NAFTA and the Reconstruction of U.S. Hegemony: The Raw Materials Foundations of Economic Competitiveness

Article excerpt

Abstract: This paper argues that conflicting assessments of the impacts of free trade in North America are incomplete because they do not analyse these effects in light of the key long term U.S. goal: the reconstruction of U.S. hegemony that was under siege by Japan and Europe. The declining competitiveness of U.S. raw materials supply systems badly damaged U.S. hegemony during the 1970s and l980s. The original U.S. strategy was to create a continental energy market to reduce overseas oil imports, guarantee access to oil and natural gas from Canada and Mexico, and reduce price instability. The evolution into broader agreements reflected the interests of other U.S. industries and the efforts of Canadian and Mexican states and firms to capture benefits from restructuring. This paper analyses the role continental integration of raw materials industries played in strategic efforts to reconstruct U.S. hegemony and the consequences of these efforts.

Resume: Cet article argue du fait que les evaluations contradictoires des impacts du libre-echange en Amerique du Nord sont inachevees parce qu'elles n'analysent pas ces effets a Ia lumiere du but principal des Etats-Unis de long terme: Ia reconstruction de l'hegemonie des Etats-Unis qui etait sous le siege par le Japon Ct J'Europe. La competitivite en baisse des circuits d'alimentation de matieres premieres premieres des Etats-Unis a mal endommage I'hegemnie des Etats-Unis pendant les annees 70 et les annees 80. La strategie initiate des Etats-Unis etait de creer un marche de I'energie continental pour neduire les importations de petrole d'outre-mer, I'acces de garantie au petrole et au gaz naturel du Canada et le Mexique, Ct reduit I'instabilite des prix. Levolution dans de plus larges accords a reflete les interets d'autres industries des Etats-Unis et les efforts des etats et des societes canadiens et mexicains aux avantages de saisie de Ia restructuration. Cet article analyse I' integration continentale de role des industries de mateieres premieres premieres jouees dans des efforts strategiques de reconstruire I'hegemonie des Etats-Unis et les consequences de ces efforts.

I. Introduction

What are the consequences of free trade agreements for North America? The North American Free Trade Agreement (NAFTA) and the Canada-U.S. Free Trade Agreement (CUSFTA) created the institutional framework for the integration of the economies of the United States, Canada and Mexico. Free trade supporters argued that the increased economic competitiveness resulting from continental integration of firm operations, access to lower cost labour, and enlarged markets would benefit all three nations, but critics emphasized the relocation of industries from the U.S. and Canada to Mexico in search of low wage labour and less stringent environmental regulations. Assessments of the impacts of these agreements remain sharply divided (see, e.g., President's Report to Congress, 1997; USITC, 1997; and Weintraub, 1997 for positive assessments and Economic Policy Institute, 1997 for a negative assessment). In part, this results from focussing on different subsets of the total "impacts" of these agreements. More fundamentally, c onflicting assessments are incomplete because they do not analyse these impacts in light of what this paper will argue are their key long term goals from the U.S. perspective: the reconstruction of U.S. hegemony that was under siege in the 1970s and 1980s by Japan and Europe.

Labour costs, market access, and the economies of scale of continental operations are all central components of this hegemonic reconstruction strategy. This paper focuses attention on another central component: U.S. raw materials supply systems. A key factor in U.S. hegemonic decline was reliance on raw materials supply networks developed in the late 1800s and early 1900s. Declining competitiveness in extraction, processing, and particularly transport costs relative to its main competitors helped cause the productivity growth slowdown in the U. …