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... NAFTA partners in 1998 also counteracted the decrease in exports to other important international markets that was caused by the economic crisis and its consequences. Reflecting this tendency, the share of Canadian exports to NAFTA members rose from 80. 8 % in 1993 to 84. 3 % in 1998. Canadian imports from NAFTA partners increased significantly over the five years as well, especially in machinery, communications articles and automobile equipment.
Canadian exports to the US have increased by 80 % since the foundation of NAFTA, reaching C$ 271 billion in 1998. Since 1993, bilateral trade with the US has increased by 80 % to a total of C$ 475 billion. As a result, Canada and the US exchange C$ 1. 5 billion worth of goods every day. The principal trade items for the two countries are machinery and transport equipment and Canada continues to be the main destination for US exports. Canadian imports from the US reached C$ 203 billion in 1998, which means an increase of 78 % during the five years of NAFTA. One important benefit that NAFTA has brought for Canada has been improved access to the Mexican market.
Canadian firms have been able to increase their sales considerably in sectors that were previously restricted, for example in the production of automobile parts, financial services, energy and fisheries. Canadian exports to Mexico have increased consistently since the ratification of NAFTA, reaching C$ 1. 4 billion in 1998, which is an increase of 65 % over the previous five years. Canadian imports from Mexico, on the other hand, have more than doubled since 1993, reaching C$ 7. 6 billion in 1998. Similarly, bilateral trade doubled to reach C$ 9 billion in that very year. The value of the bilateral trade of services with the US has doubled since the Canada-US Free Trade Agreement of 1989, totaling C$ 58. 9 billion in 1998. In the five years since Nafta's foundation, the exportation of services from Canada to the US has increased by 64 % and is now C$ 26. 7 billion, while US imports to Canada increased by 24 % to reach C$ 32. 2 billion. 2) The Downside of the NAFTA Coin The Nafta's social ambitions are modest.
In December 1994, the Mexican government was forced to devalue the peso, which increased the US trade deficit with Mexico dramatically. Although NAFTA did not create the crisis, it contributed to it by creating a climate of investor optimism that kept foreign capital flowing into Mexico despite deep social and economic problems, including an overvalued peso. More than three quarters of this capital was in portfolio investment ( = hot money) rather than productive investment. Moreover, during the NAFTA negotiations and later on, the USA kept up pressure on Mexico to dismiss all forms of capital control, and since NAFTA also forbids investment controls, the Mexican government could not prevent the rapid capital flight that occurred after the peso devaluation. As a result, millions of Mexicans lost jobs, property, and savings and considerable harm was done to the Mexican economy.
Apart from that, many American workers lost their jobs because their employers moved production to Canada or Mexico or lost revenues as a result of increased imports from the other two members. On November 1, 1996, more than 90, 000 American workers had qualified for a retraining programme by losing their jobs through direct NAFTA impact. The actual job loss, however, is considered to be even greater since it has to be assumed that many laid-off workers were unaware of the retraining programme or could not prove that they lost their jobs due to the NAFTA Agreement. NAFTA is also being blamed to have failed to improve the working conditions in Mexico. Numerous complaints regarding violations at three Mexican and one US manufacturing plants had been filed, but without any result for any of the workers involved because a major flaw of the NAFTA Agreement allows trade restrictions only in the case of violations related to minimum wage, health and safety, and child labour. Violations of core labour rights, including freedom of association, strikes, and collective bargaining, can only lead to consultation.
In addition, complaints can only be filed against a government while the corporate lawbreakers do not have to fear any sanctions. Last but not least, Nafta's North American Development Bank, which was designed to provide low-interest financing for environmental projects, did not approve a single project within the first two years after the foundation of NAFTA. This was in strong contradiction with the promise of the US government that the bank would inject up to $ 3 billion in the border region. Moreover, Nafta's environmental threats reach far beyond the US-Mexican border. In fact, the agreement locks in an unsustainable structural adjustment model that the World Bank and IMF began imposing on Mexico in the early 1980 s. This model measures success by increases in natural resource extraction.
V. Current NAFTA Issues Two current issues connected to NAFTA shall be addressed: Firstly, the idea of business-oriented sectors in the USA to ease immigration restrictions on Mexico. Secondly, the very recent decision of US President George W. Bush to impose tariffs of 8 % to 30 % on a wide variety of imported steel products for a period of three years. 1.
Immigration: Since 1970, the number of Mexicans living in the US has risen from around 800, 000 to more than 8 million, half of them illegal. This immigration from Mexico is only part of an immigration wave that pushed Americas foreign-born rate to 11. 2 % of the total population in 2002 up from 4. 7 % 30 years ago. However, easing immigration for all foreign immigrants is not an issue in the US. Instead, the discussion is focused on the immigration from Mexico, more precisely about an amnesty for illegal Mexicans living in the country. At first, one might think that this is an issue connected only to Mexican-US relations and has little to do with NAFTA. However, it should be kept in mind that both countries are NAFTA members.
