Organized by North American Forum on Integration (NAFI) Escuela de Graduados en Administracin Pblica y Poltica Pblica del Tecnolgico de Monterrey

(EGAP) Mexican Council on Foreign Relations (COMEXI)

Abstracts
THE IMPACT OF FEDERALISM ON THE ENERGY SECTOR Friday April 2, 2004 Room Continental - 4:00 to 5:15 p.m.
In what way do U.S. and Mexican states and Canadian provinces influence the form and rate of North American energy integration? Does federalism make for easier cross-border integration on a regional level? What place do states and provinces have in the continental energy debate? Does wellfunctioning federalism constitute a contributing factor to energy security?

CHAIR

Eduardo ANDRADE ITURRIBARRIA

President, Mexican Association of Electric Energy
Engineering Major from the University of Mexico with specialization on Project Management; also has studies in corporate finance from Tecnolgico de Monterrey and Capital Investment Projects from the Organization of American States. Member of the Board of several not-for-profit and educational organizations. Currently he is President and Chairman of the Mexican Association of Electric Energy and President and Chairman of the Mexican Chapter of the World Energy Council; he works for Techint, an energy oriented industrial group based in Italy and in Mexico since 1954. He is a regular speaker on energy issues in seminars and conferences both in Mexico and abroad.

SPEAKERS

Earl FRY
Professor of Political Science, Brigham Young University
Earl H. Fry is Professor of Political Science and Endowed Professor of Canadian Studies at Brigham Young University. He is the author of many articles and books dealing with North American economic relations. He previously served as Special Assistant in the Office of the U.S. Trade Representative, and has been the Bissell-Fulbright Professor at the University of Toronto and the Thomas O. Enders Fellow at McGill University. He is the former President of the Association for Canadian Studies in the United States.

ABSTRACT Introduction of the paper entitled "The Impact of Federalism on the Evolution of the North American Energy Sector The North American Free Trade Agreement (NAFTA), which went into effect in 1994 and will be fully implemented by 2008, exemplifies the growing interdependence between Canada, Mexico, and the United States. Figure I illustrates various dimensions of North American interdependence. For example,

Forging North American Energy Security

Canada and Mexico rank as the two leading trading partners of the United States. U.S. exports to Canada actually surpass its exports to the entire European Union (EU), even though Canada has fewer than 32 million people and the EU has 380 million inhabitants. U.S. exports to Mexico are almost twice as large as its combined exports to Central America, the Caribbean, and South America. Since the implementation of NAFTA, U.S. trade with Canada and Mexico has grown much more rapidly than with the rest of the world, climbing from 31.5 percent of all U.S. exports in 1993 to more than 37 percent in 2002. U.S. direct investment north and south of its border has also climbed rapidly, with U.S.-owned companies in Canada producing the equivalent of 10.3 percent of Canadas gross domestic product (GDP) and providing 1.15 million jobs within Canada. Since NAFTAs inception, U.S. direct investment in Mexico has been growing at an even more rapid rate than with Canada, with U.S.-controlled enterprises holding 115 billion dollars in assets in Mexico and employing 1.05 million Mexican workers. As for Canada, its direct investment in the United States stood at 92 billion dollars at the end of 2002 and its companies have recently made sizeable investments in the U.S. energy sector. NAFTA is a partnership of the worlds largest, eighth largest, and ninth largest economies, according to the World Banks gross national income (GNI) rankings in 2002. However, the North American economic relationship is asymmetrical, with Canada and Mexico being much more dependent on access to the huge U.S. marketplace than vice-versa. The U.S. population base is almost three times larger than Mexicos and almost ten times larger than Canadas. The GNI differential is even greater, with U.S. GNI 14 times larger than Canadas and 17 times larger than Mexicos. Over 80 percent of all Canadian and Mexican exports are destined for only one foreign market, the United States, and these exports account for over one-third and one-fifth respectively of each countrys annual production of goods and services. This paper will concentrate on a rather unusual dimension of the very extensive and elaborate North American economic relationship, the impact of federalism on continental energy cooperation and security. Joseph Dukert asserts that trilateral cooperation among the three sovereign nations of North America is arguably more advanced in the field of energy than in any other aspect of everyday life. There are only 25 nations out of almost 200 in the world today which maintain federal systems of government, and three of them are members of NAFTA. The three sovereign nations referred to by Dukert are governed by three national governments, 92 major subnational governments in the form of states and provinces, and over 100,000 additional county, municipal, township, village, and special-district forms of local government. The paper will explore how modern-day federalism is currently affecting North Americas energy relations and what effect it might have on this relationship over the next two decades.

Joseph M. DUKERT
Independant Energy Analyst
Joseph M. Dukert, an independent consultant since 1965, has focused since 1990 on North American energy. He has been involved in the preparation of numerous U.S. energy policy documents; and he was a senior advisor to the Commission for Environmental Cooperation (CEC) of North America for its report on the environmental effects of North American electricity trade. On behalf of the U.S. Energy Association, he developed the policy recommendations on North American energy that USEA submitted in response to the Cheney Report under the current Bush administration. Recently, he was named a senior fellow of the U.S. Association for Energy Economics.

ABSTRACT Coping with the Federalist Reality in North American Energy Trade National energy policy in Canada, the United States, and even Mexico is influenced to varying degrees by diverse regional interests and attitudes. This federalist characteristic influences how policies articulated by the central authority are actually implemented. That may determine how energy resources and infrastructure are developed . . . and thus how continental trade takes place. A commonality of crossborder interests facilitates international cooperation, but local recalcitrance can block it. Methodical analysis of subnational priorities is advisable, perhaps increasing chances of any projects success.

Forging North American Energy Security