North American Free Trade Agreement (NAFTA)
Wednesday, November 2, 2005
Historical Background & Facts:
- Effective
January 1, 1994, NAFTA links Canada, Mexico, and the US into a free trade
region. It expands on the Canada-US
Free Trade Agreement of 1989.
- Why? Benefits of proximity in trading and
prosperity/competitiveness requires higher levels of integration
- Immediately
eliminated tariffs on half of all US goods shipped to Mexico and gradually
phases out other tariffs over 15 years.
- Major
industries affected: agriculture,
automobile and textile manufacturing,
- telecommunications,
financial services, energy, and trucking
- Contains
provisions for the inclusion of additional member nations
- Institutions
- NAFTA
Secretariat: “Administers the
mechanisms specified under the NAFTA to resolve trade disputes between
national industries and/or governments in a fair, timely and impartial
manner.” Located in Ottawa,
Mexico City, and Washington, D.C. and appointed by each respective
government
- North
American Development Bank (NADBank):
channel funds in border area to improve the environment
Readings:
Robert A. Pastor, “North
America: Three Nations, a Partnership or a Community?”
- Why
NAFTA is viewed as 3 separate nations?
- Historically
separate because of “asymmetry” in economic/military power between US,
Canada, & Mexico
- Canada
reversed position due to changing public sentiment and Mexico because of
debt crisis threats called for a change in development strategy
- Impact
of NAFTA
- (+)
NAFTA has met goals on trade and investment – almost all duty-free goods
- (+)
Increased trade, investment, travel/immigration, intra-regional exports
- (+)
NAFTA members purposely avoid any bureaucratic/supranational institutions
- NAFTA
implemented by each government
- (+)
Mexico: oil dependent nation Þ manufacturing
export nation
- (+)
Canada: a more diversified and
international economy
- (+)
US: GDP increased by 25% during
1990s (no major job losses)
- (+)
Increased dependency on each member’s economies
- (-)
Lack of compliance/political will:
US imposes limitations on agriculture imports
- (-)
Development gap has widened
- (-)
Inadequate infrastructure cannot handle increased traffic
- (-)
Did not address immigration and undocumented workers in US has increased
- (-)
Did not address energy issues
- (-)
Did not coordinate macroeconomic policy (no way to deal with Mexican peso
crisis)
- (-)
No mention of security
- Three
sovereign nations, trilateral partnership, or a community – what’s best
for N. Americans?
- Community: must reduce development gap through
EU-learned lessons
- Limit
number and time that institutions provide aid
- Aid
in infrastructure & college education
- Aid
to be concentrated in poorer countries
- Macro-economic
policy coordination and resources cushion volatility of poorer markets
- Community
requires that all members assist each other b/c problems cannot be
contained and growth in one can help others
- Challenges
for NAFTA in its second decade:
- Canada
must take the lead in replacing dual-bilateralism with rule-based N.
American institutions
- Mexico
must demonstrate how it would contribute and use a N. American investment
fund to double its growth rate and lift its economy
- US
must redefine its leadership to inspire support rather than resentment,
fear, or unease
Alejandro Chanona, “A Comparative Perspective Between the European
Union and NAFTA.”
- Thesis: NAFTA needs a theoretical tradition to
debate its progress as well as its obstacles
- NAFTA
is under-theorized and theories are at beginning of development
- Neo-liberalism
and neo-realism do not explain the “2nd wave” of regional
integration that NAFTA is a part of
- 1990s
formalization can be explained by Andrew Moravcsik’s Intergovernmental Institutionalism and Modified Structural
Realism, which stresses central importance of power & interest
based on:
- Intergovernmentalism
- Lowest-common
denominator bargaining (of largest state’s interest, i.e.: US)
- Strict
limits on future transfers of sovereignty
- What
is to be learned from the EU?
- NAFTA
intergovernmental negotiations can redefine supranational goals
- An
institutional system aids integration, and economic integration requires
political integration
- Obtain
a diversity of theoretical starting points between actors and structures
- NAFTA
is not part of one theory
- Combining
Theories
- International
Theory
- Theories
of Regional Integration
- Neo-functionalism/liberal
institutionalism help explain the Mexico-US integration process ca be
seen as a more North-South relationship and less a “regional”
partner. Increasing levels of
interdependence generate increasing demand for international cooperation
- Liberal
Intergovernmental
- Moravcisck: “An understanding of domestic politics
is a precondition for, not a supplement to, the analysis of strategic
interaction among states.”
- The
strongest theory to explain NAFTA must combine regional variables with
domestic variables in an international context.
Questions:
- Should
NAFTA become a community, and as such adopt more institutionalization and
US/Canada provide more aid to Mexico?
What would compel the US to adopt such a policy?
- For
nations that expressly did not want institutions, would a North American
Advisory Council, North America Parliamentary Group, or Permanent Court on
Trade and Investment be effective or another façade of integration?
- If
the US lessened its impact of the Department of Homeland Security, would
it be giving up part of its sovereignty and security?
- If
Moravcsik is correct that domestic forces (people/interest group’s wishes)
can explain a state’s choices in international actions, and if Pastor is
correct that people want more integration, what is the likelihood that
governments will entertain new approaches to joining a North American
“community”?
- Should
the increasingly complex interactions and interdependencies be
institutionalized or left to “ad hoc political bargaining” (Chanona 5)?