Developing Business for the CANAMEX Corridor - Case Study Example

Developing Business for the CA X Corridor I. What is the CA X Corridor? The so-called CA X Corridor can be broadly described as an international economic cooperation highway among three North American countries – Canada, the United States (U.S.), and Mexico. It is actually a 3,200 miles (8,000 kilometers) transportation route which traverses the three countries from Mexico City in the south, passing through five states in the U.S., and the province of Alberta in Canada, all the way up to Anchorage, Alaska in the north (CANAMEX.org, n.d.). The name CANAMEX is derived from the initials of the three-member countries CANada, AMerica, and MEXico. CANAMEX.org, a website dedicated for the promotion of trade activities in the CANAMEX region, defined it as “a geographically designated area that has been developed and offers enhanced resources to facilitate the easy transportation of freight, movement of personnel, and the delivery of services along its route.” It can therefore be said that the primary objective of CANAMEX would be the facilitation of movement of goods and services, along with the movement of people along the route, probably with the ultimate goal of generating profitable business activities in the area. Specifically, the trade route encompasses the province of Alberta and the Canadian northwest territories; the states of Alaska, Montana, Idaho, Utah, Nevada, and Arizona in the U.S.; and the Mexican states of Sonora, Sinaloa, Jalisco, Nayarit, Guanjuato, Queretero, Estado de Mexico, and Mexico City (CANAMEX.org, n.d.). Figure 1 below shows the CANAMEX trade route map from Alaska in the north down to Mexico City in the south. Figure 1. CANAMEX trade route map II. Historical background In the United States, the CANAMEX was created in 1995 through a legislative act. The National Highway Systems Designation Act of 1995 officially created CANAMEX, with its definition and designation as a high-priority trade route (CANAMEX.org, n.d.). Its Canadian counterpart, the province of Alberta had initiated the CANAMEX proposal in the early 1990s, seeking “U.S. cooperation on harmonization of regulations” (Alberta Transportation, 2013). CANAMEX has a somewhat parallel existence with the NAFTA, or the North American Free Trade Agreement, which was inked by the U.S., Canada, and Mexico in 1994. NAFTA is an economic treaty which aimed to promote the free flow of goods and services across the borders of its member-countries. NAFTA took effect in January 1994 after the legislatures of the three-member countries ratified the treaty. According to Chambers and Smith (2002), the promotion of free flows of goods between member countries will be achieved through the elimination of “duties, tariffs, and trade barriers” over a period of time. While CANAMEX is not about the elimination of duties and tariffs, it is more about the promotion of free flow of goods and services along the designated trade routes. CANAMEX therefore hues well with the NAFTA objective of eliminating “trade barriers” with the promotion and harmonization of rules governing the movement of international goods and services, and of people, along the CANAMEX trade route. CANAMEX is fulfilling one of the requirements for a successful free flow of goods brought about by NAFTA: the demand for an efficient and reliable transportation system. According to Transportation Alberta, “Under NAFTA, international trade has grown rapidly, placing demands on transportation carriers and infrastructure to reach new markets in Mexico, the U.S., and Canada” (Alberta Transportation, 2013). After NAFTA was ratified, it was reported that 65 percent of goods produced in the U.S. immediately gained duty-free status, including farm goods exported to Mexico (Chambers & Smith, 2002). III. Rationale for the CANAMEX Corridor As stated in the CANAMEX Trade Corridor brochure issued by the province of Alberta, the goals of the CANAMEX are as follows: Improve access for the north-south flow of goods, people, and information Increase transport productivity and reduce transport costs Promote a seamless and efficient intermodal transport system, and Reduce administration and enforcement costs through harmonized regulations. Given the economic benefits that are to be realized with the free trade agreement as contained in NAFTA, the CANAMEX trade route is meant to support the objectives of NAFTA, enabling it to move goods and services across borders through an efficient and cost-effective means of transportation. Aside from transportation, there is also a communication component of CANAMEX, providing for a communication and information infrastructure for users in the trade area. CANAMEX therefore is a support system helping to realize the economic objectives not only of NAFTA but also of the states, provinces, and communities within its jurisdiction. IV. Expected benefits CANAMEX envisions an improved and efficient transport system that will lower the cost of transporting goods and services across borders. With the increased pressure for global businesses to transact in volumes to achieve economies of scale, there is likewise an increased