Excalibur
03-19-06, - 04:55 PM
The creation of the North American Free Trade Agreement (NAFTA) in 1992 was touted as a means of promoting the economic interests of all three sovereign nations involved – theUnited States, Canada and Mexico. However, over the course of negotiations these priorities were changed to favour the interests of the United States in the emerging globalized economy and to create a system whereby the Canadian and Mexican economies would become dependent on natural resource exports to the United States. While the development of state economies and industries was the goal of Canada and Mexico when entering into negotiations, it will be demonstrated here that in actuality what resulted was a situation where the United States benefited from the exploitation of cheap labour and resources while offering in return only dependence on its terms. As such, NAFTA was a forced and unfair agreement that ultimately was designed to extract the most benefits for the United States. Canada was left with few economic gains and became subjected to American control through export dependence, while Mexico suffered a similar fate, bearing the full brunt of United States’ exploitation as a less developed country.
The main or primary resource upon which this argument is based is Ciccantell’s (2001); NAFTA and the reconstruction of US hegemony: The raw materials foundations of economic competitiveness. In this text, the author effectively demonstrates that the motives for US involvement in NAFTA were completely selfish, and designed to place Mexico and Canada under the trade control of the United States as a means of insuring the flow of raw materials and natural resources into America at a cost that would allow the slumping country to maintain dominance in a world of growing global competitiveness. All this stands in stark contrast to the original motivation for Canada and Mexico to enter into the agreement, which involved each country’s plan for development derived from the comprehensive benefits and cooperation of
NAFTA. The author’s own conclusions makes this clear, as he indicates strong doubts that the incorporation of Canada and Mexico into a continental economy on the basis of their respective riches in natural resources will provide the developmental benefits hoped for by their governments, whether or not the United State’s priorities are met; he states that it is likely that
the developmental gains in terms of industrial employment and wages for an important part of Canada and Mexico’s populations will be negated by economic restructuring and integration in support of US competitiveness (2001, pp. 79-80). At this point, therefore, it will be appropriate to trace the author’s argument underlying this conclusion and considering its validity in light of other sources. Such a review will enable the proof of the argument that NAFTA was forced, unfair, geared only to promoting US interests, and ultimately an agreement in which Canada gained little while Mexico bore the full brunt of American exploitation.
In terms of the forced nature of NAFTA, when Mexico and Canada first entered into negotiations where trade would be opened up between the three nations, their main motivation was to create a system where they would be able to develop and diversify their economies through expansion into and integration with U.S. markets. Take as an example Canada and Mexico’s original progressive philosophy towards opening up their respective energy resources to America: Canada and Mexico provided low cost oil, natural gas and other energy resources for the U.S. to develop its economy, with the ultimate goal of promoting and diversifying their own economies as a result of the strong trade relation that they have built with America (Ciccantell, 2001, p. 72-73). While this was the original goal, somehow the priorities of the American negotiators changed over the course of talks, and what emerged was a situation where Canada and Mexico were coerced into signing onto an agreement where they basically became the source of raw material and resource advantages for the United States according to a system of dependence rather than one of shared development. The author effectively argues in the case of Canada that the nation entered into negotiations with the goal of at the very least to protect
Canadian resource and export discrimination by the U.S., and at the best provide an alternative to economic dependence on resources (2001, p. 71). Mexico entered into negotiations with the goal of facilitating economic and industrial restructuring and transcending dependence on resource exports through development (2001, p. 71). In both cases, however, America was able to reconstruct the agreement so that quite the opposite effects were produced, as NAFTA led to a renewed emphasis on raw materials exports to the United States from both countries while offering very little in return (2001, p. 71).
Let us now consider exactly how NAFTA failed to fulfill the goals of development expected by Mexico; Ugalde (2002) provides three points that summarize how things have worked out for that country as a result of its participation:
1) Mexican exports have become an important engine driving the country’s economic growth. The main destination for these exports is the U.S. market.
2) NAFTA has reinforced Mexico’s liberalization strategies, but it has not necessarily represented the turning point of Mexico’s industrial sectors.
3) NAFTA has enhanced Mexico’s attractiveness as a destination for foreign
investment – even though the country’s weak regulatory framework continues to hamper long-term prospects for economic industrial development.
(Ugalde, 2002, p. 79)
The subtext of these conditions involves American benefits from the situation; the main destination for Mexican exports is the U.S., and as we have learned these are primarily based on resources and raw materials rather than industrial production or services. Liberalization has
helped U.S. exploitation but not industrial development; and foreign investment is based on similar exploitation rather than cooperation. Certainly, this demonstrates and supports criticisms of American trade imperialism over developing nations created out of neoliberalism, such as the doubts raised by theorists towards studies which claim that countries most open to global trade grow the fastest (Wallach, 2004). These oppositions certainly contradict neoconservative economists such as Panagariya (2003), who still maintains that for developing economies there is a direct link between open trade and enhanced growth (p. 2). Elsewhere, the issue is expressed as
one which asks what kind of growth exactly is promoted through such arrangements; Wilkinson (2004) states that exports from countries such as Mexico become limited to raw material production and prohibit developing states from diversifying their industries outside of those based on raw materials, as other segments of the economy are restricted from developing due to intense international competition (p. 152).
