International Trade and Finance: A North American Perspective

By Khosrow Fatemi | Go to book overview

IX
ECONOMIC INTEGRATION IN NORTH AMERICA: MYTH OR REALITY?

Theoretically, a common market provides many advantages to its members. It gives the more efficient producers a larger market to compete in, and with it all the benefits of economic scales. It even protects the less efficient producers from outside competition by maintaining (sometimes erecting new) trade barriers. Whether these benefits are because of large markets (trade creation) or at the expense of nonmember producers (trade diversions) makes little difference to the producers in the member states. In reality, with the exception of the European Community, few attempts at integration have been successful.

By all economic indicators, North America could be another example of successful integration. The three countries of the region are much more complementary to each other than European countries were before the Treaty of Rome was signed or are now. The economies of most member states ( France, Germany, Italy, Belgium, the Netherlands and Britain) were and still are much more competitive and duplicative than complementary.

In contrast, in North America each country is rich in what others lack and needs what others have. U.S. capital and technology, Canadian land and agriculture, and Mexican labor and natural resources are all classic examples of what makes a common market a success. Yet, the idea of a North American common market has never reached beyond the stage of academic debate. Even the opponents of the concept admit to its great economic benefits and potentials but reject it because of its political implications.

The core question of Part Nine is raised in Chapter 21 by Rafael Lecuona by the title of his contribution. He argues that indeed the time for a serious consideration of a North American common market has come. Following a brief summary of the experiences of the European Common Market and some integration attempts in Latin America, the author analyzes the interdependence of the three North American economies. He concludes that negotiations should be initiated for the establishment of a North American common market.

In Chapter 20, M. Reza Vaghefi provides an economic analysis of the relations between North American countries, particularly the United States and Canada. Citing specific examples of successful economic agreements, such as the Automobile Agreement between the United States and Canada, he argues that the economic benefits accrued to participants in each example can be broadened to gradually include every industry and all North American countries.

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