Free Trade Agreement Mustn't Ignore Canada

Article excerpt

THE NORTH AMERICAN Free Trade Agreement (NAFTA) is intended to expand commercial and investment opportunities among its signatories--Canada, Mexico, and the US. Volumes have been written, both before and after the signing of the agreement in the fall of 1992, mostly in the form of op-ed columns. The majority have focused on Mexico. This is primarily a reflection of the fears that American environmentalists and labor unions have with regard to the inclusion of Mexico, still perceived as an underdeveloped, even "backward," country. Canada is not regarded as a threat or a likely major contributor to the expansion that theoretically could occur. On both counts, these perceptions probably are mistaken. In either case, Canada's participation and role in NAFTA is understated widely.

It is helpful to make some comparisons with the European Community, especially since part of the American (and Canadian) motivation behind the NAFTA concept has to do with the rapid rise of the EEC and its successful progression toward a regional free market. Population figures and Gross Domestic Product are significant because they reflect market size and capability. In 1991, the EEC had a population of 343,000,000 and a GDP of 6.5 trillion dollars. The NAFTA countries had a population of 360,000,000 and a GDP of 6.55 trillion dollars. This would make the markets approximately equal.

Without Mexico, the NAFTA side would have a much smaller, although relatively wealthier, market. The amount of consumers is critical. It is far easier to saturate a less populous, richer market than one with larger numbers with great potential for expanded spending power. Without Canada, which has a Gross National Product more than twice the size of Mexico's ($591,000,000,000 to $283,000,000,000 in 1991) and a per capita income considerably higher than that of the U.S. ($24,657 to $20,902), a major producer of goods and services not only would be absent from the configuration, but, in effect, it would be some kind of competitor. Since Canada also is the U.S.'s largest trading partner, the success and basic operation of NAFTA are inconceivable without it.

The sociopolitical developments that could result from NAFTA might be as important as the economic ones. As with most of the agreement, this applies to both Mexico and Canada. The Mexican changes, as usual, have received more attention. Ed Williams of the University of Arizona, a specialist in Mexican and border politics, argues that NAFTA is signaling more prestige and acceptance for both Mexicans and Mexican-Americans. Recent political and legal reforms can be consolidated under the agreement, while there might be retrogression were NAFTA not put in place by legislative approval. As with Spain, Portugal, and Greece in Europe, Mexico is likely to see considerable social benefit from the increased financial activity in a set of economies operating under a consolidated trade and investment agreement. …