North American Regionalism and Global Spread

I. Hussain, R. Dominguez

• Publisher: Palgrave Macmillan
• Year: 2015
• Print ISBN: 9781137497918
• eBook ISBN: 9781137493347
• Topic: Política y relaciones internacionales
• Subtopic: Negocios en general

Was the 1993 North American Free Trade Agreement (NAFTA) designed as a definitive trade agreement, or as a stepping stone? This book reviews NAFTA's performances on trade, investment, intellectual property rights, dispute-settlement, as well as environmental and labor side-agreements within a theoretical construct.

1

North American Economic Integration: State or Supranational Preferences?

Setting

When Stephen Harper, Enrique Peña Nieto, and Barack Obama—chief executives of the three “North” American countries1—met in Toluca, Mexico, in February 2014,2 the North American Free Trade Agreement (NAFTA) signed by the three countries was already 20 years old. Crafted at a time of intense regional trade bloc rivalry,3 NAFTA bondages were quickly and widely interpreted in similar fashion as the European Union (EU)—of policy-making authorities plausibly passing from the state to a supranational entity.4 In other words, existing mutually dependent, or interdependent, relations would pave the way for economic integration of sorts between states. Yet, as Duncan Wood of the Mexican Institute in Washington, DC argued, shortly after the Toluca Summit: (a) “the bilateral approach has more often than not trumped trilateralism” and (b) “a dual-bilateral approach may be complementary,” ultimately, to the “trilateral vision for the region.”5 Had the ambitious initial integrative efforts regressed into interdependence across North America during those 20 years, or was a strategic shift underway to adjust to globalizing economic behavior elevating unilateral action?

This integration–interdependence tussle is not a new interpretive framework of international relations.6 Integrative efforts can be measured, not necessarily in terms of supranational institutions, as has become popular with the EU,7 but in terms of the six goals stipulated by NAFTA Article 102: all countries would promote (a) “cross-border” flows of both goods and services by eliminating barriers; (b) “fair competition,” without formally defining fairness or meshing the statist interpretation with societal; (c) investment opportunities—a target as critical amid the early 1990s economic slump as it is in the post-“Great Recession” circumstances today;8 (d) intellectual property rights protection—a relatively new interest elevating the service sector more than the manufacturing; (e) administrative and dispute settlement infrastructures, thereby harmonizing disparate rational and patrimonial decision-making behavior in addition to common and civil legal traditions; and (f) “trilateral, regional and multilateral cooperation”—in a way seeking to both promote a singular North American identity and look beyond North America.

Interdependent behavior accents bilateral relations in which both sides seek their own vested interests. This clearly characterized North America prior to the integrative impulses of the late 1980s and early 1990s: Canada and the United States may have boasted the world’s largest unfettered border, but conflicts over softwood lumber,9 pork and swine,10 and salmon exposed significant nationalistic considerations;11 Mexico and the United States harbored too many mutual suspicions, from not only illegal border-flows,12 but also the huge gap in economic size, breeding what has been called a shark–sardine atmosphere,13 with inequality-based recriminations a natural outcome; and Canada and Mexico barely had a viable or noteworthy economic relationship before the NAFTA initiative. The 1988 Canada–United States Free Trade Agreement (CUFTA) exposed one way to overcome many constraints in the first of those three bilateral relations, prompting a serious and successful CUFTA extension to Mexico, thereby loosening the other two interdependent bilateral relations for expansion.

Fast-forwarding 20 years and before thrashing out the key components of the integration–interdependence paradigms to address the above questions, it is important, we feel, to understand why ground-level integrative developments between the three countries were “showing [their] age and strains” at this juncture.14 We profile two contradictory trends at the end of those 20 years.

“North American” Upswing

On the eve of the Toluca Summit, Eduardo Medina Mora, the Mexican ambassador to the United States, saw the region “as potentially the most competitive region in the world for reasons made possible by NAFTA.”15 Over those 20 years, trade between the three countries more than tripled, with railway traffic between Mexico and the United States, for example, spiraling 17-fold, accounting for 1 percent of total bilateral trade in 1993 to 17 percent in 2013. Just in that one bilateral relationship, trade expanded from 81.4 billion USD in 1993 to 506 billion USD 20 years later; yet a closer scrutiny will also show one of the many nationalistic strains: bilateral trade surplus, for example, shifting from the United States to Mexico right from the moment of NAFTA implementation—an argument frequently cited by US legislators to revamp restrictions.16

A similar setting in the mid-1980s and early 1900s, dramatized by “aggressive [US] unilateralism,”17 prioritized quite a different goal: regionalism within North America. All three countries sought one, or both, of the others out for idiosyncratic and similar reasons.

Taking Canada first (for alphabetic and sequential reasoning), it can be seen that regionalism triumphed over nationalism in several simultaneous developments. The Macdonald Commission Report,18 charged with finding out Canada’s economic malaise, pointed out not only how Pierre Trudeau’s one-track stubbornly pursued Third Option policy approach had failed, but also that shifting economic attention away from the United States was erroneous since it was both the largest and closest market for Canadian traders and investors.19 This appealed to the Conservative Party leader, Brian Mulroney, who, as prime minister of Canada, proposed a free trade agreement to the US president Ronald Reagan at the Shamrock Summit, in March 1985.

