|
From pages 15-17
Mexico is also a major energy supplier and customer within North America. In 2004, it was the second-largest exporter of oil to the United States; in previous years, it was consistently among the top four suppliers. Mexico relies for a significant share of its revenues on the state oil producer (Pemex). It has major oil and gas reserves, but these are relatively untapped. Development has been hampered by constitutional restrictions on ownership, which are driven by an understandable desire to see this strategic asset used for the benefit ofMexicans. This restriction on investment, coupled with the inefficient management of the state monopoly, Pemex, has contributed to low productivity. As a result,
16 Building a North American Community
Mexico has expensive and unreliable supplies of energy for its consumers and industries. Mexico has begun to bring in some foreign capital through multiple service contracts, but the most serious constraints on its future growth as an energy supplier are the restrictions that impede development of its own energy resources and the low productivity of Pemex. Reforms in this area are needed urgently. Although energy security represents perhaps the most critical challenge, it is important to recognize that trade in other natural resources, including metals, minerals, wood, and other products, is also central to the growth and economic security of North America. In these other resource sectors, NAFTA has not succeeded in ensuring a free flow of goods. Resource and agricultural products such as softwood lumber, fish, beef, wheat, and sugar have been the flashpoints for highly visible trade disputes. The softwood lumber case has led some Canadians to question whether the United States will comply with NAFTA if decisions by the dispute-settlement mechanism run counter to private American interests.TheUnited States andMexico have failed tocomply with free trade provisions on movement of trucks for more than a decade, and the failure to resolve the softwood lumber case between Canada and the United States has plagued their trade relations for the past quarter century. Changing some trade rules and the disputesettlement process may reduce this friction, as would a determined effort to reduce unnecessary regulatory differences within North America. NorthAmerica is blessed with an abundant resource base. Exploiting these resources on a long-term, sustainable basis requires that the three governments work together to resolve issues and ensure responsible use of scarce resources and the free flow of both resources and capital across all three borders. As noted, the most troubled areas of crossborder trade over the past twenty years have been in resource trade, largely because of the impact of regulatory differences, including different approaches to resource pricing and income protection. Efforts to eliminate these problems on the basis of dispute-settlementmechanisms have not worked as well as anticipated. WHAT WE SHOULD DO NOW • Develop a NorthAmerican energy strategy. Recognizing their individual policies and priorities, the three governments need to
Recommendations 17
work together to ensure energy security for people in all three countries. Issues to be addressed include the expansion and protection of theNorthAmerican energy infrastructure; development opportunities and regulatory barriers; and the technological andhuman capital constraints on accelerated development of energy resources within North America. These objectives form part of the agenda of the North American Energy Working Group established in 2001 by the leaders of the three countries and emphasized in their 2005 summit meeting. This initiative, however, has so far made only modest progress toward developing a North American strategy, and it does not cover oil. • Fully develop Mexican energy resources. Although the inclination of Mexico to retain full ownership of its strategic resources is understandable, expanded and more efficient development of these resources is needed to accelerateMexico’s economic growth.Mexico is quickly losing ground in its energy independence, and the only way to satisfy growing demands within Mexico is to find ways to unlock its energy sector. Progress can be made even under the existing constitutional constraints. As discussed above, Canada and the United States could make important contributions in this effort throughthedevelopment of creativemechanisms, especially financial, that bring needed technology and capital to Mexico. The most important steps, however, must be taken in Mexico by Mexicans. • Conclude a North American resource accord. In order to ensure the fullest development of North America’s mineral, forest, and agricultural resources, investors in one country need to be confident that they will not be harassed by competitors in another. To that end, the three governments need to conclude an accord that recognizes the balance between security of supply and security of access and includes rules about resource pricing that will reduce the friction that has given rise to some of themost persistent and difficult bilateral irritants.A resource accord should also address the remaining barriers to trade in agricultural products, including barriers that arise from the different regimes in the three countries, to guarantee prices and incomes.
|