Canada, Mexico, and the United States Need Each Other

Politicians and pundits often warn us away from greater cooperation across national borders. You hear how free trade hurts workers. You hear that trading partners take advantage of one another. And you hear that we are losing to China or India, or whichever country fits this narrative best on any given day. 

We are told we can fix these problems by turning inward. Buy only home-grown products. Shy away from trade deals. Punish partners with high tariffs. Shut the door on neighbors.

Yet the growth of our economy is linked to the global marketplace. In particular, our close relationships strengthen our domestic economy. And nowhere is this more true than in North America, which remains one of the world’s most competitive economic platforms. An economically vibrant North America, and the continued cooperation, interconnection, and integration of the American, Mexican, and Canadian economies, is fundamental to our shared success.

An economically vibrant North America, and the continued cooperation, interconnection, and integration of the American, Mexican, and Canadian economies, is fundamental to our shared success.

North America on display in San Diego/Tijuana

But we must keep building these relationships to keep growing and thriving. For that reason, the Bush Institute’s North America Working Group has been meeting to identify ways to make North America more competitive. 

In fact, earlier this year we spent two days touring projects along the San Diego/Tijuana border. We made the trip to see how closer economic relations among the three nations of North America can produce growth that benefits citizens and consumers on both sides of the border. 

As part of the tour, we visited the Cross Border Xpress airport terminal. To the delight of San Diego residents, the sky bridge provides an alternative that cuts the border crossing time to a mere three minutes.

For years, San Diego residents had used the Tijuana International Airport when traveling to destinations where service from the San Diego International Airport was not convenient. The decision was entirely rational, but it also involved an extra 45 minutes or more of travel. Crossing the U.S./Mexico border by car took at least that long. 

Then came the building of the Cross Border Xpress terminal in 2015. The facility is located in San Diego and connected to Tijuana International Airport via a pedestrian bridge. For a small fee, San Diego-based passengers can park on the U.S. side, pass through the necessary immigration and customs checks for both countries, cross the border on the sky bridge, process through airport security, and continue to their flight.

Something as simple as a sky bridge highlights the underlying strength of the communities that we share along our borders. 

Something as simple as a sky bridge highlights the underlying strength of the communities that we share along our borders.

In fact, that is the more important story here.  The Cross Border Xpress, which is privately-owned by Mexican and American investors, serves this cross-border community in an innovative, practical way. This kind of public-private relationship represents the future of economic cooperation along the border.

We also visited the Energia Sierra Juarez wind farm. The energy facility is in La Rumorosa, Baja California, Mexico and its entire output is sold to San Diego Gas & Electric’s American customers. 

The wind farm highlights how electric energy markets can be integrated across borders. It sits on a geographically ideal location, where winds on the hilltop consistently keep the turbines operating.

Energia Sierra Juarez also encapsulates the border infrastructure, energy, and human capital issues we have studied over the last year. In order to sell its energy to the U.S., Sempra had to apply for a presidential permit to build electric lines that cross the border. Its employees range from the middle-skilled to college-educated engineers. They also come from across Mexico and receive training in wind farms around the world. 

Strengthening the talents of our people

Each country has unique strengths in its workforce. Mexico has an abundant supply of young workers. Job growth in the U.S. is in middle- and high-wage industries. Canada currently has a stable employment rate and a government that is committed to building an innovation-led economy that supports and builds upon Canada’s ample resources.

Each country has unique strengths in its workforce. Mexico has an abundant supply of young workers. Job growth in the U.S. is in middle- and high-wage industries. Canada currently has a stable employment rate and a government that is committed to building an innovation-led economy that supports and builds upon Canada’s ample resources.

Yet we share a challenge.  Each of us needs enough skilled workers with post-secondary education or training to meet future employment demands. 

This is already a problem in the U.S., where demand overwhelms supply in such important parts of the economy as computer sciences and health care. A solid base of skilled workers will become even more important as our economies become more service-oriented and knowledge-based. We need to make sure that our workers have these skills to maintain our productivity and competitiveness.

Of course, a skilled labor force is more useful if its workers’ skills are portable. Yet few skill standards are consistent across all three countries. This inflexible scheme frustrates the process of getting workers with the right skills to the available positions. 

Addressing this problem seems simple enough:

• Leading business organizations should come together to identify specific skills in demand and opportunities to harmonize training standards across North America.
• Policymakers, employers, and industry associations together should identify ways to expand training programs, improve access, and achieve greater transferability of credentials for technical workers.
• Federal, state, and provincial governments in North America and the private sector should improve labor market forecasting abilities so entry level workers can know what jobs are available, where they are, and what skills they need.

This issue is clouded by legitimate concerns about immigration and foreign investment.  Nonetheless, greater and deeper economic integration and cooperation in North America actually supports domestic jobs in all three countries. Take just the manufacturing sector. High levels of production that cross borders every day draws upon supply chains and workers from all three nations. 

More importantly, upgrading our workforce across North America creates a dynamic where we work together to produce high-value goods and services for a competitive global market.

Developing our energy resources

North America’s abundant natural resources are one of its greatest advantages. Most recently, we have seen this in the development of the Canadian oil sands, the U.S. shale boom, and the dramatic reforms in Mexico that are opening the hydrocarbons and electricity markets to private investment, including North American investment.

