Zero-sum future: North America in the maelstrom of a new international order

Since China's entry into the World Trade Organization in 2001, intra-regional trade in North America has declined by at least 7%. The clause restricting non-market economies in the USMCA has not done enough to contain its relative power. China's bilateral relationship with each of the countries has become more important: it is Canada's second largest trading partner; it would not be wrong to say that it is, actually, an interdependent trading partner; until a few years ago it was the only country in North America with which it had a deficit trade relationship. With Mexico it has a direct economic rivalry as they produce and trade the same goods; some theorists claim that China has replaced Mexico in its expectation of being North America's main supplier. Even more so since, in this continent, it trades the goods that generate the most profit for the Mexican State. López and Rodil rightly point out that in that sense both countries are part of a “global factory” pivoted by the United States.

For Washington and Beijing, the bilateral relationship is a mixture of economic rivalry and commercial interdependence (with a disadvantageous asymmetry for the United States). All North American countries are dependent to some extent on the U.S. relationship with China. The importance of nearshoring and the strength of the supply chain depends on political tensions outside the national interests of Mexico and Canada.

How regional is North America? Asymmetries and disaggregation

Mexico and Canada are exporting countries. The United States is also an exporter, but still derives significant income from domestic consumption; its neighbors, on the other hand, are mostly export-oriented economies. The advantages and disadvantages of this asymmetry are reinforced by the fact that the United States is the largest consumer of its North American partners exports. Even so, the relationship of subjugation of China's neighbors is much greater, but so is the political cohesion of their region.  

Despite their semi-liberal economic system, a communist party structure reigns in Vietnam, Cambodia and Laos; on their own, these countries barely achieve mid-power status in Southeast Asia, yet from a regional perspective, the cohesion of these states and China is vital. Through coercion, Beijing can control the interests of other countries in the region when they chair the Association of SouthEast Asian Countries. In this way, they generate significant diseconomies for politically non-aligned countries such as the Philippines and create sufficient political cohesion in the region that allows them to enjoy a certain degree of security. In North America, inter-regional institutions not only do not exist, but also the national policy agendas of its three members could not be more different. Not even the asymmetry between the U.S. and its neighbors, which stifles migration, security and energy, is sufficient incentive to organize and finance supranational mechanisms to manage the region's affairs.

Market-oriented integration: consequences of a lax regionalism

It seems that none of the three countries has a genuine interest in strengthening political ties at the zone level. Even indispensable issues such as security are negotiated bilaterally with the United States.  The integration process in North America has been more oriented by regionalization than by regionalism: many economic interactions at the sub-national level but insufficient political will to formalize institutions to improve commercial conditions. This integration is, in principle, conditioned by physical proximity, transnational ties and paradiplomat efforts; such as migration networks, cultural spaces, sister cities.  However, political initiatives at the State level since then NAFTA have been meager; the last one was the SSP, which ceased in 2009.  In any case, this shows that the free trade agreement was a business contract between governments more interested in asserting their national sovereignty than in finding areas of common interest.

Therefore, how "regional" is North America? As long as coordination efforts at the zone level impact the domestic outcomes of each State, processes at the regional level are said to be functional. In this region, with the prevailing agreements, it is difficult to think of joint outcomes beyond the economy.  As some academics suggest, integration in North America appears to consist of three intertwined bilateral relationships.

At the turn of a new international order

At least for Mexico, the incentives to move closer to the United States remain greater than those to move away. Theoretically, it reduces military spending and safeguards trade; it's also a guarantee of proficient nearshoring.  The terms of the USMCA makes that for World Trade Organization members Mexico remains an attractive investment destination despite its domestic problems. The treaty has been instrumental in increasing international trade flows in the region. However, the economic structures are not sufficient to meet the challenges of a rising power that is more organized, ideologically aligned with its region, and perhaps even with more potential allies in the international system. Taking into account all of the above, it is not surprising that the People's Republic of China (PRC), without a single signed trade agreement, has become the second largest trading partner of the three North American countries.

While economically the world is moving closer to China, Mexico is moving closer to the United States. The situation for Canada is no less complex. Guajardo and Coté-Muñoz suggest that North America needs a coherent strategy to meet the challenges posed by China. A strategy that identifies common issues in economic, security and other areas relevant to all three countries without avoiding the domestic characteristics of the PRC. North America is finally facing a challenge hazardous enough to force itself to create the shared characteristic of all successful regions of the world: a bureaucratic and institutional regional structure with common moral goals.

Sources:

López-Arévalo, Jorge & Rodil Marzábal, Óscar & Valdez, Saul. (2014). The impact of China's incursion into the North American Free Trade Agreement (NAFTA) on intra-industry trade. CEPAL review. 2014. 83-100. 10.18356/100ccd07-en.

Guajardo, Jorge & Coté-Muñoz Natalia (2022). The Future of North America-China relations.  Wilson Center..

Capling, A., & Nossal, K. R. (2009). The Contradictions of Regionalism in North America. Review of International Studies, 35, 147–167. http://www.jstor.org/stable/20542781

Long, Tom & Bersin, Alan. (2022). North America 2.0: Forging a Continental Future.

Borzel, Tanja & Risse, Thomas. (2016). The Oxford Handbook of Comparative Regionalism. Oxford University Press.