Live coverage at 4 45 eastern on cspan3. Good afternoon, everyone. My name is peter schekter, Senior Vice President for Strategic Initiatives at the Atlantic Council. Im also the director of the asian orange latin american center. Thank you for joining us in this very timely event. And it is timely because 2 of the 3 members of the president S National Security cabinet are prafl trav traveling to mexico this week, but it is also timely because we are in imminent danger of dismantling the north american experiment we built with mexico and with canada in the past 25 years. It is a mystery to me and i suspect it is a mystery to many of you how we got to this point of profound rekrim nation when in fact mexico and the north american integration experiment of the past 25 years have been a huge Foreign Policy success. Today the u. S. Mexican border is the Worlds Largest border of a developing country with an industrialized nation, and instead of tension and rekrim nati recrimination and reproach, t 15 billion crosses the rio grande every day. Mexico and canada are now 2 of our top 3 trading partners. Nafta supports 14 million jobs in the United States. Combined canada and mexico invested nearly 400 billion in the United States in 2015. Progress is not only commercial. The past two decades created a unique era of trust between our nations that has brought unprecedented security cooperation. Intelligence sharing, matter narcotics enforcement, antiterrorism security happen daily. And proof of the reality of this partnership is found at mexicos border with guatemala where at our request, mexicos efforts to stem the flow of Central American refugees take an enormous burden off our border patrol. Todays rhetoric is forcing mexicans everywhere to question the unquestionable. Did the country make a mistake 25 years ago by betting its future on north america. We saw massive marches last weekend against the United States. The leftist candidate has locked in the top spot in national polls. If we continue to antagonize mexico, we risk our neighbor turning its back on us and turning its back on decades of strategic cooperation. Today as the two secretaries arrive in mexico and in the coming months, this center will continue to play a constructive role in suggesting ways to move this relationship forward. On march 7th, we will welcome a leading candidate for president and former secretary Michael Chertoff to discuss strategies for the future. As we kick off todays discussion about the way forward, nobody can begin to do that job better than a very distinguished guest, a dear friend and somebody who knows a thing or two are trade and u. S. Jobs. Secretary carlos gutierrez. Thank you, carlos, for hosting this event. Then there will be a Panel Discussion by my colleague, jason marzak. We are lucky to have a panel of impressive experts. Paula stern, our Atlantic Council board member and former chairwoman of the International Trade commission. Peter mckay, a good friend and former defense, justice and foreign minister of canada. Finally, Rafael Fernandez de castro, professor at the Maxwell School for citizenship and public affairs. Secretary gutierrez needs to introduction but quickly he served as secretary of commerce from 2005 to 2009 under president george w. Bush. During his time there he helped advance economic relationships, enhance trade, promote u. S. Exports. Secretary gutierrez is now share of the Albright Stonebridge group. Previously he spent nearly 30 years with the kellogg company, a global manufacturers and well known maker of food brands. In 1999 he was the youngest ceo in the companys 100year history. Without any further ado, please help me welcome carlos gutierrez. [ applause ]. Good afternoon and thank you very much for having me on this very timely meeting. It is a pleasure to be here with peter mckay, paula stern. I want to thank you Peter Schecter and jason marsak for the invitation. The discussion today is about nafta, but we know that there is a big elephant in the room thats called immigration policy. And im not going to get into that, but i think it is important that we just realize that were talking about our Free Trade Agreement with mexico and canada and the backdrop is this new immigration executive order that should be finalized very soon. I think all the details are out, but thats going to add a level of complexity to this that i dont think we are fully acknowledging. Peters going to discuss a lot of canada and the canadian context. Im going to focus mostly on mexico because it seems like that is the epicenter of whats going on here. It is important to step back. I know that were going to talk a lot about the details and whether we renegotiate or whether we update and whether it is the labor chapter or the environmental chapter and rules of origin and those are very important things, obviously. But i just want to step back a little bit because there is a lot more at stake than just the rules of origin and who wins or loses on a specific product category. Were talking about a big strategic issue. I remember being in mexico city a couple of years ago and just thinking about how the relationship has evolved and how there is a certain confidence in the relationship whereby its becoming somewhat bilingual, bicultural. There are english words that have just creeped in to the mexican to the Spanish Language in mexico. There are spanish words that have creeped in to the u. S. Language, cultures, food, you name it. The relationship has never been better. This is what was on my mind. Today youre talking about a level of anxiety in mexico