Regionalization Case Study #1

1. Regionalization Case Study #1 NAFTA and AFTA? I mean FTAA

2. What is NAFTA? • It is a Free Trade Area serving Canada (you remember Canada?), the USA and Mexico • A Free Trade Area is a zone within which tariffs are eliminated. It might be more, but this is essentially what it is. • Why is this of the remotest interest to the USA? What are the pros and cons of such an arrangement?

3. Typical Caricatures Monroe's Dream No, the other one. The “Hemisphere”

4. In Favor Of NAFTA • Open Access to Huge Market (800+m) • Gives US Manufacturing a chance to survive using cheap labor • Prevents countries like Mexico being “shut out” by US Protectionism • Confirms the reality of the extreme dependence of Canada and Mexico on the US for exports.

5. Why NAFTA is Important to our Neighbors. • The U.S. received about 85 per cent of all Canadian exports in 2001. About 72 per cent of Canadian imports came from the U.S in the same year “Regionalism has had profound effects on North America, with about 85 percent of Mexican exports destined for the United States under NAFTA”

6. Also… • The US has to compete in a globalizing world in which scale is important. The EU is about to grow to over 500m. The Hemisphere is close to 900m. • The countries of Latin America represent an enormous potential for growth, especially with US investment. • Growth in Latin America reduces the need for illegal immigration. • This is a world, increasingly, in which only the big boys can play. This is one way for mid-size countries to join the game.

7. And the downside? • Hard to remember now, but Ross Perot fought the 1992 election on the basis that NAFTA would steal US jobs—in fact he said they would go south in a “giant sucking sound” and, for manufacturing this has been true.

8. And other fears of our regional neighbors are… • Cultural Domination • The Unequal situation with the US dominating everything • Undermines the State Welfare approach of countries like Canada to industry and countries where labor unions have been traditionally strong • The US has a history of not being a team player (especially now)

9. Old Memories Die Hard The US “New Hampshire” on its way to occupy Vera Cruz, Mexico General Scott enters Mexico City 60% of Mexico is now called the USA

10. And What are the other Gripes in the USA? • FTAs undermine environmental and labor laws—e.g firms will go to Mexico to pay less to workers, avoid environmental controls. There is almost no evidence that the latter happens, but of course cheaper labor is attractive for manufacturing. • So, in Bloomington, RCA went to Juarez, and two other major employers left. But employment remains the same

11. And…What about the FTAA? Unions Hate It Congress has it on the fast track The Talks are Secret The President is a Latin America Man He's from Texas. His best friend is the MexPres, and he speaks a sort of Spanish.

12. So, will it happen? Is this our Regional Future?? • Some people hope not • Others say it is inevitable if we are to compete with Europe and China • Time is short—2005 • The President seems Committed, but that was before 9/11 • However, NAFTA has been so enormous for the US—30% of our trade, that Business is all for this change.

13. Is This Our Future Region? Or is This?

14. I think I’m willing to give it a try, always remembering they don’t forget who’s in charge.