pressure for their operations to be efficient, cost-effective, and competitive in order to reduce cost of operations. CANAMEX is therefore working to improve the productivity and efficiency of the transport system in the designated trade route. As stated by Transportation Alberta, “efficiencies reduce transport unit cost and raise the service levels, which allow exporters to be more competitive in existing markets, expand to new markets, and in turn, pass on savings to consumers.” (Alberta Transportation, 2013) Focusing on the truck industry, some of the benefits that can be derived from the CANAMEX strategies to improve the transportation system along the trade routes are the following: The size economies are expected to result in significant trucking savings Fewer trucks on the road Reduced collision rates Less cumulative damage to highways Less pollution Fewer bottlenecks, particularly at border crossings (Alberta Transportation, 2013) However, CANAMEX has evolved from just being a transportation support system, as it has now transformed itself into a mini-economic unit area that can take advantage of the cooperation among the states and provinces within the trade route. There are indeed other opportunities that can be derived from an improved economic highway, such as tourism, real estate, e-commerce, and a host of other businesses. The pan-American highway that is the CANAMEX is therefore more than just a transportation support, but truly gives a whole new set of economic opportunities for the people within the vicinity of its jurisdiction. V. Business trends: prospects and opportunities In the U.S., the five CANAMEX states have developed a plan to promote CANAMEX opportunities along the line of transportation, tourism, telecommunications, e-commerce, and e-governance. They have come up with at least five initiatives that CANAMEX has to undertake in order to take advantage of the economic cooperation and opportunities for the benefit of their constituents. These initiatives are aptly branded as Smart Corridor initiatives, each one described below: 1. Smart freight corridor initiative This initiative is encouraging businesses to deploy information technology to improve the services for both freight and tourist passengers using the trade route. Businesses and state agencies are encouraged to share information using internet technology in order to ensure safety and efficiency in the corridor. The use of an improved information technology system would allow the sharing of timely and relevant information across important stakeholders that can enforce safety and transport efficiency along the corridor. Such information sharing and information value will be important to the “general public…using the corridor,…enforcement agencies, and to medical, fire, and hazardous material teams.” (CANAMEX.org, n.d.) 2. Smart tourist corridor initiative Tourism is one big industry after transportation that is being eyed for development, given the potential to generate economic benefits along the trade corridor. There are a host of tourist attractions along the corridor that can be promoted. Along the U.S. portion of the CANAMEX Corridor, these are well-known tourist attractions located in the area, some of which are considered as American symbols. These include the following: The Grand Canyon National Park – spectacular sight with its unique combinations of geologic colors and erosional forms (National Park Service, 2013) Arches National Park – a red rock wonderland, a landscape of contrasting colors, landforms, and textures unique in the world (National Park Service, 2013) The Great Salt Lake and its islands – provide outstanding scenery and recreational activities in northern Utah (Utah.com, 2013) Yellowstone National Park – world’s largest collection of geysers (National Park Service, 2013) Glacier National Park – a hiker’s paradise for adventurous travelers, with pristine forests, alpine meadows, rugged mountains, and spectacular lakes (National Park Service, 2013) Las Vegas strip – a hugely famous entertainment and gaming destination (CANAMEX Corridor Project, 2003). In Canada, some of the tourist attractions that can be promoted within CANAMEX are the parks and wildlife ventures in the province of Alberta. The Alberta Tourism, Parks, and Recreation website (Alberta Tourism, Parks, and Recreation, 2013) indicated the following camping and recreations sites that can be explored by outdoor tourists, travelers, and adventure seekers: Cypress Hills Interprovincial Park - where pines touch prairie skies. Dinosaur Provincial Park - a world heritage site in the heart of the Canadian Badlands. Fish Creek Provincial Park - one of Canadas only urban provincial parks. Glenbow Ranch Provincial Park - Albertas newest provincial park. Kananaskis Country - Towering mountains, pristine lakes, evergreen valleys, and glacial streams are the backdrop to your outdoor adventure. William A. Switzer Provincial Park - experience Canadas beautiful Rocky Mountains in an uncrowded setting. (Alberta Tourism, Parks, and Recreation, 2013) In Mexico, the Mexican border town of Nogales offers a great tourist destination for those who want to explore Mexican