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Overview
NAFTA entered into force in 1994 after a bitter Congressional debate. But NAFTA in operation has proved no less controversial than NAFTA before ratification, for both supporters and opponents of trade liberalization have cited experience with the agreement to justify their positions. To provide a factual basis for this ongoing debate, the authors evaluate NAFTA’s performance since its inception, comparing actual experience with both the objectives of the agreement’s supporters and the charges of its critics. They examine future challenges and opportunities in the trade and investment relationships among the three partner countries and the broader implications for new trade initiatives throughout the hemisphere. Chapter 1 describes trade, investment, and macroeconomic developments under NAFTA, beginning inauspiciously with the Mexican economic crisis of 1994 but moving on to impressive growth in trilateral trade and Mexican GDP. Chapter 2 traces the implementation of NAFTA’s dispute settlement provisions and the progress to date in implementing reforms. Chapter 3 distills and updates the findings from NAFTA and the Environment: Seven Years Later and recommends how to improve the performance of NAFTA’s institutions in addressing environmental problems. Chapter 4 undertakes a similar assessment of the operations of the North American Agreement on Labor Cooperation and the impact of NAFTA on employment and wages in the region. Chapters 5 and 6 examine integration in the North American auto and energy markets. The final chapter looks forward and focuses on the challenges facing North American economic integration on important issues such as immigration, environment, energy, and exchange rates.Synopsis
The North American Free Trade Agreement has largely been a success, argue the authors (both of the Institute for International Economics), citing increased trade and growth, but there is now a need to implement a NAFTA II that will address some of the issues neglected in the first agreement and a changing global environment. Their primary proposals include the adoption of common external tariff in order to inaugurate a North American customs union, agreement to use the strengthened dispute settlement mechanisms of the World Trade Organization, more energy cooperation in the areas of infrastructure planning and regulation, common visa standards for non-NAFTA visitors and immigrants, updated labor and environmental provisions that are in accord with other recent US trade agreements, and expansion of the capital of the North American Development Bank for addressing environmental and infrastructure needs. Annotation ©2006 Book News, Inc., Portland, OR
Foreign Affairs
All of us seeking respite from the highly partisan, often surreal shouting matches over trade policy are deeply in debt to Hufbauer and Schott for this definitive, comprehensive assessment of the North American Free Trade Agreement's first decade. Nimbly dissecting virtually every numerical study of NAFTA, they reason that the trade accord has achieved its benchmark economic goals — spurring competition in domestic markets, doubling merchandise trade, boosting direct investment — and then proceed to deflate exaggerated claims that it has had major effects on either employment or wages. Recognizing that NAFTA's labor and environmental institutions and dispute-resolution mechanisms were badly shortchanged, the authors also recommend doubling the capital of the North American Development Bank and creating a unified (and fortified) NAFTA headquarters. Hufbauer and Schott toss out a basketful of market-based yet politically savvy proposals to deepen North American integration — a common external tariff, Mexican nonvoting participation in Federal Reserve Board meetings, common visa standards for non-NAFTA visitors, an independent trilateral monitoring board to promote core labor standards, an annual environmental report card to spotlight glaring deficiencies — but, bowing to vested interests and nationalist sentiments in all three member countries, stop short of the more ambitious "North American Community" vision. Every international economist will want a copy of this exemplary analysis of public policy on his or her bookshelf.