Turning to the Canadian situation, a review of its impact by the Canadian Department of Foreign Affairs and International Trade ten years after its introduction demonstrates the dependence that Canada has developed during that period on exports to our southern neighbour. Canada is the United States’ main trading partner, but it is clear that today Canada relies a great
deal more on exports to America than it had in the past. As proof of this, the Canadian Department of Foreign Affairs and International Trade (2003) reports that Canada accounts for 19.0 percent of American exports and 16.5 percent of imports to the United States compared to 81.6 percent and 69.9 percent of Canadian exports and imports (p. 11). The report further contends that since the US economy exports only ten percent of its production (in comparison to Canada’s over forty percent of GDP that is exported), the size of the American market makes it independent while Canada’s relies almost completely on it (2003, p. 11). Thus it is clear that the dependence of the Canadian economy on America has been the result of its participation in
NAFTA as opposed to the kind of broad development envisioned during initial negotiations.
Quintero-Ramirez (2002) states “that in their search for cost reduction, corporations move to countries with developing rather than established economies, and also to find niches in established economies such as Canada under NAFTA where they can maximize competitiveness” (p. 253). While this statement summarized American exploitation in Mexico and Canada from the perspective of women’s labour, it can also be effectively applied as a
summary of the motivations of the United States in constructing the NAFTA agreement and the outcomes that have been generated from its systems.
---------------------------------------
References:
1. Canada Department of Foreign Affairs and International Trade.
(2003). NAFTA @ 10: A Preliminary Report. Ottawa: Ministry of Public Works and Government Services Canada.
2. Ciccantell, P. (2001). NAFTA and the reconstruction of US
hegemony: The raw materials foundations of economic competitiveness. Canadian Journal of Sociology, 26(1), p. 57.
3. Panagariya, A. (2003). Think again: International trade. Foreign Policy,
(January/February), p. 20-28.
4.Quintero-Ramirez, C.(2002). The North American Free Trade
Agreement and women. International Feminist Journal of Politics, 4(2), p. 240.
5. Ugalde, J.L.V. (2002). NAFTA and Mexico: A Sectoral Analysis. In E.J. Chambers & P.H. Smith (eds.). NAFTA in the New Millennium. Edmonton:
University of Alberta Press.
6. Wallach, L. (2004). Trade Secrets. Foreign Policy, (January/February), p. 70.
7. Wilkinson, R. (2004). Crisis in Cancun. Global Governance, 10, p. 149.
The main or primary resource upon which this argument is based is Ciccantell’s (2001); NAFTA and the reconstruction of US hegemony: The raw materials foundations of economic competitiveness. In this text, the author effectively demonstrates that the motives for US involvement in NAFTA were completely selfish, and designed to place Mexico and Canada under the trade control of the United States as a means of insuring the flow of raw materials and natural resources into America at a cost that would allow the slumping country to maintain dominance in a world of growing global competitiveness. All this stands in stark contrast to the original motivation for Canada and Mexico to enter into the agreement, which involved each country’s plan for development derived from the comprehensive benefits and cooperation of
NAFTA. The author’s own conclusions makes this clear, as he indicates strong doubts that the incorporation of Canada and Mexico into a continental economy on the basis of their respective riches in natural resources will provide the developmental benefits hoped for by their governments, whether or not the United State’s priorities are met; he states that it is likely that
the developmental gains in terms of industrial employment and wages for an important part of Canada and Mexico’s populations will be negated by economic restructuring and integration in support of US competitiveness (2001, pp. 79-80). At this point, therefore, it will be appropriate to trace the author’s argument underlying this conclusion and considering its validity in light of other sources. Such a review will enable the proof of the argument that NAFTA was forced, unfair, geared only to promoting US interests, and ultimately an agreement in which Canada gained little while Mexico bore the full brunt of American exploitation.
