It’s been a long time since the United States has formally changed its territory; or has it been? Depending on how you describe territory, U.S. trade agreements are a sort of territorial modification. For instance, the North American Free Trade Agreement (NAFTA) of 1994 eliminated all tariffs between the United States, Mexico and Canada. Usually tariffs are set up between separate countries. So, in a sense NAFTA combines some of the commercial features of all three countries making them a unified territory for some purposes.
What NAFTA Delivers
Those purposes are more than just the collection of tariffs, because tariffs, or the lack there of, influence employment, manufacturing and all the other knock-on features of employment and manufacturing. For example, once a Mexican city can attract Canadian and U.S. companies to manufacture in Mexico other things are affected beyond just employment. The infrastructure necessary to support the manufacturing facility is going to need improvements. The local economy around the manufacturing facility will need to supply additional workers. Things change.
Looking at a trade agreement as a modification to a country’s territory begins to open up questions about the quality of society within that territory. Because trade agreements are commercial by nature, let’s look at the commercial aspects of society. The infrastructure that supports commercial activities, like energy and electricity generation directly affect the manufacturing quality of society. In North America the combination of hydraulic fracturing (fracking), deep water drilling, horizontal drilling, shale oil processing and smart petroleum field operations have changed the energy profile. In 2014 the United States will once again become the world’s largest gas and oil producer, while Canada and Mexico also both have large gas and or petroleum deposits.
For the United States the possibility of energy independence is now very real, whereas just five years ago it didn’t seem likely. Even the beginnings of renewable energy are appearing in meaningful amounts. For instance, electricity generation from wind increased 16-fold between 2000 and 2010. While during those same years overall renewable electricity generation from solar, biomass, wind, thermal and hydro-generation doubled. At the end of 2012 renewable electricity generation represented 4 percent of US energy use, and that number is projected to double again between 2012 and 2014. Fortunately, renewable energy numbers elsewhere around the world are higher. According to the International Energy Agency (iea), global use of renewable energy in 2012 was about 13.1 percent.
Is there a bridge away from fossil fuel use that leads to complete renewable energy generation? This is a difficult question. The two areas that need the most attention in the US are energy conservation and changes in transportation methods. Moving from gasoline powered cars to electric cars, moving towards single car families and improved mass transit are all moves that will be needed to make any dramatic change in the US energy profile. At the moment, these changes don’t seem imminent, although they are beginning to be adopted. There success isn’t out of the question.
Oil represents 93 percent of the energy used for transportation but only 1 percent of the energy used to generate electric power according to the US Energy Information Administration. Switching to electric cars and renewable and natural gas electric generation can make a significant dent in the shift towards renewable. And as for energy conservation, at least ten cities around the country have instituted smart grid technologies for their energy use. These cities, like Denver, San Diego, Washington D.C. and Austin are pilot programs used as proof of process for better electricity use. At the core of these changes are smart meters, which are installed in private homes and businesses to help guide decisions about economical energy use.
Canada and Mexico have different energy profiles, but neither country has as large a population so their overall energy use is not as large. The United States population size continues to grow modestly, but that is due to immigration. NAFTA plays a role in this trend. The United States desperately needs an immigration policy that works to naturalize productive immigrants. Unfortunately this is currently not the case, but between legal and illegal immigration, the number of people entering Mexico, Canada and the United States are attracted to opportunities which are not available elsewhere.
What Are The Benefits?
The U.S. territory, expanded by NAFTA, is partially attractive because of its energy profile. In the U.S., energy is dependable, and relatively inexpensive, which supports industry. But does dependable and inexpensive energy produce jobs in the United States? Let’s look at NAFTA statistics. The United States runs a trade deficit with Canada and Mexico every year. We import raw materials, commodities and manufactured goods. So, both Canada and Mexico are benefiting from these arrangements. There is, however, a winning piece of the exchange for the U.S. also. If you just look at the services rendered area of trade, then the U.S. is a net surplus exporter. In other words, we send more consultants and professional services to Canada and Mexico than they send to us.
In 2009 the United States, according to the office of the United States Trade Representative, “Trade in services with NAFTA (exports and imports) totaled $99 billion…. Services exports were $63.8 billion. Services imports were $35.5 billion. The U.S. services trade surplus with NAFTA was $28.3 billion in 2009.” Here is the reason an expanded territory via trade agreement is worthwhile, but to make it an ongoing, workable arrangement, the quality of life has to improve for all partners. Basic infrastructure has to be adjusted to leverage the expanded territory.
Making the most of an expanded territory is an ongoing negotiation about critical issues. Two the most difficult issues are U.S. immigration policy and U.S. drug policy. For the entire twenty years NAFTA has been in place, these two issues have been problems. Drugs in particular are a trouble spot that involve cartels, murders and addiction. Then, as an extension of U.S. drug policies, U.S. immigration policies are arranged to prohibit entry. One policy has a negative influence on the other and as a pair of political issues they have been intractable.
Fortunately, changes in U.S. drug policy are beginning to happen. Marijuana is slowly but systematically becoming decriminalized. It’s a drug and there are addiction problems involved, but just like alcohol, the marijuana prohibition has produced more collateral problems, like huge U.S. jail populations, and the international drug trade, than were expected. To improve the benefits of NAFTA, U.S. domestic policies are being adapted to accommodate needs of our partner countries as well as domestic interests. As U.S. drug policy and then immigration policy change there is much more growth available for the extended NAFTA territory.