that we cant see from here. We hear about it, we read the papers, but there isnt anyone in mexico who isnt thinking about whats going on. So weve worked very hard to get here and that relationship today is at risk. I think what we need to understand and i trust that our government here in the u. S. Will understand this. We cannot humiliate a country to the bargaining table. We cant get a country to negotiate with us by humiliating them. Maybe in business you can because it is all about the bottom line. But you cant quantify national pride. You cant quantify national dignity. And thats whats at stake here. And it is going to be extremely difficult. F difficult for mexico to do anything but take a combative response, take a combative position. And in many ways, it is our position and our tactics that have forced mexico into a corner and they have no option. We have given them no option. Its not going to be an easy task. And i wouldnt push mexico on that. I wouldnt call their bluff. Because you know, as well as i do, that if this means going into a recession for a couple of years but were going to keep our National Sovereignty and dignity, that will happen. And i would hate to even test it. So we are creating the conditions for a president ial election in 2018 in mexico where the winner could well be an antiamerican populist, antiimperialist. What have you. In mexico. Something we havent seen in decades, decades, and decades. That would be a strategic issue. I just we need to have the wisdom to not go for ata tactic victory that down the road well realize that it was a strategic defeat. And the motivation for a quick tactical victory is always there. I just hope we have the wisdom to look down the road a little bit. I started my career in mexico, so for me, its a country i know very well. I was actually general manager of kellogg, mexico from 1983 to 1988, before nafta. I remember that mexico extremely well. Were talking about very nationalist policies. Protectionist in many, many ways. Products that are imported today we couldnt import back then. A sense that things had to be nationalistic, that not open but very nationalistic. Being on the corporate side of things, you could see the impact that that had on our ability to create jobs. 100 inflation. Lot of people have forgotten that. But during that period when i managed the business, we had about 1 00 inflation, on average. Low growth rates so high inflation, low growth rate. And we all remember this boom bust cycle where approximately once every six years there would be a major devaluation. That major devaluation would have devastating impacts on border towns, on border states, on jobs in the u. S. , on jobs in mexico, on corporate Balance Sheets and corporate earnings, which in turn led to more downsizing. Just a terrible vicious cycle. We havent seen that. We havent seen that for about 20 years. And that coincides with the nafta period. Today what the three countries have built is really quite breathtaking. Nafta is worth over 1 trillion. Well over 1 trillion. Supply chains have been integrated throughout it the three countries. Manufacturing supply chains and Agricultural Supply chains, going on both sides of the border, being able to get produce to the countries on time so that it doesnt rot. We know how to do that. We can do that because weve been building this infrastructure for over 20 years. Logistics operations on both sides. Computer systems. Nafta is digital. And the Computer Systems that have been also integrated across the three countries to consolidate information, all the things that you need to do, to work the supply chain, to forecast sales, to invoice a customer. Its not like switching off a light that all of a sudden nafta goes away. These are billions and billions of dollars that have been invested in this infrastructure that we call nafta. 14 million u. S. Jobs are tied to nafta. 14 million u. S. Jobs. As we approach this, we need to keep that in mind. Geographic proximity always makes a difference. And you would expect that mexico is the main export market for the majority of u. S. Companies. Let me just explain that a second. 57,000 u. S. Companies export to mexico. Of those 57,000 companies, 94 are small and medium size. So youre talking about this is the essence of geographic proximity. If you start exporting, you might as well export to your neighbor. So a lot of jobs, a lot is at stake. I was hearing this morning, just to take one example of the trickle effect and kind of the domino effect of Something Like this. We receive ekxports and avocadfn ka exports of avocados and tomatoes. Those are highvalue items. But they also happen to be in states where we have seen the drug crime and weve seen the impact of organized crime in mexico. What are those families going to do if theyre out of a job . If you cant find a job in the avocado business, if you cant find a job in the tomato business, where else do you go . So we just have to keep thinking about and connecting dots and understanding that this is a lot bigger than how much are we paying for mexican goods or how much are they paying for u. S. Goods and how much are they buying and how much are we buying. Canada and mexico are the top customers for u. S. Products. So we are were dealing with the biggest thing weve got going. The world is regionalized. We keep talking about globalization and how globalization has hurt everyone. It is still very much a regional world. The eu, in spite of brexit one of the problems with brexit is the eu is the biggest market for british goods. Because of proximity. Because theyre