Regional economic co-operation, global markets and domestic politics
A comparison of NAFTA and the Maastricht Treaty 1
Global economic interdependence has created incentives for greater international economic co-operation. In many instances, these incentives have led states to accept important and controversial co-operative agreements, despite other constraints. A crucial element of contemporary international economic policy co-operation is the development of regional patterns of economic integration. In the early 1990s, regional economic co-operation took two large steps forward. In 1992, the US, Canada and Mexico signed the North American Free Trade Agreement (NAFTA). In 1993, the Maastricht Treaty initiating a process of monetary union among the twelve European Union (EU) countries came into effect. These agreements represented significant but costly co-operative measures. In both cases, the countries agreed to give up substantial policy autonomy and some measure of national sovereignty. These agreements also provoked much domestic opposition. Indeed, Prime Minister Brian Mulroney of Canada faced a major challenge in the 1988 elections because of his backing of Canadian-American Free Trade Agreement (CAFTA), while political leaders in Europe, such as John Major in the UK and Paul Schulter in Denmark, suffered electorally for their support of monetary union. Policy-makers thus faced significant costs in accepting both NAFTA and Economic and Monetary Union (EMU).
The central question asked by this chapter is why did these countries choose to co-operate economically, especially given the costs they faced. This question is addressed in three parts. First, why did political leaders initiate these negotiations? That is, given the costs of such far-reaching economic change as the accords involved, why were leaders interested in pursuing them? Free trade agreements in North America and monetary union among European Community (EC) countries had both been attempted before, and had failed. While different leaders were in power by the early 1990s, these earlier events still should have alerted them to the potential costs involved. Why did political leaders initiate these negotiations?
The second issue is why were the countries able to reach agreement? A number of factors, such as the end of the Cold War in the late 1980s and the