In terms of the forced nature of NAFTA, when Mexico and Canada first entered into negotiations where trade would be opened up between the three nations, their main motivation was to create a system where they would be able to develop and diversify their economies through expansion into and integration with U.S. markets. Take as an example Canada and Mexico’s original progressive philosophy towards opening up their respective energy resources to America: Canada and Mexico provided low cost oil, natural gas and other energy resources for the U.S. to develop its economy, with the ultimate goal of promoting and diversifying their own economies as a result of the strong trade relation that they have built with America (Ciccantell, 2001, p. 72-73). While this was the original goal, somehow the priorities of the American negotiators changed over the course of talks, and what emerged was a situation where Canada and Mexico were coerced into signing onto an agreement where they basically became the source of raw material and resource advantages for the United States according to a system of dependence rather than one of shared development. The author effectively argues in the case of Canada that the nation entered into negotiations with the goal of at the very least to protect
Canadian resource and export discrimination by the U.S., and at the best provide an alternative to economic dependence on resources (2001, p. 71). Mexico entered into negotiations with the goal of facilitating economic and industrial restructuring and transcending dependence on resource exports through development (2001, p. 71). In both cases, however, America was able to reconstruct the agreement so that quite the opposite effects were produced, as NAFTA led to a renewed emphasis on raw materials exports to the United States from both countries while offering very little in return (2001, p. 71).
Let us now consider exactly how NAFTA failed to fulfill the goals of development expected by Mexico; Ugalde (2002) provides three points that summarize how things have worked out for that country as a result of its participation:
1) Mexican exports have become an important engine driving the country’s economic growth. The main destination for these exports is the U.S. market.
2) NAFTA has reinforced Mexico’s liberalization strategies, but it has not necessarily represented the turning point of Mexico’s industrial sectors.
3) NAFTA has enhanced Mexico’s attractiveness as a destination for foreign
investment – even though the country’s weak regulatory framework continues to hamper long-term prospects for economic industrial development.
(Ugalde, 2002, p. 79)
The subtext of these conditions involves American benefits from the situation; the main destination for Mexican exports is the U.S., and as we have learned these are primarily based on resources and raw materials rather than industrial production or services. Liberalization has
helped U.S. exploitation but not industrial development; and foreign investment is based on similar exploitation rather than cooperation. Certainly, this demonstrates and supports criticisms of American trade imperialism over developing nations created out of neoliberalism, such as the doubts raised by theorists towards studies which claim that countries most open to global trade grow the fastest (Wallach, 2004). These oppositions certainly contradict neoconservative economists such as Panagariya (2003), who still maintains that for developing economies there is a direct link between open trade and enhanced growth (p. 2). Elsewhere, the issue is expressed as
one which asks what kind of growth exactly is promoted through such arrangements; Wilkinson (2004) states that exports from countries such as Mexico become limited to raw material production and prohibit developing states from diversifying their industries outside of those based on raw materials, as other segments of the economy are restricted from developing due to intense international competition (p. 152).
Turning to the Canadian situation, a review of its impact by the Canadian Department of Foreign Affairs and International Trade ten years after its introduction demonstrates the dependence that Canada has developed during that period on exports to our southern neighbour. Canada is the United States’ main trading partner, but it is clear that today Canada relies a great
deal more on exports to America than it had in the past. As proof of this, the Canadian Department of Foreign Affairs and International Trade (2003) reports that Canada accounts for 19.0 percent of American exports and 16.5 percent of imports to the United States compared to 81.6 percent and 69.9 percent of Canadian exports and imports (p. 11). The report further contends that since the US economy exports only ten percent of its production (in comparison to Canada’s over forty percent of GDP that is exported), the size of the American market makes it independent while Canada’s relies almost completely on it (2003, p. 11). Thus it is clear that the dependence of the Canadian economy on America has been the result of its participation in
NAFTA as opposed to the kind of broad development envisioned during initial negotiations.
Quintero-Ramirez (2002) states “that in their search for cost reduction, corporations move to countries with developing rather than established economies, and also to find niches in established economies such as Canada under NAFTA where they can maximize competitiveness” (p. 253). While this statement summarized American exploitation in Mexico and Canada from the perspective of women’s labour, it can also be effectively applied as a
summary of the motivations of the United States in constructing the NAFTA agreement and the outcomes that have been generated from its systems.
---------------------------------------
References:
1. Canada Department of Foreign Affairs and International Trade.
(2003). NAFTA @ 10: A Preliminary Report. Ottawa: Ministry of Public Works and Government Services Canada.
2. Ciccantell, P. (2001). NAFTA and the reconstruction of US
hegemony: The raw materials foundations of economic competitiveness. Canadian Journal of Sociology, 26(1), p. 57.
3. Panagariya, A. (2003). Think again: International trade. Foreign Policy,
(January/February), p. 20-28.
4.Quintero-Ramirez, C.(2002). The North American Free Trade
Agreement and women. International Feminist Journal of Politics, 4(2), p. 240.
5. Ugalde, J.L.V. (2002). NAFTA and Mexico: A Sectoral Analysis. In E.J. Chambers & P.H. Smith (eds.). NAFTA in the New Millennium. Edmonton:
University of Alberta Press.
6. Wallach, L. (2004). Trade Secrets. Foreign Policy, (January/February), p. 70.
7. Wilkinson, R. (2004). Crisis in Cancun. Global Governance, 10, p. 149.