there. Today in asia, china is leading the way toward what they call rsep. Some call it as onplus three or asean plus four. The three south Asian Countries plus korea, japan and china. Without the u. S. , without the u. S. Dollar. Thats the vision. It may not happen for seven years, for ten years, but today as we speak, theyre building roads going down through vietnam, laos, from china. Theyre getting ready. So lets look at the americas. We are fragmented. Were splintered. Theres aside from nafta, theres cafta, you name it, the pacific alliance. There are a lot of Different Things but there isnt one americas. The crown jewel that we do have is nafta. And i hope that we also think about the role that our region plays as we are competing with other regions in the world. We would much rather have jobs stay here in the hemisphere than go to asia. And that is a reality. It becomes an economic reality and it becomes a National Security reality. Again, i hope we keep that in mind. Energy supply chains. We have the opportunity to see a massive shift of wealth from the east to the west if we could get our act together regionally and build Energy Supply chains. We have the oil, we have the gas. And this is the time when we can be doing that. This is a time when we can be negotiating that. By 2050, mexico will be the seventh large aes econost econo world. The seventh largest economy in the world. Our southern neighbor. And canada will always be one of the most developed per capita income economies anywhere. So nafta is not only important today, but it will get more and more important. Nafta should be updated. Okay . Lets agree to that. The market has changed. The world has changed in 23 years. So, yes, the labor chapter, the environmental chapter. We probably should look at rules of origin. Think about nafta was signed before the internet took over the world. Right . So think about the digital economy. Online marketplaces. The cloud. The app economy. The internet of things. This is an area we can have, the u. S. Can have a significant advantage if we can get to a point where we can negotiate a better agreement where it is not a zero sum game, where one party wins, the other party loses. Thats not what trade has been all about. It has been about growing the market. So i think the question that i would hope that were asking as we go into these talks, whenever they start to happen, how do we make nafta stronger for all three countries. And how does north america better compete with the rest of the world. Those are really the two strategic questions. Everything else i think is tactics and politics and, you know, sort of appealing to the political circumstances in individual countries. I think we should be working on Bilateral Agreements with mexico on immigration. We should be working on Bilateral Agreements and trilateral agreements on border security. I had the opportunity to work wion a major study that we did to come up with a Bilateral Agreement for lowskilled workers from mexico. Because right now lowskilled workers have to go to a black market. So were essentially just outsourcing the labor that our Companies Need to a black market. Why not negotiate some kind of an agreement . Those are the things that i think are possible. Those are the things that i think we should be focused on if we have the right attitude. And not this idea that were going to win and theyre going to lose or were going to show them or, you know, were going to put our foot down. We know from history and history looms large in our relationship with mexico that thats not going to work. So i want to thank all of you for your interest in this. I want to thank you for your leadership. I want to thank you for your commitment. But above all, i hope that we can be a voice of wisdom as this process starts. Because theres an awful lot at stake. Not just for next year but 10, 20 years down the road. Thank you very much for being here. It is a pleasure. Thank you. [ applause ] thank you, secretary gutierrez, for are taking the time and to be with us today. Secretary, for your important leadership on this topic. It is such a pivotal moment. Thank you so much for your comments and your insights. Thanks to all of you for joining us today for this incredibly timely and important discussion. Im jay sore marzak, director of the asianamerican economic associati tonight secretary of state Rex Tillerson and secretary of Homeland Security john kelly will arrive in mexico with an objective of trying to calm the waters. Im sure we can all guess what will be a part of the topics in tomorrows meetings. Security, migration, the economy, border issues. But of course this will be against a backdrop where a once constructive relationship is now under threat. Politics, politics especially on both sides of the border now, will be as important as policy or potentially more important. Finding common ground. It comes just over a week after Prime Minister trudeau came to washington, a visit that again raised questions if one potential casualty of this new u. S. Approach could be broader north american integration. That would of course be a huge loss from u. S. Jobs lost to our strategic footing weakened. Intertwined with the three north american economies simply keeps us safer as we will discuss today. We have an allstar panel to do that. On your right, peter mckay. Peters someone who ive had the pleasure of working with for the past few years. I can say that every good thing youve heard about peter is correct. He is one of canadas premier thought leaders who has held an impressive number of posts in the canadian