Imtiaz Hussain

North American Economic Integration: State or Supranational Preferences?

When Stephen Harper, Enrique Pena Nieto, and Barack Obama—chief executives of the three “North” American countries1—met in Toluca, Mexico, in February 2014,2 the North American Free Trade Agreement (NAFTA) signed by the three countries was already 20 years old. Crafted at a time of intense regional trade bloc rivalry,3 NAFTA bondages were quickly and widely interpreted in similar fashion as the European Union (EU)—of policy-making authorities plausibly passing from the state to a supranational entity.4 In other words, existing mutually dependent, or interdependent, relations would pave the way for economic integration of sorts between states. Yet, as Duncan Wood of the Mexican Institute in Washington, DC argued, shortly after the Toluca Summit: (a) “the bilateral approach has more often than not trumped trilateralism” and (b) “a dual-bilateral approach may be complementary,” ultimately, to the “trilateral vision for the region.”5 Had the ambitious initial integrative efforts regressed into interdependence across North America during those 20 years, or was a strategic shift underway to adjust to globalizing economic behavior elevating unilateral action?

NAFTA’s Side Agreement on Labor: Sidelined Forever?

Turning to the labor side agreement, the North American Agreement on Labor Cooperation (NAALC), which is its official name, became the NAFTA “black sheep.” It took a Mexican legislation, on November 13, 2012, which became the country’s first labor law in 42 years, to fully expose why this was so. This chapter’s four findings echo the legislation’s conclusions: (a) failure to subordinate corporatism—the type of interest intermediation in which a noncompetitive monolithic union works with the government to safeguard worker rights;1 (b) inability to level the North American playing feld—which disadvantaged Mexican workers from the very start by stigmatizing them as permanent less developed country (LDC) representatives, ostensibly exploiting economic opportunities of their northern developed neighbors; (c) side agreement subordination—by adopting too loose enforcements and not making any provisions binding; and (d) energizing societal actors more than state-led labor-reform action—a setting through which state institutions were bombarded with complaints when they had neither the interest nor the authority to do anything, a plight from which LDC Mexico was targeted disproportionately more than the developed countries (DCs) Canada and the United States by societal groups in all three of these countries.

North American Trade: Growth with Strings?

Trade measures more than transactional volumes and values. It informs us of the nature of the relationship between partners.

NAFTA’s Intergovernmental Underbelly: Of Westphalian Whispers and Global Ghosts

This volume has repeatedly noted transformations of sorts among state and nonstate players implementing or being impacted by NAFTA provisions. Yet, this endogenous agenda (i.e., every development emanating from within the NAFTA document itself) must square off with exogenous dynamics (forces such as immigration, security, development considerations, and transportation problems impacting NAFTA progress without being a formal or informal part of it). The first part of this chapter explores the extent to which the three North American member states have been able to move beyond traditional Westphalian mechanisms with common collective challenges more efficiently, whether trilaterally or bilaterally. A trilateral tendency carries the seed for supranationalism, but since NAFTA was the aggregation of three bilateral agreements, the bilateral context cannot be dismissed. The second part shifts attention from the state to nongovernmental organizations (NGOs) such as businesses and civil society groups.

Environmental Side Agreement: Societal Sideshow?

Supplementing our direct focus on specific NAFTA chapter performances, we turn, with this chapter and the next, to the two side agreements. Whereas the NAFTA document involved almost overwhelmingly state-based negotiations (or business groups working through the state), the two side agreements elevate predominantly societal pressures, not necessarily in conjunction with the states. We examine this dimension of the NAFTA experiences, with the environment under the microscope in this chapter and labor likewise in the next.

NAFTA and Intellectual Property Rights: Regionally Strapped?

NAFTA leadership in developing and protecting intellectual property rights (IPRs) is not by accident.1 On the one hand were the local reasons: as the first compact between developed countries (DCs) and less developed countries (LDCs), safeguarding Mexico’s fledgling IPR protection regime became more than a priority for NAFTA, and part and parcel of that concern was to ensure, through the rules of origin (ROO), that Mexico did not become a global production platform for the world’s largest market—that of the United States. On the other, though the major Internet copyrights and protection movement would literally take off after the 1994–2014 period being studied here,2 it was clear from the outset that protecting Internet-based information would become an IPR Achilles’ heel for NAFTA: they involve more than simply trade and investment—the two dominant integrative sectors, and an independent treatment would help bring that exclusive feature out better. Having just concluded a discussion of NAFTA arrangements addressing various types of disputes, we find that both the above IPR rationalizations actually expose the emergence of a special breed of disputes stepping beyond dumping/countervailing and typical investment cases, thereby necessitating yet another evaluation.

NAFTA and Foreign Direct Investment: Multilateralism Matters

Like trade, foreign direct investment (FDI) also sheds significant light on relational changes between states once a regional commitment is made. How it particularly impacts the intergovernmental (interdependent) versus neofunctional (integrative) theoretical fitting is discussed in this chapter in three substantive sections: (a) NAFTA instruments stimulating FDI in Canada, Mexico, and the United States; (b) FDI evolution and performances; and (c) impacts on each of the three NAFTA members and key dynamic sectors.

NAFTA’s “Linchpin”: Dispute Settlement Mechanisms

In bringing about the largest bilateral trade relationship in human history (between Canada and the United States), North American integration wrestled against stubborn nationalistic practices and infinite bilateral feuds right from the very start—as the previous two chapters exposed over trade and investment.1 Not surprisingly, then, dispute settlement was made an essential component of regional integration: its inevitable role in an uneven terrain profited from both incremental growth and incidental developments. It was also not surprising that Canada’s withdrawal from CUFTA negotiations on September 23, 1987, which opened up North America’s experimentation with dispute settlement,2 was combined with the US proposal for premising this upon a binational panel framework to adjudicate dumping/countervailing disputes.3 The resultant arrangements were both institutionally novel and pragmatic enough to both countries for Gilbert R. Winham to call them a “linchpin,”4 and to set the stage for even more breathtaking arrangements to deal with investment disputes.

NAFTA and Intellectual Property Rights

To businesses, intellectual property “may be the most important asset”1 Designed to prevent costly free riding, the North American Free Trade Agreement’s (NAFTA’s) intellectual property rights (IPR),2 outlined in Chapter XVII, were unique across North America. Widely claimed to be “the first international trade agreement to include obligations to protect intellectual property rights,” NAFTA’s Chapter XVII provisions influenced the World Trade Organization’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).3