Transcript The Institutional Environment: FTA, NAFTA and Hemispheric

Geoffrey Hale
Political Science 3170
The University of Lethbridge
October 19, 2010
Outline
 NAFTA’s Institutional Structure
 The Treaty
 Detailed Contract vs. Institutional Delegation
 NAFTA and “Competitive Liberalization”
 NAFTA in the Context of Broader U.S. Trade Policies
 U.S. domestic barriers to NAFTA expansion
 Canadian domestic barriers to NAFTA expansion
NAFTA and Economic Integration
Chapter 1 – Creation of Free Trade Area
Continuum of Economic Integration
Limited bilateral
agreements
------------------------------------------------------------------
Economic
Union
Customs
Union
Free Trade
Area
* joint monetary,
* common external * separate external
regulatory policies trade policies
trade policies
Independent
Countries
Structure of NAFTA
 General rules (Chapters 2-5, 8-9, 16, 18)
 Definitions
* National Treatment
 Rules of Origin
* Customs Procedures
 Safeguards
* Technical Barriers to Trade
(Emergency Action)
* Temporary Entry (business people)
 Publication and Administration of Laws
 Sector-specific rules (Chapters 6-7, 10-14)
 Energy
* Agriculture + SPS
 Procurement
* Investment
 Services
* Telecommunications
 Financial Services
Structure of NAFTA
 Other policy-specific areas (Chapters 15, 17)
 Competition Policies (incl. * Intellectual property
monopolies, state enterprises)
 Dispute Settlement
 Investment (part of Chapter 11)
 Financial Services (part of Chapter 14)
 General Dispute Settlement (Chapter 19)
 General Dispute Settlement (part of Chapter 20)
 Other
 Free Trade Commission (Chapter 20)
 Accession (of other countries) or Withdrawal (Chapter 22)
 Exceptions

e.g. National Security, Taxation, Cultural Industries, Balance of
Payments emergency
Institutional Development of NAFTA
 Context
 Proposals for “deepening” of NAFTA


Pastor (2001) – “North American Community” (w. independent executive)
Dobson et al (2004ff) – movement towards customs union.
 NAFTA – “just a trade (business) deal”?

“High level of obligation; high level of precision; low ... delegation.”

Origin – market access, strategic positioning (Canada, Mexico re: U.S.; U.S. re:
Western Hemisphere, ROW – especially EU, East Asia)
Membership – restricted (3), requiring consensus for expansion.
Scope – primarily trade and economic issues; minimal capacity for expansion to
include North America wide social issues (NAALC, NAAEC focus on “national
standards”
Control – Asymmetry; U.S. has de facto veto on expansion.
Flexibility – obligations highly detailed; flexibility for extension largely based on
informal agreement  “three can talk, two can walk”.




Factors shaping institutional development
 All three countries
 Protect sovereign authority, subject to reciprocal national
treatment for residents of member countries
 Limited desire for European-style delegation of sovereign
authority through trilateral institutions
 Canada
 Symmetry of U.S. legal obligations to protect FTA-related
gains (e.g. dispute resolution) ... avoid “hub and spoke”
Factors shaping institutional development
 Broadening, deepening of economic integration to customs
union or future economic union requires development of shared
institutions
 Advocates of expansion also envisage
 Shared regional development role (Mexico uplift)
 Shared environmental and health policies

Major asymmetries among NAFTA member nations
 Shared policies re: labour mobility and security

Extremely controversial in U.S.
 BUT Canadian advocates of NAFTA expansion focused mainly on
expansion of Canada-US relationship, while U.S., Mexican
advocates focused mainly on U.S.-Mexico relationship.
Barriers to Expanded Trilateralism
 U.S. reluctance to delegate powers restrictive of national
sovereignty to external institutions
 U.S. reluctance to accept political responsibility for social
and economic development of Mexico through shared
institutions
 Parallel frustration of FTAA agreement with Brazil, other
Latin American governments (2003) due to competing
priorities.
 Canadian perceptions that Canada-US, US-Mexican
relations have very different problems and challenges.
 Shifting focus of U.S. trade policies under Bush
Administration  “Competitive Liberalization”
Competitive Liberalization
 Pursuit of network of bilateral and regional trade
agreements with “like-minded trading partners”
 e.g. Australia, CA-4 / DR, Colombia, Peru, Singapore, Morocco,
Jordan, Chile.
 Followed similar actions by Mexico in late 1990s
 De facto institutionalization of “hub and spoke” regime.
 Followed belatedly by Canada after 2006
 Absence of coherent policy responses to China by NAFTA
countries (individually and collectively)
 Evolving slowly in aftermath of 2008-09 recession
Options for Trade Policy Evolution (Wise)
 Emergence of “Regional 12” trade bloc from harmonization
of NAFTA countries’ separate trade agreements with CA-6,
Dominican Republic, Columbia, Peru and Chile.
 Canadian negotiations with Columbia, Peru, CA countries
intended to facilitate eventual emergence.
 Treaties signed with Chile, Costa Rice, Colombia, Peru,
Panama (2010).
 Negotiations continuing with CA-4, Dominican Republic,
CARICOM.
 BUT coordination of agreements will require major
political shifts in U.S., cross-partisan cooperation in Mexico
to overcome domestic political barriers.
Factors contributing to / constraining
competitive liberalization
 “Single Undertaking” rule at both WTO and FTAA
negotiations  “joint decision-trap”
 U.S.-Brazil standoff in hemispheric trade
 Canadian fears of marginalization by U.S. Strategy
 Major barriers to reducing NTBs, e.g. “rules of origin”
 Limited / intermittent U.S. Congressional support for
Trade Promotion Authority necessary to negotiation trade
agreements
 U.S. Congressional support for trade liberalization
evaporated after 2008 Presidential election.