When he became president of Mexico in 1988, Carlos Salinas de Gortari felt the same way as Trudeau felt about the United States but acted like Mulroney did, though much more rapidly. His complementary policy approach to diversify trading partners from the United States led him to West Europe and Japan—precisely when the Berlin Wall collapse shifted German interests to the domestic agenda from the international, and Japan began what eventually became the longest recession any developed country had faced,20 and which still continues in 2015. Neither could pay attention to Gortari’s proposal. Unsuccessful in both arenas, he returned to the United States—through a February 1990 proposal at the Davos World Economic Forum—with free trade on his mind.21

Mexico also had its failed Third Option counterpart: its import substitution industrialization (ISI), upon which the country recorded very enviable growth in the 1950s and 1960s, was exhausted by the 1970s,22 resulting in massive indebtedness during the 1980s. Borrowing abroad, Mexico had no choice but to begin the liberalization process, with the United States serving as the guiding light, under the Brady and Baker plans.23

Just as Ronald Reagan had accepted the Shamrock proposal, George H. W. Bush—whose own plan for Latin America, called the Enterprise for the Americas Initiative (EAI), was floated to new Latin leaders in June 1990,24—accepted Salinas’s proposal at the San Antonio Summit of the Americans in September 1990. Among other reasons, Reagan did so as part of his drive to liberalize US agriculture trade (for the first time, in fact), and Bush, driven by a peace dividend now that the Cold War had ended, to cultivate new relations in an arena as thorny historically as any other.

All three countries also faced other common impulses: the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) was stalemated from the very start in 1986 at Punta del Este,25 meaning a fallback to regionalism became attractive—hastened no less by the European Community adopting the Single European Act (SEA) in 1986,26 threatening trade bloc rivalry. Additionally Japan’s rise as the second largest economy posed a perceived global economic threat that fed into this trade bloc mind-set.27

The end of the Cold War opened nonsecurity sectors for all three countries to explore. Some demanded overdue collective attention (Mexico–US immigration, environmental protection, drug trafficking, etc.), while others presented opportunities derived from newly emerging technologies (trade as prime beneficiary, biotechnology being a key new development).

Whereas the NAFTA impact remains at the heart of this study, returning to the Toluca context, all three leaders credited the NAFTA-based growth, while unequivocally expressing wishes to move beyond. Harper observed how the three economies had become “increasingly linked,” to which Peña Nieto added that the region itself had become “more competitive and more prosperous,” while Obama, wanting to overcome “parochial interests” as an obstacle in all three countries, even signed an executive order en route to Toluca to expedite border trade documentation electronically.28

Yet, Obama led the call to “expand” this North American alliance with Canada and Mexico through the evolving Trans-Pacific Partnership (TPP).29 Peña Nieto had been formalizing his own Pacific Alliance, while Harper trod a similar pathway toward Europe through the Comprehensive Economic and Trade Agreement (CETA). Pursuits such as these, to go “beyond NAFTA,” as opposed to widening NAFTA membership,30 however, might be taking their own North American toll:31 the Toluca Summit, marking the sixth such summit in ten years, broke the annual pattern, as Obama’s three attendances during his six years in office did not quite tally with George W. Bush’s three attendances in just three years. Diminishing zeal need not necessarily express downsized relations. Yet, priorities began to shift: 19 TPP rounds of negotiations were squeezed into 40 months (from March 2010 until August 2013), and CETA negotiations, which began in May 2009, already boasted an agreement, “in principle,” by October 2013 for Harper and European Commission president José Manuel Barroso to sign. Should this persist, regional integration may not be the appropriate NAFTA birthright in the way it was for the European Community/Union. “Even if NAFTA’s explicit details never change,” William C. Gruben explicitly reminded us in 1995, that is, after the first NAFTA year, “what NAFTA implies can change.”32 If the concatenated NAFTA vision aired in Toluca depicts a different integrative ballgame, a fallback framework cannot be readily dismissed. Parsimonious as it is, interdependence may better suit the occasion,33 especially given the prior history of North American relevance dating back to the Cold War.34 If so, where and how particularly can we trace the origin of this diversified approach to understand what got in the way of the integrative efforts unleashed from the mid-1990s?

Obama alone does not show integrative hesitancy. Harper’s open call for a bilateral deal with the United States, harking a return to CUFTA exclusiveness, could be seen as a snub for Mexico, particularly as it coincided with the adoption of a visa regulation for Mexicans visiting Canada after the ostensibly fake Mexican refugee applications for Canada spiked in 2009.35 Peña Nieto, too, like his immediate predecessor, Felipe Calderon Hinojosa, has looked south seriously and substantively—a Latin inclination that proved too superficial in prior NAFTA years when Mexican leaders sought to project their country as a “North” rather than a “Latin” American player. In other words, even in the integrative heydays, we find (a) greater resort to unilateral action not only within North American countrie...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright
• Contents
• Acknowledgments
• List of Abbreviations
• 1 North American Economic Integration: State or Supranational Preferences?
• 2 North American Trade: Growth with Strings?
• 3 NAFTA and Foreign Direct Investment: Multilateralism Matters
• 4 NAFTA’s “Linchpin”: Dispute Settlement Mechanisms
• 5 NAFTA and Intellectual Property Rights: Regionally Strapped?
• 6 Environmental Side Agreement: Societal Sideshow?
• 7 NAFTA’s Side Agreement on Labor: Sidelined Forever?
• 8 NAFTA’s Intergovernmental Underbelly: Of Westphalian Whispers and Global Ghosts
• Appendices
• Notes
• Bibliography
• Index