Excerpted from Americas Quarterly Winter 2012 Diplomacy: Canada’s New Policies Toward Latin America
Ambition is important. But so is perseverance.
Canadian efforts in the Americas are characterized by quixotic spasms of tango-like embrace: joining the Organization of American States (1990); negotiating the North American Free Trade Agreement (NAFTA, 1993–1994); and committing to the Free Trade Area of the Americas (1994)—all nearly 20 years ago. But this rush of engagement was followed by a long siesta until 2007, when the Harper government announced its Strategy of Engagement in the Americas, which emphasized democratic governance, prosperity and security. The plan is only now taking shape.
It does take two to tango, and Latin American governments share equal responsibility for failing to take advantage of Canadian interest and opportunities.
So what makes Harper’s newest effort different?
First, there is the economic malaise in the United States and the recognition that Canadians really do need options to the U.S. market. Agree or not with Standard & Poor’s’ reevaluation of American creditworthiness, there is no disagreement with its analysis that “the effectiveness, stability and predictability of American policymaking and political institutions have weakened.”
For Canadians, the U.S. market and the bilateral relationship will always remain primordial, but as the U.S. hunkers down and the administration focuses on a “jobs” agenda, there is a likelihood of renewed protectionism—which could affect the huge Canada–U.S. resource trade in everything from lumber to fish. Notwithstanding President Barack Obama’s promise to export his way out of the economic malaise, certain Democrats and Tea Party Republicans equate free trade with the outsourcing of jobs. And that may impede further efforts to broaden the opportunities for Canada under NAFTA.
While Canadian and U.S. negotiators are in discussions to ease border access for people and goods, these steps alone will not strengthen the Canadian market. Canada must look to new opportunities to hedge its bets.
That is being done slowly in Latin America. On August 15, a free-trade agreement (FTA) with Colombia—an economy equal to the state of Connecticut—went into effect, and new implementing legislation for the Canada–Panama Free Trade Agreement (similar in economic weight to Vermont) is being introduced in Parliament this fall. Canada also has FTAs with Costa Rica, Peru and Chile.
Beyond FTAs, Latin American countries are making it easier for Canada to invest and do business in the region. A decade-long dose of the Washington Consensus, whatever its faults, has rinsed away the previous attachment to the Prebisch-inspired statism that stigmatized earlier efforts at boosting investment and terms of trade.
Mexico is a prime example. The World Bank and International Finance Corporation’s Doing Business 2011 report declared this NAFTA partner as the easiest place in Latin America to run a company. The International Monetary Fund says Mexico’s economic growth will eclipse that of the U.S. and Canada from now until 2015, and Goldman Sachs predicts that in 40 years Mexico will be the world’s fifth-largest economy—bigger than Russia, Japan or Germany.
Third, Canadian business is prepared for risk, recognizing that the options are either grow or get absorbed. Twenty years of freer trade have given Canadian companies, especially the larger ones, the confidence that they can compete internationally and the experience of operations on the global stage.
CTV network anchor Andrea Mandel-Campbell notes in Why Mexicans Don’t Drink Molson that Canadian companies are historically timid about venturing into international markets, but Mexicans ride on Bombardier-constructed subways and Scotiabank is the sixth-largest retail bank in Mexico. Where once Canada’s business associations focused almost exclusively on the U.S., their membership is now encouraging them to look beyond its neighbor to the south.
Fourth, the renewed Canadian approach melds trade objectives with development aspirations. Attitudes toward aid are changing with the increasing recognition that a job is the best form of development assistance. A key feature of the rebooted relationship with Brazil is a CEO Forum, staffed by the Canadian Council of Chief Executives and the Brazilian National Confederation of Industry.
This business-to-business dimension promises real gains, especially if Brazilians and Canadians can agree on a set of practical objectives such as increasing direct flights and identifying business impediments that can be addressed by working with governments. CEO forums should be included in every FTA negotiation and built into the existing relationships with Mexico and Chile.
To sustain the opening with Brazil and to move the relationships with key partners like Mexico and Chile to the next level will require a series of focused blueprints. These will have to address critical questions such as how to attract more Latin American investment in Canada and what barriers—especially those specific to Latin America—can be addressed by Canadian initiatives. The Canadian business community is engaged and should be a driving force for taking the relationship to the next level.
In every case, there needs to be a systematic plan of engagement starting at the most senior political level.
For one, the prime minister needs to block at least one week a year for visits to the region. To provide the needed intellectual capital, Canadians also need to actively support the work of think tanks and improve existing synergies among organizations.
The demise for lack of funding in September of the Canadian Foundation for the Americas (FOCAL) research center, after 21 years of advancing Canadian interests, is a setback because it consistently provided useful intellectual heft and intelligent trend-spotting.
FOCAL had been largely dependent on Canadian government funding after it was created by an act of cabinet under Prime Minister Brian Mulroney (1984–1993). In its next iteration it should look more like the Inter-American Dialogue or Americas Society/Council of the Americas, with strong private-sector involvement and a focus on investment and trade as the best means of generating development and creating long-term relationships.
The current Canadian government is not the first to promise a new look at the region, but all too often action never followed rhetoric. If the Americas are truly a priority, and Harper’s promise to be “ambitious” is more than just repetition of the old rhetoric, the prime minister’s continued attention to the region will be necessary.
Unless the Canada–Latin America relationship is given a place of priority on the agenda and moves from aspiration to pragmatic results, the grass will grow back in the cracks.