01/03/2012 07:06 EST | Updated 02/26/2012 05:12 EST

Mexico: Nice Place to Visit but Wouldn't Want to Trade There

Holiday parties gave me the opportunity to talk to Washingtonians about Canada, and the most frequent question this year is not about the Keystone XL pipeline, but about Canadian attitudes about Mexico. Why is Canada so hostile to U.S. attempts to address problems trilaterally?

Misapplying the template of U.S. politics on Canada, some assume that Canadians are racist, prejudiced against Hispanics. Or more charitably they think that Canadians are snobs, seeking to disassociate themselves from Mexican poverty and crime.

With apologies to Mohsin Hamid for paraphrasing the title of his MAN Booker Prize shortlisted novel, I prefer to think of the Canadians -- the Harper government, anyway -- as the "Reluctant Continentalists" of North America.

The Canadian drive for trade liberalization in North America has generally been the pursuit of privilege, or advantage, but not any principle such as free trade. Not, as Jerry Seinfeld would say, that there is anything wrong with that; but Americans have a more ideological view of the process, and for Mexicans it is an epic historical gamble that also includes democratization.

The story of the Canada-U.S. Free Trade Agreement (CUFTA) is often told as the story of Canada protecting itself from a wave of American protectionism. Yet it was also an effort to end-run that protectionism to gain an advantage over rivals for U.S. market access.

Canadian governments believed that the North American Free Trade Agreement (NAFTA) was desirable because participation allowed Canada to safeguard its CUFTA gains, avoiding becoming a wheel spoke rotating around an American hub. And Canadians did not see Mexico as a commercial rival in most sectors, with the sole exception of automobiles, and the North American auto manufacturers reassured Canadian officials that the deal was necessary so they acquiesced.

After NAFTA, Canada showed little interest in "North America" or rather in Mexico. Canadian participation in the working groups established by NAFTA was dilatory. When the U.S. Congress passed immigration reform and new border controls in 1996, Canada resisted, lobbying Washington alone and launching a series of bilateral dialogues with the Americans. In the wake of the Sept. 11, 2001 terror attacks, Canada proposed the bilateral Smart Border Accords to the G.W. Bush White House. The major trade disputes of these years were similarly bilateral: softwood lumber, Pacific salmon, intellectual property.

The Bush administration responded to Canada, but sought to trilateralize. It agreed to Smart Border Accords with Canada, and proposed parallel accords with Mexico. In 2005, Bush launched a trilateral Security and Prosperity Partnership for North America (SPP). Canada participated in its 20 working groups on economic and security cooperation, but skeptically, particularly when Paul Martin and the Liberals were replaced by Stephen Harper and the Conservatives. Barack Obama replaced Bush, and attended the fifth North American leaders' summit in Guadalajara in 2009; Obama scrapped the SPP, but kept its trilateral architecture in a new round of negotiations, proposed the merger of U.S. Clean Energy Dialogues with Canada and Mexico (Canada refused) and Obama pledged to attend the sixth summit in Canada in 2010. Canada never organized a summit, and so the United States hosted the subsequent summit this year in Hawaii.

Today the United States is the hub and Mexico and Canada are spokes in talks intended to improve the competitiveness of the North American economy. In Washington, the situation is called "dual-bilateralism" in puzzlement as to why Canada and Mexico find it acceptable. There are parallel talks with Canada and Mexico on border security, regulatory cooperation, and energy research and development. The U.S. has NORAD with Canada and the Merida Initiative with Mexico. Behind the scenes, the United States coordinates its positions in all these groups with an eye to eventual convergence; in public, American officials maintain the polite fiction of separate but equal talks with the neighbours.

If you asked Obama what he most wanted for Christmas this year, peace on Earth might make the list along with a second term, but goodwill among Canadians and Mexicans would certainly make his job, and a U.S. economic recovery, easier. And even the Mexicans believe that Santa lives at the North Pole, in Canada.