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'Three amigos' summit: Can US, Mexico, and Canada modernize NAFTA?

The countries' leaders meet in Mexico today to discuss expanding the 20-year-old pact. But, their publics harbor lingering doubts 鈥 including that some nations have benefited more than others.

By Howard LaFranchi, Staff writer
Mexico City

With his hands on the wheel of what looks to be a large black American sedan, President Obama tells the gas station attendant 鈥 who happens to be Mexican President Enrique Pe帽a Nieto 鈥 鈥淔ill鈥檈r up 鈥 and I鈥檒l take the gas station, too.鈥

The cartoon in the left-leaning Mexico City daily La Jornada captures the sentiment of worried Mexicans who question Mr. Pe帽a Nieto鈥檚 controversial reform of Mexico鈥檚 state-run petrochemical sector. The fear is that foreign investors 鈥 and in particular oil-thirsty gringos 鈥 will finally be able to get their hands on Petroleos Mexicanos, or PEMEX, which many Mexicans still consider to be the country鈥檚 crown jewel.

But in a broader sense, the cartoon speaks to the lingering doubts for many Mexicans about their economic path under the North American Free Trade Agreement, or NAFTA, which turned 20 this year.

Those concerns about the economic future and the impact of an inexorably globalizing marketplace are front and center as Pe帽a Nieto welcomes his two NAFTA colleagues, Mr. Obama and Canada鈥檚 Prime Minister Stephen Harper, to a North American leaders鈥 summit today.

The barely six-hour summit in Toluca 鈥 about 39 miles southwest of Mexico City 鈥 is billed by all three NAFTA governments as an opportunity to highlight the need to 鈥渂ring NAFTA into the 21st聽century.鈥

The plan is to modernize NAFTA by way of the Trans-Pacific Partnership, a much broader trade accord being negotiated by 12 Pacific Basin countries 鈥 including the three NAFTA partners. The TPP, whose rules would apply to NAFTA trade, would regulate trade in sectors like e-commerce and some services that didn鈥檛 even exist when NAFTA was negotiated. It will also address issues like labor and environmental standards that were purposely left off the NAFTA table.

鈥淲e鈥檝e got 21st-century trade with a 20th-century framework,鈥 says Arturo Sarukh谩n, who until 2013 was Mexico鈥檚 ambassador to Washington.

NAFTA 鈥渄etonated the integrated supply and production chains鈥 that mean the three countries increasingly produce 鈥淣orth American鈥 and not national products, he says. A car produced in North America will on average cross borders eight times before it is ready for the showroom, for example.

What the 1994 trade pact hasn鈥檛 done is keep up with key changes in the global economy, he adds.聽 聽

Public opinion

Perhaps the biggest challenge for the North American leaders is winning their populations over to TPP鈥檚 vision of a broadened聽trade agreement.

If the leaders take a break from their discussions to listen to what鈥檚 going on beyond the walls around them, they may hear the chants of protesters who aim to derail any expansion of NAFTA.

Obama, too, faces stiff resistance at home from trade-pact opponents 鈥 concentrated largely in his own Democratic Party. If a free-trade agreement with Mexico was bad for American workers, as some companies moved south of the border where labor was cheaper, they say,聽how much worse will a pact be that includes the likes of Vietnam? 聽聽

鈥淲hat may make sense from the perspective of CEOs may not reverberate with public opinion,鈥 says Sarukh谩n, now an associate analyst at the Brookings Institution in Washington. He notes that the 鈥渢wo huge elephants in the room during NAFTA negotiations鈥 鈥 environmental standards and labor standards and mobility 鈥 were left off the table because the pact simply wouldn鈥檛 have passed with them.

Senior administration officials involved in preparing the Toluca summit say all three leaders are aware of a need to communicate more effectively about NAFTA's benefits 鈥 and why it鈥檚 time for an update.

NAFTA has fostered modernization of North American manufacturing, proponents say, created higher-paying jobs in Mexico in export-related manufacturing, opened Mexico to cheaper consumer products, and created a boom for US farmers.

鈥淧resident Obama is well aware of the voices that have been raised in opposition to NAFTA,鈥 says one senior administration official. From the White House perspective, a large part of the criticism stems from what NAFTA left out. If that鈥檚 the case, then a new trade pact that brings in labor and environmental standards should be seen as a plus, officials reason.

鈥淭he point I鈥檇 make is that TPP in part is intended to plug those holes,鈥 the official says.

Supporters of NAFTA point to the explosion in North American trade the pact has spawned and to growth in trade-related jobs, particularly in Mexico. But critics counter that while the big numbers 鈥 $1.2 trillion in US trade annually with Mexico and Canada, better than a three-fold increase since NAFTA's inception聽鈥 may look good, the micro level is less rosy.

鈥淲e鈥檝e had quite enough time to get an idea of what鈥檚 happened under NAFTA, and we can say at this point that much of it has been negative,鈥 says Laura Carlsen, director of the Center for International Policy鈥檚 Americas program in Mexico City.

She ticks off a list of what she says are direct results of NAFTA: Some 2 million small Mexican farmers leaving the land largely as a result of huge increases in American corn imports; the expansion of Mexico鈥檚 informal economy; and sluggish economic growth leaving more Mexicans below the poverty line. 鈥淭he daily lives of millions of Mexicans have gotten worse as a result of this trade policy,鈥 Ms. Carlsen says.

Such sentiments highlight the difficult sales job facing the three summit 聽leaders 鈥 especially if they hope to see TPP win political support.

But there are some signs the job might get easier.

New surveys from the US and Mexico by the Chicago Council on Global Affairs found that Americans have gradually grown more positive toward NAFTA. At the same time, a majority of Mexicans say NAFTA has been good overall for Mexico 鈥 including in creating Mexican jobs.

One thing hasn鈥檛 changed in 20 years, however. People in both countries, but especially in the US, believe that if NAFTA as a whole has been somewhat positive for their country, it鈥檚 been a whole lot better for the neighbors.