The Future of North American Integration: Beyond NAFTA

Chapter 4: NAFTA is not Enough

87 4 NAFTA Is Not Enough Steps toward a North American Community Robert A. Pastor More than four hundred million people in 2002 live in the United States, Mexico, and Canada, but few, if any, think of themselves as residents of “North America.” The term has described the continent’s geography but not its people. The governments of these three countries have devoted so much energy to declaring their differences that they have given their people little reason to consider what they have in common . The nations share a continent, cultures, values, and a trade agreement that has accelerated the pace of social and economic integration. The North American Free Trade Agreement (NAFTA), which came into effect in 1994, could be the foundation on which a North American Community could be built, but much work needs to be done. NAFTA’s purpose was to dismantle trade and investment barriers, and that explains why it reads like a business con- 88 NAFTA Is Not Enough tract. Although North America is the largest free trade area in the world in terms of population and product, the region lacks a vision of what it could or should become. This may be because some thought NAFTA was already too much for the three nations to absorb, or it could stem from the lack of imagination of the leaders of the three governments or the lack of interest by the people. Whatever the cause, after more than eight years, the question is whether North America should be more than NAFTA. Bouyant with the legitimacy of having won the first indisputably fair election in Mexico’s history, Vicente Fox offered the most ambitious agenda for his country and the entire region. He challenged his two colleagues in the United States and Canada to borrow some lessons from the European Union (EU) and begin to construct a customs union and a common market. Thus far, neither U.S. president George W. Bush nor Canadian prime minister Jean Chrétien have offered much of a response to his proposal. This chapter accepts Fox’s premise—that NAFTA is good, but not enough—and it offers options and ideas to flesh out his proposal. NAFTA’s Success and Inadequacies When it was first proposed, NAFTA was subject to blistering criticism by, among others, Texas billionaire business- 89 NAFTA Is Not Enough man and 1992 independent presidential candidate H. Ross Perot, who predicted that the United States would lose millions of jobs. As it happened, the onset of NAFTA coincided with one of the most successful periods of job creation in American history. The United States did not lose or, for that matter, gain many jobs because of NAFTA, but the agreement can be considered a success if one judges by its goals. It reduced trade barriers, and trade and investment more than doubled in a relatively short time. Today, the first and second largest markets for U.S. goods in the world are Canada and Mexico, respectively, and about 85 percent of both countries’ trade is with the United States. Regional integration cannot be measured by the absolute increase in trade, but rather by the relative increase in intra–North American trade as a percentage of the three countries’ world trade. Two decades ago, less than one-third of the three countries’ world trade was with each other; today, more than one-half of their world trade is with each other. A growing percentage of intra–North American trade is intrafirm and intra-industry trade. This is a sign that national companies have become more continental in operations. The 1990s also witnessed a convergence of values among the peoples in all three countries and a deepening of social integration because of immigration.1 While NAFTA succeeded in what it was designed to do, its flaws come from what it omitted. NAFTA was silent on 90 NAFTA Is Not Enough the income gap among the three countries, and the two gaps, particularly between the United States and Mexico, widened in the 1990s. The Canada-U.S. gross domestic product (GDP) per capita gap widened from $3,400 in 1989 to $7,600 in 2000; the Mexico-U.S. gap went from $15,800 to $26,200 over the same period.2 NAFTA did not address migration, and illegal migration increased. Until Fox arrived, both the United States and Mexico traded recriminations instead of intelligence about drug traffickers. After...