North American Free Trade Agreement: what are we really getting?

• Author: LaFalce, John J.

"We must not let the weight of political arguments cloud our thinking on the economic merits of NAFTA and its potential advantages and disadvantages to U.S. citizens."

Depending on one's perspective, the North American Free Trade Agreement (NAFTA) deserves rave reviews or outright rejection. NAFTA is either the pot of gold at the end of the rainbow or a bottomless pit that will pull the American economy into a dark, downward spiral.

What really is known about NAFTA? It is designed to reduce tariff barriers over 10-15 years, protect intellectual property rights, safeguard foreign investment, and not require lowered environmental standards.

What isn't known is the true impact NAFTA will have on American jobs, living standards, health, and safety. No one really knows if NAFTA will induce greater waves of illegal immigration or more occurrences of environmental degradation. Not yet considered adequately is the environment in which U.S. businesses - particularly small ones - would be operating, including a legal process, judicial system, and business practices often alien to America's. Not enough thought has been given to the peso-dollar relationship in the context of NAFTA and whether there should be a consulting, coordinating, or correcting mechanism in place. Policymakers have not weighed properly the implications of integrating the U.S. economy with that of a country whose system is recognized as undemocratic and rife with human rights abuses. In short, the American people really do not know their neighbor to the south, and most U.S. citizens do not want to integrate the two economies based primarily on promises and projections that all will turn out right.

There are numerous reasons for concern about NAFTA, including its short-term approach to U.S. competitiveness; its inevitable encouragement of U.s.-based companies' relocation to Mexico and the consequent loss of jobs; the questionable reliability of Mexico's enforcement process; different and much more lax health and safety standards; the problems inherent in an attempt to integrate the US. system with one that lacks human rights protection, democratic liberties, and judicial integrity; and the exclusion of provisions for dealing with exchange-rate issues.

Past administrations have promoted US. competitiveness by emphasizing exports and free trade. Under certain circumstances, this can be most appropriate. I was a major proponent of the U.S.-Canada Free Trade Agreement, believing it would result in a win-win proposition for both nations. NAFTA, however, takes the wrong road - the short-term, low-wage route - to competitiveness. It encourages companies to pare labor costs to achieve improvements in their bottom line and secure a more competitive position. It purports to promote competitiveness by merging two unequal economies in a short period with effectively no...