NAFTA at 10: Progress, Potential, and Precedents
Ten years ago, U.S. President George Bush, Canadian Prime Minister Brian Mulroney, and Mexican President Carlos Salinas de Gortari signed the North American Free Trade Agreement (NAFTA) in San Antonio, Texas. Since the signing of NAFTA, trade and investment among the three North American nations has grown by more than 100 percent, with $1.7 billion in trilateral trade each day.
Marking the 10th anniversary of this historic agreement, the Wilson Center convened a two-day conference to assess the impact of NAFTA, the lessons the agreement may hold for deepening North American ties and future trade agreements, and the international effort to “get globalization right.”
The 10th anniversary of NAFTA comes in the midst of the most wide-ranging set of trade negotiations the world has ever seen. In addition to the Doha Development Agenda launched last year, a number of regional and bilateral negotiations are underway. In particular, Canada, Mexico, and the United States will be engaged in the effort to forge a Free Trade Agreement of the Americas (FTAA) by 2005. This ambitious trade agenda is taking place in the context of a widespread debate over the benefits and costs of globalization, particularly the effects of trade on poverty, inequality, labor rights, and the environment.
During the conference, panelists examined the experiences of the past decade to look ahead to the still unfolding development of a North American community both challenged and strengthened by growing economic and social integration. As Wilson Center Director Lee H. Hamilton said in his introductory remarks, “Woodrow Wilson himself might have seen [NAFTA and this conference] as a step toward his own vision of an international community.”
The Three Signatories
“The NAFTA signing created the largest, richest, most productive market in the world,” said former President Bush at the opening session of the two-day program, held in the Atrium Ballroom of the Ronald Reagan Building and International Trade Center. More than 800 people attended this session featuring the three national leaders who negotiated and signed the agreement.
All three leaders lauded NAFTA’s success at creating millions of new jobs. Since 1993, Bush said that in the United States some 350,000 manufacturing jobs were lost due to NAFTA, but that 2 million higher-paying jobs were created.
“Our countries are stronger, our economies more robust, our peoples more prosperous, our social structures more resilient, our capital markets more stable, and our roles in the world more vigorous as a result of NAFTA,” said former Canadian Prime Minister Brian Mulroney.
“NAFTA guaranteed that Mexican products would gain access to the world’s largest market,” said former Mexican President Carlos Salinas. “For the first time, labor and environmental issues—the latter an issue on which Canada taught us much—had a place in a trade agreement.” He also recounted the process leading up to NAFTA, recalling the importance of reducing Mexico’s debt, unifying the government, and rallying the public before signing on.
Mulroney endorsed similar future agreements such as the pending FTAA, which potentially would encompass 800 million people in 34 countries when ratified. “The power of a good idea should never be underestimated,” he said. “It should happen again.”
Making an Impact
Dozens of key business leaders, academics, and current and former government officials convened for two days of panel discussions. During the first panel, after the three heads of government spoke, speakers called NAFTA a positive revolutionary event representing a paradigm shift for the three nations led by three visionary leaders.
Yet speakers also addressed the challenges facing NAFTA, including the need for more work to strengthen dispute-resolution mechanisms, to increase the openness of borders among states while strengthening exterior borders, and to have agricultural trade open and free of subsidies. Another challenge will be to ensure that certain regions, particularly the southern sections of Mexico, are not left behind.
Linking North America
While the “big idea” behind the European Community was the prevention of another European war, many found it difficult to see the “big idea” behind NAFTA, beyond the obvious strengthening of trade relations. NAFTA institutions do exist, and the three states do submit to them, but these institutions are neither democratic nor transparent. The question was raised as to whether the concept of continental security could be the new idea around which NAFTA could move forward, especially if the tradeoffs between continental democracy and sovereignty are addressed in the process.
Numerous speakers throughout the conference noted that, in practice, NAFTA represents two separate bilateral agreements (between the U.S. and Mexico and the U.S. and Canada), more so than one trilateral agreement as was intended. For example, there is little military collaboration between the United States and Mexico compared with the stronger military cooperation between the United States and Canada. Panelists reported the call for a reduction in the perceived unilateralism of the United States regarding border issues with Canada and particularly Mexico. Some suggested that potential benefits would result from stronger convergence on many elements of tax policy.
Getting Globalization Right
A panel on globalization highlighted the growing income inequality, both within and between Mexico and the United States. Income disparities in Mexico are among the highest in the world with many elements and geographic regions failing to participate in the market economy, a situation which, in turn, drives migrants to the United States in search of jobs.
Panelists also said that income inequalities have been a major source of Mexican migration. For example, the rural population comprises one fifth of Mexico’s total population, yet it contributed only about one twentieth of GDP. Meanwhile, the U.S. job creation of 1.2 million jobs per year exceeded growth in the U.S. labor force—a gap that Mexicans living in the United States helped fill. Six million Mexicans, working in the United States, send about $9 billion to Mexico each year.
In particular, speakers urged a focus on building stronger institutions in NAFTA to address governance problems and corporate disputes. Panelists observed that, regardless of whether the NAFTA countries develop a common currency, interest rates and monetary policy in Mexico, the United States, and Canada are beginning to converge.
Into the Future
While NAFTA addresses business relations, some of the related and more difficult issues have yet to be tackled, such as migration, labor, security, transportation, and monetary policy. Regarding NAFTA as a model for future agreements, speakers emphasized that negotiators should take a long-term approach to the agreement, seek to avoid special status treatment for politically powerful industries, and focus on building institutions for the resolution of disputes. Speakers also stressed the importance of involving civil society, NGOs and businesses, big and small, to build a more powerful constituency for a better agreement. Panelists suggested that NAFTA be seen as a model, along with the creation of the European Community, for the creation of substantial regional free trade agreements in other parts of the world.
Hady Amr, managing director of the Amr Group, contributed to this story.