These developments will allow the U.S., Canada, and Mexico to trade even greater amounts of energy between each nation. Mexico’s vast oil and gas reserves will contribute to this flow once its historic energy reforms lead to new productive investment and greater production. 

To capitalize upon these resources, and realize the maximum benefits from them, we need to more fully integrate our energy markets. Our recommendation is a public-private forum that identifies solutions and delivers results.

Specifically, North America’s energy ministers should convene a permanent group that works with the private sector to deliver results that are informed by consumer preferences. 

Renewable energy sources also need to be part of our regional strategy. A diverse energy portfolio can help North America maintain its competiveness. Drawing upon a variety of energy sources can lessen the impact that events such as the recent sharp drop in oil prices can have on our markets.

Equally important, connecting our electric energy grids can enhance our competitiveness. Mexico is now in the process of establishing a new wholesale electricity market, dramatically transforming what has been a state-owned electricity monopoly into a bona fide competitive market that will further bring down electricity costs in the region.

Integrating the U.S. and Mexican electricity markets would improve the security and reliability of the grid. That would lower costs to manufacturers and consumers alike, adding a huge boost of competitiveness, which would benefit all of North America.

Integrating the U.S. and Mexican electricity markets would improve the security and reliability of the grid. That would lower costs to manufacturers and consumers alike, adding a huge boost of competitiveness, which would benefit all of North America.

We will not fully realize the competitive gains from integrated energy markets if we don’t make it easier for pipelines and transmission lines to cross borders. The solution we recommend is specific to the United States. The presidential permitting process needs to be more predictable.

The current process for getting approval for pipelines and electric transmission lines that cross borders can be long, unpredictable, and expensive. While companies wait for approval to build new pipelines, production sits without an efficient, safe way to transport it to refineries. Regional electricity transmission is hampered by this process, too, with few interconnections between the U.S. and Mexico.

For these reasons, we recommend that the next administration move immediately to improve the presidential permitting process for cross-border infrastructure. The current process presumes that border infrastructure is not in the national interest unless the President finds otherwise. There also should be a limited period of time for the government to analyze the environmental and economic implications of a proposal. Likewise, there should be a presumption that this kind of infrastructure generally serves our national interest.

The roads, bridges, and ports that we need

The vast majority of commerce between and among the United States and Mexico and Canada flows through an antiquated physical infrastructure that was never intended to support the astounding level of cross-border commercial crossings we see today.  Despite some recent progress, the process for building a competitive 21^st century architecture for trade and commerce is lagging significantly and is in need of reform.

For example, the busiest land port of entry in the Western Hemisphere sits between San Diego and Tijuana. Thousands of pedestrians and vehicles daily cross the San Ysidro Land Port of Entry. A new facility was built there to improve the flow of people. The Mexican government constructed it as part of an agreement with the U.S. government. The arrangement involved rerouting the interstate highway that leads to the border checkpoint.

But here’s the problem: The interstate has not yet been rerouted.

Differing priorities between the two governments, and impatience with the pace at which the highway project was progressing, resulted in this snafu. This disconnect highlights why governments need to work together to remove political uncertainty from the planning process to the extent possible.

As long as that uncertainty persists, the way people and goods flow across the border will remain driven by politics rather than free economic choices. And that reduces our countries’ prosperity. Construction of bridges, roads, and processing facilities has lagged far behind the volume of traffic. As a result, long delays and increasingly high extra transaction costs are imposed on both producers and consumers.

What we lack is better regional planning and cooperation. Consider the international bridge between Windsor, Canada and Detroit, Michigan. It is a prime example of a lack of coordination.

Rather than continue to wait for Michigan’s voters to warm up to funding the U.S. portion of a much-needed bridge, Canada decided to pay for the entire project on its own. That included the portion that connects to the U.S. interstate highway system.

While Canada and Mexico have prioritized large-scale infrastructure planning and spending, it is an entirely different story in the U.S., where infrastructure spending is a hodgepodge of smaller regional projects. We understand the need for strong regional and local input, but the lack of a broader plan hinders the strategic planning needed to support the trade that drives our competitiveness.

That’s why we recommend a North American Border Infrastructure Bank. This regional bank could be created by restructuring and recapitalizing the North American Development Bank, using private sector investment to introduce market priorities into border infrastructure. This approach would help overcome the often politicized process of prioritizing border projects by employing an “end to end” perspective.

These goals we have outlined are not impossible to achieve. In fact, they are narrow in scope and relatively low-cost. Our initial estimates indicate a benefit to the U.S. economy of almost 2.5% of GDP – about $500 billion – in the first five years. 

Our Working Group’s trip to the U.S.-Mexico border highlighted how integration works in the real world. An innovative airport terminal, the busiest land port of entry in the Western Hemisphere, and a unique clean energy facility near the border community of San Diego, California and Tijuana, Baja California, Mexico show the benefits and potential of living on the border.

An innovative airport terminal, the busiest land port of entry in the Western Hemisphere, and a unique clean energy facility near the border community of San Diego, California and Tijuana, Baja California, Mexico show the benefits and potential of living on the border.