government. This includes serving as minister of defense for six years and minister of Foreign Affairs for a yearandahalf. Most recently he was minister of justice until 2015. Peters currently a partner in the Baker Mckenzie toronto office, a firm with which we have had the good fortune to collaborate with on a number of different conferences and events. Thanks for coming out for this. Paula stern is the founder and chairwoman of the stern group which she founded in 1988. Shes also truly a wealth of knowledge and im privileged to call paula a Dear Colleague as paula serves on the Atlantic Councils board of directors. It is hard to find someone with both the experience and expertise of paula. Thats why shes always one of my first calls on any trade related matter. Paula served as chairwoman of the u. S. International trade commission and as commissioner for nine years analyzing and voting on over 1,000 trade cases. Next to me Rafael Fernandez de castro, prove for in both mexico city and Syracuse UniversitysMaxwell School of citizenship and public affairs. Rafael, you are really the ultimate expression of a strong u. S. Mexico relationship. Ive had the pleasure to know rafael, worked with him for a number of years. He is a prolific writer as well, having written and coed dit coe books. Rafael was also a Foreign Policy advisor to former president felipe calderon. Thank you all very much for joining us. Were going to spend the next halfhour or so taking a deep dive on a number of different issues beginning with tomorrows meetings in mexico, then moving on to north american linkages as a whole. The future of nafta. Short to longterm repercussions of todays environment. And the path forward. And we are going to leave plenty of time for questions from everybody whos joining us here today. It is a lot to cover. Ive asked the panelists to keep comments short and warned that if the comments go long ill jump in to keep the conversation flowing because there is a lot of ground to cover. Start off with tomorrows visit that both secretaries arrive in mexico city tonight. Border security, Law Enforcement, cooperation and trade are going to be at the top of the agenda with our counterpart meetings in mexico. Theyll meet with president pena nieto as well as secretaries of interior, foreign relations, finance and national defense. Perhaps, peter, starting off with you. Given the new low in the relationship, and i think President Trumps personal interest in driving this agenda, what do you think can be realistically accomplished at this point . Well, firstly, i think i want to thank peter and yourself and the Atlantic Council for the invitation. Firstly, i think its been clear to us from a canadian perspective that the president s quite serious criticisms of nafta have been very much aimed undoubtedly in the direction of mexico. The visit of President Trump with Prime Minister trudeau here last week i think demonstrated that, that the word that he used was tweak. Not tweet. Tweak. When it comes to the relationship. [ laughter ] people jump when he tweets. With respect to the question and this upcoming meeting, i think it is an opportunity to maybe step back and the u. S. Officials, tillerson and kelly who are going, have an opportunity to hone in on legitimate concerns around security. And i think if they go back to the basics of the security as being perhaps the primary concern thats been expressed by this administration, that may allow them to, i dare say, rethink some of the rhetoric, particularly around the wall. I fully expect well have a discussion on the wall. And at the same time i think it will allow mexican counterparts to make a very strong case for the continuation of this unprecedented relationship here in north america. How integral it is to the success of all of our countries, from an economic perspective, but from an overall quality of life perspective. Lets go back to basics here. To make America Great again, you have to make nafta great again. So i agree with many of the comments all of the comments, frankly, of secretary gutierrez who spoke of the need to modernize this agreement. So i think this opening salvo in this visit tomorrow is a tremendous opportunity to recast what has perhaps been a wrongfooted approach and go back to the basics of security, improving some of the concerns that do exist in an agreement that is 23 years old when it comes to nafta, and not retrench or double down on some of the rhetoric, but really hone in on just how important nafta is. And i know that that was part of the approach that Prime Minister trudeau took last week when he was here. What about on the trade issue. What do you trade is in addition to the wall and border issues and Law Enforcement cooperation is obviously front and center. What do you see being realistically accomplished tomorrow on that level, whether its behind the scenes . What do you see as far as potentially public statements that could come out . Obviously taking into account that the folks that are traveling from the u. S. Side are Homeland Security secretary and our secretary of state. Im glad you asked about trade, because we heard about one elephant in the room, which was immigration in the opening statement. But i really think the elephant in the room is trade. So maybe there are two elephants here. It is a big room. The fact is the president of the United States of america ran successful on a trade agenda. He said two things that he wanted to get done. One, he wanted to reduce the trade deficits. And the second, he wanted to throw out those dumb agreements that were made by stupid