North American Free Trade Agreement

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NORTH AMERICAN FREE TRADE AGREEMENT

NORTH AMERICAN FREE TRADE AGREEMENT. The General Agreement on Tariffs and Trade (GATT), which went into effect in 1948 in the wake of World War II, sought to expand free trade by reducing tariffs between the twenty-three signatory nations. A strong supporter of GATT throughout its history, the United States in 1986 began to urge that GATT move beyond the reduction of trade barriers and that its agenda include foreign investment, services, agriculture, and intellectual property rights.

Increasing competition from Pacific and European countries caused the United States to begin trying to assemble a dollar-dominated block in the American hemisphere. This desire led first to the Free Trade Agreement (FTA) with Canada, effective January 1989, and then to an expanded trilateral agreement with Canada and Mexico, the North American Free Trade Agreement (NAFTA), effective January 1994. Given the earlier agreement between the United States and Canada, NAFTA dealt primarily with restructuring trade between the United States and Mexico and between Mexico and Canada. All tariffs between the United States and Canada would end by the year 1998; those between the United States and Mexico would be eliminated by 2008.

The agreements, however, much like the expanded agenda for GATT, covered more than the elimination of trade barriers and led to divisive debate in all three countries. Concerns among Canadians in 1988 and Mexicans in 1992 reflected a lingering view of the United States as a powerful nation that might yet seek to swallow up or strangle its neighbors. While some critics employed a powerful emotional rhetoric reminiscent of the days when the United States was roundly condemned as the Colossus of the North, others focused on the perceived need to protect Canadian and Mexican sovereignty, which they saw as threatened by expanded U.S. investment in such crucial national resources as oil and in institutions such as banking. Given the unequal status between them and their powerful neighbor, these opponents argued, both Canada and Mexico risked becoming in effect economic colonies of the United States.

In 1988 Canadians voiced many of the same concerns expressed by labor leaders and environmentalists in the United States in the early 1990s. Because Canada was already part of GATT, Canadians questioned the necessity of the FTA and the benefit to Canada of tying itself more closely to the largest debtor nation in the world. They argued that the movement of jobs from Canada to the United States, already a problem because of lower U.S. labor costs, would accelerate and that Canada's higher standards of environmental regulation and social programs would be threatened by U.S. investment and business practices. By far the most emotional issue in all three countries was the effect of NAFTA on employment. While proponents of NAFTA stressed that implementation would create jobs, opponents argued that the accord would lead to job loss. The negotiations commenced and continued during a period of global recession and high unemployment. While the movement of jobs from Canada to the United States and from the United States to Mexico had preceded the FTA and NAFTA negotiations, labor groups in both the United States and Canada were unshakable in their opposition.

As the leaders of both Mexico and the United States sought to assuage the fears of those at home who opposed NAFTA, the fate of the pact had implications beyond the borders of North America in the early 1990s. When President George Bush and Mexican President Carlos Salinas de Gortari announced in June 1990 the possibility of a free trade agreement between Mexico and the United States, Bush also announced the Enterprise for the Americas Initiative, which envisioned a free-trade block stretching from Alaska to Tierra del Fuego. This announcement preceded a dizzying number of new trading alignments within Latin America, including the agreement among Argentina, Brazil, Paraguay, and Uruguay in March 1991 to establish MERCOSUR, which pledged to integrate their economies by 1995, and numerous framework trade agreements between the United States and its southern neighbors.

The creation of a multinational trading bloc was a political and economic project. By the early 1990s, Latin American leaders had come to see the opportunity to move closer to the United States economically as a way to move their countries politically along a modern path of reform. At stake, then, was more than an economic reordering of the relationship among the three North American countries; there was also a foreign policy objective: strengthening political ties throughout the hemisphere. The U.S. Congress approved NAFTA in November 1993. A complicated and cumbersome document largely unread by proponents and opponents alike, it included concessions from all the parties because the United States, Mexico, and Canada saw in it an opportunity to promote their own economies, and protect the frailest components of those economies.

BIBLIOGRAPHY

Bowker, Marjorie Montgomery. On Guard for Thee: An Independent Analysis, Based on the Actual Test of the Canada-U.S. Free Trade Agreement. Hull, Quebec: Voyageur, 1988.

Bulmer-Thomas, Victor, Nikki Craske, and Monica Serrano, eds. Mexico and the North American Free Trade Agreement: Who Will Benefit? New York: St. Martin's Press, 1994.

Cavanagh, John, et al., eds. Trading Freedom: How Free Trade Affects Our Lives, Work, and Environment. San Francisco: Institute for Food and Development Policy, 1992.

MaryCommager/a. g.