living and culture just across Arizona. According to one Arizona website promoting tourism attractions, Nogales is the “largest Mexican border town” with lots of tourists coming from the U.S. every year to experience Mexican culture in an “old-charm” city (The Go Travel Sites, 2013). Some of the activities that can be done in Nogales are the following: Pena Blanca Lake – fishing and boating activities Patagonia Lake State Park – fishing and boating activities Santa Rita Mountains – hiking and camping adventures Huachuca Mountains – hiking and camping adventures Saguaro National Park – resident of the popular and desert icon, the giant Saguaro cactus that can live up to 150 years Juan Bautista de Anza National Historic Trail – an old Spanish historical trail connecting Nogales to San Francisco for the first time in this historic overland route Smithsonian Astrophysical Observatory – the largest field installation of the Smithsonian Institution Astrophysical Observatory (The Go Travel Sites, 2013) With an efficient and safe highway systems leading to these tourist destinations, more people are expected to flock the area, bringing with them tourist dollars that can further fuel economic activities along the way. Furthermore, this CANAMEX initiative for tourists envisions the creation of “state-of-the-art rest stops” providing tourists access to “traveler information services such as tourist attractions, border crossing, hospitality services, and hunting and fishing licenses” (CANAMEX.org, n.d.). 3. Telecommunications access for rural areas initiative There are rural areas within the CANAMEX corridor states that still have limited access to broadband services. If the CANAMEX has to realize its full potentials, and given the demands of doing business in the 21st century require access to faster and efficient communication means, then telecommunication services in the rural areas have to be improved, and raised to the level of 21st century communications. Among the activities that are being planned under the telecommunication initiatives are the following: Using government authority to leverage telecom companies to install broadband service to smaller town and rural communities. Encouraging the deployment of fiber optic and other telecommunications cable lines within the CANAMEX corridor. Reviewing the status of Wireless Local Loop technology carriers in the corridor states and providing recommendations on how to facilitate deployment of these carriers for “last mile” access in rural areas. Establishing a north-south broadband backbone to facilitate the deployment of ITS and related smart corridor enhancements. (CANAMEX.org, n.d.) 4. Corridor highway improvement According to documents from CANAMEX Corridor Project, there are vast tracts of land owned by the U.S. federal government, including Native American reserves, located along the CANAMEX corridor. It has been foreseen that the vastness of these tracts of land would require an improved coordination of resources in case of emergencies, necessitating an improved emergency responders protocols involving the five affected U.S. states of Arizona, Nevada, Utah, Montana, and Idaho. A multi-state approach would be necessary, as these states “have few emergency resources close at hand” ( (CANAMEX Corridor Project, 2003). According to the CANAMEX Corridor Project, a vast portion of the five U.S. states within the jurisdiction of CANAMEX are public lands. These include the following states and land areas: Table 1. Percentage of Federal and Native American Lands Arizona Nevada Utah Idaho Montana 74% 85% 68% 64% 34% Source: www.channelingreality.com/nau/canamex_corridor_safety_security.htm Medium to long-term plans are needed to be put in place with the expected increase in the use of the corridor highways brought about by an increase in the influx of trade and commerce in the affected areas. Businesses opportunities are therefore expected along the areas of road construction and maintenance, road safety inspection and enforcements, and other investment areas in road infrastructure development. The bottom line is that with the increase usage of the trade routes, the wear-and-tear of the roads will increase, necessitating regular and constant maintenance and improvement works to ensure safety and efficiency for the general public and businesses. 5. Smart process partnerships Private individuals and businesses can expect a more efficient and dynamic businesses transaction either with government and/ or among businesses themselves with the CANAMEX initiative to encourage the use of e-commerce technology in the conduct of daily business. E-commerce provides another dimension to a “borderless”, 24-7 economy that encompasses business and trade not only within the trade route, but throughout the world reached by the internet. CANAMEX encourages partnership among businesses and state governments in order to promote efficiency in communications, and to take advantage of other business opportunities that can be derived from using e-commerce technology. The CANAMEX has three main points that it would like to encourage to promote the partnerships among businesses and governments: Accelerating