NAFTA and the Future of Canada, Mexico and the United States

by Marilou Moursund on January 7, 2014

in Foreign Markets,Geopolitical,Recommended Reading

Stratfor had an interesting piece this morning on the ties between Canada, Mexico, and the United States.  I have put a few excerpts below, and I recommend reading the entire article.

North America proper extends from the Arctic reaches of Canada to the Darien  Gap, a thin, swampy strip of land linking Panama with South America. But given  the idiosyncratic and fundamentally different geopolitical realities of the  Central American isthmus — encompassing Belize, Costa Rica, El Salvador,  Guatemala, Honduras, Nicaragua and Panama — a simpler and more appropriate  definition of North America would be the continental landmass from the Arctic to  the southern Yucatan Peninsula in Mexico.

There is little question that North America, by this definition, has been  blessed by geography. There are only three countries in an area more than twice  the size of Europe. Each of them enjoys a coastline on both of the globe’s major  oceans, providing critical buffers and serving as jumping-off points for  domestic and international trade. Natural resources are abundant, as are overall  arable lands, all facilitated by naturally integrated river transport networks  at the heart of the continent.

The overwhelming  beneficiary of these geographic advantages has, of course, been the United  States, but its meteoric rise as a global hegemon was also in great part due  to the fact that neither of its neighbors has posed a threat. The wealth of the  United States, combined with the physical barriers of the three northern Mexican  deserts and to a lesser degree the Great Lakes, ensured that America’s military  power could preserve the borders dividing the three countries — yet those  boundaries are not so insurmountable as to hinder trade. The definition of those  borders with Canada and Mexico during the 19th century allowed Washington to  concentrate on dominating the world’s oceans, eventually giving it control over  most of the world’s trade and the ability to deploy its power to any corner of  the globe.

Canada was not always a friendly neighbor. During the War of 1812, Canada was  the launching pad for a British military campaign that resulted in, among other  things, the burning of the White House. This stance changed definitively in the  aftermath of World War II, when the British Empire — Canada’s previous patron  — began its decline in earnest and Ottawa had to become more integrated with  and dependent on the booming U.S. economy. By the time the United States and  Canada signed a bilateral free trade agreement in 1988, the two countries had  been each other’s largest trade partners for decades. Today, China is Canada’s  second-largest export destination, and yet China takes just 6 percent of the  goods that the United States does.

Mexico’s role and history in North America are a bit more complex. The  country controlled the largest territory and had been the dominant economic and  military power on the continent for centuries under the aegis of the Spanish  Empire. But the Mexican War of Independence fragmented the already-weakening  country and shifted the balance of power in favor of the United States. With the  United States having received Florida from Spain earlier in the 19th  century, the Texas War of Independence and the Mexican-American  War allowed Washington to gain the vast swath of land between Louisiana and the  Pacific Ocean — including the strategic ports of California and the approach to  the Mississippi River. With the border settled (figuratively and literally), the  two countries finally began economic cooperation in earnest.

With its large pool of cheap labor and its geographic proximity to the United  States, Mexico became a vital economic variable for Washington. Setbacks did  occur over time, in particular Mexico’s expropriation and nationalization of its  oil industry in 1938 and the immigrant repatriation crisis of the 1930s. But geography and the  economic complementarity between the world’s largest consumer market and its  neighboring low-end manufacturing economy continued to make the relationship  inevitable. Today, Mexico exports about $1 billion worth of goods per day to the  United States, making it the United States’ single-largest source of imports and  its third-largest trading partner. Issues do remain, particularly over the  question of immigration, legal or otherwise, with both countries trying to find  a balance between competitive growth and stable domestic employment.

Read more:  NAFTA and the Future of Canada, Mexico and the United States | Stratfor Follow us: @stratfor on Twitter | Stratfor on Facebook

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