NAFTA: Key to Hemispheric Unity

THE GLOBAL ECONOMY

THE preliminary North American Free Trade Agreement (NAFTA) reached this month among negotiators from the United States, Canada, and Mexico marks a crucial juncture in US-Latin American relations. Soundly structured free trade arrangements among the three countries, worthwhile in their own right, could lay the cornerstone of a future Western Hemisphere economic community.

With the end of the cold war, a common hemispheric agenda has been emerging across the Americas. A growing convergence of values and interests now spans political, economic, and security matters. Democracy has come to be accepted as the only legitimate way to gain and exercise power; market-oriented economic development strategies are now being adopted in most countries; and multilateral cooperation is being strengthened on many fronts. Free trade and economic integration are at the leading edge of this convergence.

NAFTA still faces a year-long ratification process by the legislatures of the three nations. But expectations are high that NAFTA will pass muster and point the way toward a free-trade system incorporating the hemisphere.

Approval of NAFTA would reaffirm and fortify the emerging sense of community in inter-American relations. Not only are the nations of Latin America giving new emphasis to closer economic cooperation, they are also showing a new willingness to undertake collective action to defend human rights and foster democratic politics. In contrast to previous Latin American initiatives toward economic integration and political coordination, the US is today being welcomed as a vital partner.

The rejection of NAFTA would be a devastating setback to US-Mexican relations in the first instance, but also to the prospect of more constructive inter-American ties generally. The key assumption behind Latin America's turn toward market-oriented reforms and closer economic collaboration with the US - that the region's economies can depend on trade and foreign investment for growth - would effectively be undercut. There is no question that the promise of a broader Western Hemisphere economic partnership

would be postponed for many years.

MERELY putting a free-trade agreement in place is not enough, however. The agreement must meet high standards and effectively lay the groundwork for a future Western Hemisphere economic community. To fulfill that potential, it must meet the following seven criteria.

(1) NAFTA should eliminate nearly all barriers to the free flow of goods and capital among the three countries. Removing protectionism is what will do most to bolster long-term economic gains. Yet, because NAFTA-induced changes will cause some significant disruptions, every barrier should not be eliminated immediately; that is what the objective should be over a 10- to 15-year phase-in period.

(2) NAFTA should not place any new restrictions on trade with third countries. NAFTA must be made fully consistent with an open, multilateral world-trading system. It should contribute to the achievement of a new global GATT agreement, not make it more difficult or somehow be considered a substitute for GATT.

(3) NAFTA should spell out the conditions and procedures by which other Western Hemisphere nations could join the pact. From the outset, NAFTA should be conceived as the initial step toward a full-fledged Western Hemisphere free-trade system.

(4) NAFTA has to give appropriate attention to environmental concerns and the rights of workers. Economic growth is needed to combat ecological deterioration as well as to improve wages and working conditions, but sound environmental and labor standards, properly enforced, are needed to build productive economic partnerships.

(5) The US and Mexican governments have to develop and adequately fund programs to offset the costs that NAFTA will impose on many workers and communities and to help those adversely affected find new sources of livelihood.

(6) NAFTA must incorporate effective dispute-resolution mechanisms - on trade, investment, environment, and labor issues - that can be extended to a broader free-trade pact.

(7) The US and Canada must continue to press Mexico to open its political system, end electoral fraud, and respect human rights. A future Western Hemisphere community must be a club reserved for democracies. It would be self-defeating at this stage to make full democracy in Mexico a condition for NAFTA, but the Mexican government must now firmly commit itself to a genuine and sustained democratic opening.

By incorporating these seven points, NAFTA can fulfill its promise and become the essential building block of a strategy for economic integration that is hemispheric in scope, comprehensive in its coverage of the many interlocking issues involved, and firmly grounded in social justice and democratic practice. Nothing less should be acceptable.