1. Geoffrey Hale Political Science 3170 The University of Lethbridge October 19, 2010

2. 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

3. NAFTA and Economic Integration Chapter 1 – Creation of Free Trade Area Continuum of Economic Integration Limited bilateral agreements  ------------------------------------------------------------------  EconomicCustomsFree TradeIndependent UnionUnionAreaCountries * joint monetary,* common external* separate external regulatory policies trade policies trade policies

4. 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

5. 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

6. 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”.

7. 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”

8. 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.

9. 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”

10. 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

11. 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.

12. 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.