to cross borders in substantial numbers. And since September 11, 2001, the governments have collaborated politically, with Canada and Mexico becoming extensions of U.S. Homeland Security policies.

On the other hand, each of the three nations has pursued bilateral and multilateral agreements with other nations that dilute the sense of a North American community. Moreover, the governments of all three have openly declared their intentions to further open their economies to free trade and investment with the rest of the globe.

This implies a future in which no one of the separate nations of North America has a particular obligation to the other two, other than what is normally required between nations with common borders.
Pursuing the North American option requires an understanding that successful economic development—of a country or a continent— demands a wide variety of flexible policy tools, including trade policy. Economic historians may argue about the exact contribution of the international sectors to the success of the major advanced nations, but any fair reading will conclude that managed trade policies-sometimes protectionist, sometimes free, and often in some combination-were part of the picture. Moreover, flexibility to deal with changing conditions is an important element in any long-term policy regime. Few sensible people would suggest that tax, monetary, fiscal, or sectoral policies should be fixed for all time. There is no reason why trade policy in support of domestic development should somehow be an inflexible exception.

To put it bluntly, Mexico, Canada, and the United States can choose to give priority to further integrating with each other or to integrating indiscriminately with the rest of the world. But they are unlikely to be able to do both at the same time. If the policy of each nation is to open up its economy to all of the nations of the world, then “North America” ceases to be a useful economic concept, and deepening NAFTA will make even less sense to the citizens of the three nations.

My own starting place for a cross-border politics would begin with the following elements:
(1) A “grand bargain” in which the United States delivers humane immigration reform and long-term aid for investment for human development and infrastructure in exchange for a serous verifiable commitment by Mexico to substantially reduce corruption as well as to reform tax and social welfare policies to assure that the benefits of economic growth are widely shared.

(2) Rebalancing NAFTA by adding the enforceable protections for workers, environmental, and human rights that were left out of the original agreement. A revised agreement should recognize that free and independent trade unions and public interest institutions are essential for ensuring an equitable distribution of income, wealth, and political power.

(3) Cooperative competitiveness planning for the economic redevelopment of the three nations. Such an effort might begin with coordinated trade, tax, education, technology, and investment policy efforts to develop internationally competitive domestic, that is, North American industries based on the needed transformation of our economies to an energy-efficient future. Other linked areas for joint planning might include older industries like autos and steel and services sectors, such as the improvement and integration of health care services.

(4) Facing up to the reality that the problem of narco-trafficking criminality cannot be solved in Mexico, or any other supplier country, with- out (a) drying up the market for illicit drugs in the United States—probably through regulated legalization—and (b) controlling and reducing the export of weapons. Both of these are politically difficult and will take years of public debate. But even putting these two issues on the table would give desperately needed hope for those in Mexico and here on the front lines of the narco wars.

(5) Intentional creation of a “continental” political consciousness. Today, while economic integration involves all classes, political integration in North America is primarily among those at the top of the pyramids of wealth and power. Deepening integration only makes sense if it is a credible instrument for a much wider participation in the benefits of growth and in the political debate. The question of what kind of North America we want in ten or twenty years needs to be part of the domestic politics of all three nations. Among other things, this will require an understanding that in an integrated market, workers, small businesses and farmers, and local officials increasingly have common interests across the borders and should have the political room to express them.

The idea of an enlarged political vision for North America will appear utopian to many people. But it is at least equally utopian to think that, having created an integrated common market, we can now walk away from the economic and social consequences of what wehave done.

Jeff Faux was the founder, and is now Distinguished
Fellow, of the Economic Policy Institute.
His latest book is The Global Class War (Wiley).