access to e-government services throughout the corridor such as license renewals and business registration. Facilitating provision of professional services in the region through common registration and licensing which contributes to the creation of a “borderless economy”. The development of an interoperable Digital Signature program. E-sign provides the legal framework and the opportunity for the CANAMEX states to work together to develop a common system and a single set of standards for secure electronic commercial transactions. (CANAMEX.org, n.d.) Table 2 below summarizes some of the windows of business opportunities in relation to the initiatives being undertaken to promote and support the CANAMEX trade corridor. All three countries are expected to benefit from the CANAMEX as a special trading route, but business enterprises in their respective countries must be entrepreneurial enough to foresee the looming opportunities in the region. Table 2. Summary of business opportunities under CANAMEX Smart Initiatives Smart Initiatives Canada Mexico United States Smart freight highways Trucking services Trucking services Trucking services Smart tourism initiative Alberta tourism Mexico tourism U.S. tourism Telecommunications highway I.T. companies can participate in building I.T. infrastructure to upgrade telecommunications services in the rural areas Mexican I.T professionals can be tapped to provide expertise and staff support in building the telecommunications highway Investments in telecommunication needs in the rural areas Road infrastructure Road construction and maintenance Road construction and maintenance; investments of super highways to support CANAMEX trade routes Road construction and maintenance; opening of more in-roads to rural areas E-commerce and E-governance Information sharing with CANAMEX governments; businesses; and other target stakeholders Improvements in public and private e-commerce E-commerce to support tourism activities; Information sharing among state authorities VI. Problems and constraints The CANAMEX Corridor project is viewed as an important project that would play an important role in the “movement of commerce, linking the major trading centers of the inter-mountain west with Canada, Mexico, and California”, according to the CANAMEX project documents (CANAMEX Corridor Project, 2003). Moreover, CANAMEX plays a vital role in the promotion of the objectives of NAFTA. CANAMEX serves as one of NAFTA’s designated trading corridor that would facilitate commerce among the three countries, providing for the unhampered flow of goods and services in the area, safe movement of people, and unrestricted deployment of technology. With these objectives, CANAMEX have the following issues and constraints to deal with, given the uneven resources and national expectations among the countries involved: 1. Level of economic development The economic profiles of the three trading countries are varied and quite different from each other. While these countries are contiguous in one land continent, they have varying demographic profile as well. Mexico’s population in 2012 is estimated to be at 195 million (Indexmundi.com, 2013). The United States, on the other hand, is estimated to have a population of about 313 million as of 2012 (Schlesinger, 2013). Canada has the smallest population spread across a vast land mass, only 34 million people as of 2012 (Statistics Canada, 2013). Economically, Mexico is considered a developing country, while Canada and the United States belong to first world countries where economic development is much more advanced. This uneven level of economic progress could be a difficult flashpoint to deal with, especially in the areas of transportation and communication infrastructure. A smooth flow of goods and services cannot be expected to happen if, for example, the level of quality of roads and highway network between Mexico and the United States are uneven. First grade, multiple lane highways maybe standards for developed countries, and along this line Mexico may have to upgrade its own transportation infrastructure to be able to keep its side of the bargain. Mexico should therefore ensure that their road infrastructures are at par with that of the United States and Canada. As a developing country, however, Mexico does not have unlimited resources. Its investments on transportation and communication infrastructure, such as highways and road development, may just be one of the many priorities of the Mexican people. Political systems and political considerations are also factors that may influence economic decisions in the Mexican economy. But even between two developed countries such as Canada and the United States, disparities can also exist which need to be addressed to provide for the smooth implementation of the CANAMEX project. For example, the province of Alberta has a different transportation and freight standards when compared to that of United States and Mexico. This should be harmonized, since various mode of transportation carrying freight in and out of national boundaries will be expected to move goods from one point in the CANAMEX corridor to another. If rules are not harmonized, this might cause delays in the movement of products, and discourage international movement of goods, hindering the realization of the goals set by the CANAMEX project in particular, and the free trading activities in general. 