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REGIONALISM _________ AND THE GATT: THE NORTH AMERICAN INITIATIVE Sidney Weintraub Re regionalism in Western Europe is now taken for granted by economists and politicians alike, who generally view as promising the further removal ofbarriers among countries in the European Economic Community (EEC) as envisaged in Europe 1992. Similarly, the U.S.-Canada free trade agreement, which entered into force on January 1, 1989, was generally applauded by those who believe in removing impediments to world trade. Now that the United States and Mexico have indicated their intention to pursue a free trade agreement, however, and President George Bush has outlined his vision ofeventual free trade throughout the Western Hemisphere, questions are being raised about the durability of the multilateral trading system in the face of growing regionalism. These developments coincide with the climax of the Uruguay Round of trade negotiations in the General Agreement on Tariffs and Trade (GATT), slated for completion in February 1991. These are complex negotiations dealing not only with the old agenda of tariffs and some nontariff measures, but also with a new set of priorities: agriculture, trade in services, trade-related aspects of foreign investment, protection of intellectual property, the phaseout of the Sidney Weintraub is Dean Rusk Professor, Lyndon B. Johnson School of Public Affairs, University of Texas at Austin, and Distinguished Visiting Fellow, Center for Strategic and International Studies. His recent works on Mexico include A Marriage of Convenience: Relations Between Mexico and the United States (New York: Oxford Press, 1990) and Transforming the Mexican Economy: The Salinas Sexenio (Washington, D.C: National Planning Association, 1990). 45 46 SAISREVIEW restrictive multi-fiber arrangement (MFA), and agreement on a new safeguards procedure to end the current widespread evasion of trade obligations. The relationship between these two sets of developments presents a number of questions. Why is the United States engaging in regionalism at this time? Special emphasis will be devoted in this discussion to Mexico, both because this prospective agreement is the most recent development and because it signals the expansion ofthe U.S. commitment to a regional approach. Is the existing GATT structure capable ofhandling the issues that regionalism will raise and the derogation ofauthority that could occur? Finally, where is the world trading system headed? The United States and Regionalism The United States adopted bilateralism as a tactic in the early to mid-1980s, especially with respect to Israel; over the years, however, regionalism has become a part ofU.S. strategic thinking. This represents a profound change in U.S. trade policy. For most of the postwar period, the United States eschewed bilateral trade agreements with other GATT contracting parties. Existing agreements with, for example, Cuba and the Philippines were perceived as remnants of colonialism and terminated. Bilateral trade agreements with communist countries were motivated primarily by the exclusion of most of the communist world from the GATT and the trading difficulties posed by their centrally planned economies. The most-favored-nation (MFN) principle of the GATT, which then referred largely to tariffs, had little relevance when dealing with state traders. The shift in U.S. policy can be traced to three developments: the growth of regionalism in Europe, the emergence of persistent U.S. trade deficits, and dissatisfaction, justified or not, with the workings of the GATT. The United States had a political motive for its early support of regionalism in Western Europe. To promote European stability and Western security in the 1950s, it endorsed the use ofeconomic integration to neutralize the deep-seated animosities in the region, particularly those between France and Germany. In addition, the United States argued that the dynamic growth resulting from economic integration would more than compensate for any short-term discrimination against its exports. The economic rationale for supporting the creation of the EEC, however, was clearly secondary. Economic integration, as far as the United States was concerned, was to be pursued for political more than economic reasons. A comparison of the strong U.S. support to the EEC with its lukewarm REGIONALISM AND THE GATT 47 response to the creation of the European Free Trade Association (EFTA), which was purely economic and had no political content, bears this out. This is not a...

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