Moreover, the economic success of NAFTA and the entailing closer relationship with Mexico are the main reasons for the current discussion: Many business-oriented sectors in the USA have seen that they benefited from getting into business relations with Mexico on the basis of the agreement. Not least, the boom of the US economy over the past 10 years (regardless the current slowdown) has led to a significant increase in demand for the type of labour that Mexico provides. All this has, indeed, strong implications for NAFTA: On one hand, if the USA ease their immigration restrictions, Canada might have to follow to be able to further tap the cheap labour market. On the other hand, granting amnesty to illegal Mexican immigrants means that they would receive a Green Card. Since all US residents are free to travel across the Canadian border, this might mean an immigration wave of Mexicans to Canada as well. Most importantly, however, easing immigration restrictions on Mexico could symbolize a first step towards widening the scope of the NAFTA agreement: towards a free flow of goods and people, meaning getting one step closer to a North American Union. 2.
Steel Tariffs: On March 5, 2002, US President George W. Bush announced that he would impose tariffs of 8 - 30 % on a great variety of imported steel products for a period of five years. This is seen as a reaction to the fact that roughly 30 American steel companies have filed for bankruptcy between 1998 and 2002. The tariffs are in contradiction with current WTO regulations and are therefore likely to cause problems between the NAFTA and the WTO/GATT. Part I, Article 103, Paragraph 2 of the NAFTA Agreement defines the relations of NAFTA with other agreements, such as the GATT: In the event of any inconsistency between this agreement and such other agreements, this agreement shall prevail to the extent of the inconsistency, except as otherwise provided in this agreement. Although the formulation of the relations seems to be clear enough, it has already caused several problems in the history of NAFTA because both the NAFTA and WTO Agreements are written agreements between states governed by international law, and therefore treaties within the definition prescribed by the Vienna Convention on the Law of Treaties (VCLT).
The VCLT provides that when states are parties to treaties governing the same subject matter (as in the case of WTO vs. NAFTA), the later treaty takes precedence over the earlier. The NAFTA, however, entered into force on January 1, 1994 and the WTO on January 1, 1995. This suggests that the WTO Agreement prevails over the NAFTA Agreement, which is in clear contradiction with the part of the NAFTA Agreement cited above. As a result, the tariffs imposed by Bush are likely to cause legal problems between both organisations now and in the future. VI.
Conclusions & Recommendations It has become apparent that the foundation of NAFTA has benefits as well as disadvantages. The benefits are clearly located in the economic sector, especially in the trilateral trade. The disadvantages of the agreement, however, can be found mainly in the political / legal sector. Since, economically, NAFTA works well, the authors of this report do not hold it necessary to give recommendations in this regard. Instead, we will propose some improvements to the political / legal sector: 1) At this moment, the primary beneficiaries of the NAFTA Agreement are large enterprises. The environment and the welfare of workers are largely being neglected.
Therefore, we recommend shifting the focus away from the current beneficiaries towards an approach to economic integration that makes workers and communities the primary beneficiaries of NAFTA while keeping in mind environmental issues. This should be supported by allowing for more transparency in the decision-making process of NAFTA officials and a stronger participation of representatives of the affected sectors than before. 2) We also recommend using political means to narrow the gap in income between the three member countries. Unless the gap is narrowed, there will be no way to reduce the incentives for US enterprises to move to Mexico, hence there will be no way to improve working conditions and environmental protection. 3) Moreover, Mexico's debt obligations should be reduced. Just like in other Latin American countries, Mexico has to use much of its national income to repay debts and pay interest. Unless this is changed, the Mexican government will continue to attract short-term foreign investments. Moreover, it is likely that the government will do so by allowing further violation of worker rights and further exploitation of the environment. 4) Last but not least, we recommend using stronger penalties for violations of labour and environmental laws.
We are confident that implementing these propositions would lead to greater economic equality and environmental sustainability throughout the North American continent an improvement that is more than overdue. In conclusion, however, we agree with Abbott (1999) that while the NAFTA could certainly do more in the are of environmental protection, the institutional structure created by the NAFTA would seem to be better than the absence of such structure. VIII. References Abbot, F. M. (1999): The North American integration regime and its implications for the world trading system, Harvard Law School, web Anderson, Cavanagh & Landau (1997): North American Free Trade Agreement, Foreign Policy in Focus, web Boards, A. & Smith, G. (2002): Spotlight on the U. S. -Mexico border, Business Week Online, 09 / 10 / 2002, web Magnusson, P. & Arndt, M. (2002): Behind the steel tariff curtain, Business Week Online, 03 / 08 / 2002, web North American Free Trade Agreement: Six years later, Ministry of Foreign Affairs Mexico, web North American Free Trade Agreement (1994), SICE Foreign Trade Information System, web Smith, G. (2002): Q& A with Mexico's Jorge Castaneda, Business Week Online, 09 / 10 / 2002, web Williams, M.
W. (1993): A brief history of GATT and NAFTA, Womens Alternative Economic Network, web
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