On June 11, 1990, President George Bush and Mexican President Carlos Salinas de Gortari issued a joint communique indicating that they had directed their respective trade negotiators to enter into exploratory discussions to lay the groundwork for negotiations on a bilateral free trade agreement.(1) Five years earlier President Ronald Reagan and Canadian Prime Minister Brian Mulroney made a similar declaration(2) that ultimately led to the implementation, on January 1, 1989, of the United States-Canada Free Trade Agreement.(3)
In the fall of 1990, President Salinas formally proposed the commencement of negotiations.(4) As required under the fast-track procedure for trade negotiations,(5) President Bush notified Congress of his intent to enter into negotiations with Mexico on September 25, 1990.(6) Four months later, the potential for a trilateral agreement for a North American free trade zone was announced by President Bush, President Salinas, and Canadian Prime Minister Mulroney.(7)
The addition of Mexico to the existing United States-Canada partnership would incorporate significant trade flows, as U.S. exports to Mexico amounted to $28.4 billion in 1990, nearly double the total exports in 1987 and a two hundred percent increase over 1983 exports.(8) This made Mexico the United States' third largest export market in 1990.(9) For the same period, the United States imported $30.2 billion of Mexican industrial, agricultural, and natural resource products, up from $20.3 billion just three years earlier.(10) The contemplated agreement would eliminate most of the tariff and non-tariff barriers between the three countries whose combined population is about 350 million,(11) rivalling the scale of the European Community's plans for finalizing its common market.(12)
During the closing months of 1990, while intransigence over farm subsidies seemed to toll the death knell for hopes of significant advances from the Uruguay Round of GATT(13) talks, some commentators and trade pundits bemoaned the perceptible shift countries seemed to be making toward regional trade groups.(14) While the European Community appeared to be circling the wagons around "Fortress Europe," Japan was displaying an interest in an East Asian economic group,(15) and the North American countries began to consider their own regional trade consortium, causing experts to fuss over the effectiveness of GATT.
Free trade agreements are not antithetical to the purposes of GATT.(16) Although an FTA is inconsistent with the Most-Favored Nation (MFN) principle of GATT,(17) GATT does permit the establishment of FTAs so long as tariff and non-tariff barriers are eliminated on substantially all the trade between or among the FTA participants within a "reasonable" period.(18) Also, FTA signatories may not increase their tariff and non-tariff defenses against other trading parties to a point exceeding the defenses in place prior to the implementation of the FTA.(19)
Although the United States has separate free trade agreements with Israel and Canada,(20) it is principally the latter that will offer the guiding structure for an agreement to include Mexico. For a trilateral pact to be negotiated among the United States, Canada, and Mexico, it would be most expedient to begin from the framework created by the existing United States-Canada FTA and make adjustments for Mexico as necessary.(21) Having labored for two years to create a framework around which bilateral negotiations could be based, the United States and Canada are unlikely to view renegotiation with enthusiasm.
The agreement between the United States and Canada incorporates provisions that are common to similar agreements and those that reflect specific bilateral concerns of the parties.(22) The North American Free Trade Agreement (NAFTA) may nevertheless chart new ground on issues such as environmental regulations and health, safety, …