2. Labor and employment In relation to uneven levels of economic development, the quality of labor and the employment/unemployment levels are also some of the major issues that could pose a challenge in the realization of the objectives of NAFTA and the CANAMEX project. Immigration policies are not going to be relaxed in NAFTA countries. Movements of people across international borders will therefore still be governed by existing laws on immigration of each respective country. The notion that a free trade area covered by NAFTA is a free-for-all migration of workers should be clarified and communicated will to the member-country’s respective citizens. A rise in illegal immigrants is a risk that should be guarded against, in order to maintain the goals of the CANAMEX project without any unwanted effects. An influx of low-cost labor could also affect the productivity and efficiency of human resources available in the trade corridor. This might cause or aggravate social problems in the areas covered by CANAMEX if left unchecked. 3. Tariffs on goods and services An attempt to harmonize tariffs on goods and services should be put in place in order to ensure the free flow of goods and services in and out of NAFTA countries. The objective of a free trade area is the eventual elimination of tariffs, ensuring that commodities can freely enter the borders of member-countries. However, this cannot be easily done, especially in the areas of agricultural products, where there would be the tendency to protect each one’s agricultural products from competing with those from another country. This would definitely be a challenge, especially on those commodities that are politically sensitive, in the full realization of free trade area objectives. 4. Safety and security Concerns about safety and security have never been as important and as urgent as today’s business world. There are various threats to safety and security coming from terrorists and extremists from all sides of the world geopolitics. Given these situation, each member-country must be able to ensure that safety and security in their areas of responsibility in the CANAMEX corridor are put in place and are assured at all times. Emergency response system must be developed and established in order to assure a fast and efficient response to any emergency situation or eventuality that might occur in any portion of the CANAMEX trade corridor. VII. Summary and conclusion The CANAMEX Corridor project is a trading route that was originally conceptualized to connect five states – Arizona, Nevada, Utah, Idaho, and Montana. The 1500 mile trading corridor soon expanded to 3200 miles, extending from Mexico in the south to the province of Alberta in Canada in the north. The CANAMEX corridor was designated as a high-priority trade route by the United States in support of the NAFTA, which was inked to push for a free and liberalized trade among the North American countries, including Mexico. The CANAMEX Corridor project aims to address the need of NAFTA’s free trade regime for an efficient transportation and communication infrastructure, a state-of-the-art information and telecommunications highway, and safety and security measures that could immediately respond to security threats and emergency situations. As a marketing strategy to promote the ideals of CANAMEX, it has come up with five key investment areas which it branded as CANAMEX Smart Initiatives. These investment areas are in freight transportation, tourism, information and communication, road networks, and e-commerce and e-governance. Some of the problems that have been identified in the implementation of CANAMEX as a free-trade corridor included the impact of uneven level of economic development among Mexico, Canada, and the United States, the quality of labor and condition of economic unemployment in each country, unharmonized tariffs on goods and services, and issues about safety and security. In conclusion, the CANAMEX Corridor Project is an important support mechanism that promotes the ideals of free-trade and liberalized commerce among the North American countries. Having the CANAMEX in place will assure that goods and services can actually flow in and out of the international boundaries of the concerned countries without any major problem. It will surely help the North American economies realize the full potentials of its trading systems for the benefit of its citizens. This is expected to happen, though, if the issues and concerns earlier identified, will be addressed properly and thoroughly by the trading countries. If proven successful, the CANAMEX project can serve as a model for other designated priority programs supporting NAFTA, or other support systems in other areas of the world that are also embarking on establish a regime of liberalized trade under a free-trade area concept. Bibliography Alberta Tourism, Parks, and Recreation, 2013. 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