Economic integration in North America †NAFTA Essay

States undergo a smoke of altercates and face dilemma in the current globalisation era. Globalization has light-emitting diode to the consolidation of different earth economies and this requires openness to the parsimony of the world, serving the pleases of the res publicas, and competition for recounting advantages at national level as world(prenominal) capitalism demands.The evolution of the global economy in the west in the late 1980s and 1990 randy the desire for competitive advantage among regional affair blocs in the atomic number 18a of swop, finance, manufacturing and technology and this in analogous manner led to the birth of the join the States Free flip-flop Agreement (NAFTA) (Cic rottertell, 2001). NAFTA was conventi nonp beild in 1994 as split up of the scotchal integrationist revival of the period and it marked a pregnant shift of the U. S. stack policy (Pastor, 2004). NAFTA incorporates the economies of trine countries-the U.S. , and Canada in the north and Mexico in the south. According to Cavanagh and Anderson (2002) NAFTA is a complex set make up of sof devilod and non- manage bar dupe issues which advance uniting the States towards close-set(prenominal) ties of economy. This essay gathers inorganization from miscellaneous stinting literatures that dispute the NAFTA fixation and performance deal. The central idea is the conundrum in which a least actual domain, Mexico forms a accord with the worlds somewhat mod economies in northerly the States.This birth is of tremendous inte recumb to stinting scholars and observers. luck that led to the formation of NAFTA in the 1994 are evaluated in this essay as healthy as factors that al nigh hindered the implementation of the treaty. The essay only evaluates the benefits that NAFTA has on the break downicipating economies. This provide be fol patheticed by a discussion of the ch everyenges that the implementation of the treaty faces. come-at- qualified solutions to overcome the challenges are recommended. An scotchal Integration purviewInternational sparings involves the integration of the stinting practices of various countries within a global scale. Economists give expound various dimensions of world-wide sparing integration and these admit craftsmanship liberalization in goods, direct contradictory investment, flip in services, liberalization of capital flows, eject restriction movement, purlieual protection rules, a gentlemans gentleman Trade Organizations (WTO) -managed rule-based system for hatful in goods and services, and open up intellectual property and palpable rules (Cic set uptell, 2001).Theoretically, countries can meet these dimensions without resorting to a regionalism standard. However, in unimaginative sense, countries meet to regionalize more for semi semipolitical than stinting reasons as a way of dealing with the globalisation challenge (Fox, 2004). Contrary to this, some scholars recomm end that grocery store-orientation factors should be the important drivers of sparing integration in the current globalization era (Funk, Elder, Yao & Vibhakar, 2006). Although already established, some economists view NAFTA as an on-going operation in which the end product is non hitherto confirmed.The future(a) of regionalization is mostly determined by domestic help and regional factors as opposed to globalization although regional and global forces are responsible for impetuous north-central the States into closer stinting ties. Carranza (2002) asserts that the future of NAFTA depends on the policy delineaters deliberate act as this will determine whether NAFTA will finalize into an asylumal deficit or develop into a deeper integration. Circumstances that could have hindered the formation of NAFTAMexico, which was to be part of the wedlock the Statesn stinting integration, had first opposed an confederate relationship with the northern colossus because of a b in adequacyball historical find out (Skonieczny, 2006). Mexico had lost almost half(prenominal)(prenominal) of its territory in the 1846 to 1848 Mexican-American war (De la Balze, 2001 Skonieczny, 2006). Secondly, Mexico strived to agree an independent impertinent policy, which sought closer alliances with the southeast and Central America and the Caribbean (Skonieczny, 2006).According to Carranza (2002), it is still a puzzle as to why Mexico later guide ony to form an economic partnership with the North America countries from a very weak position. The country likewise paid a very heights domestic political price by agreeing to join the NAFTA. However, the economic situation in Mexico and the labor marketplace was deteriorating, and the political situation was unstable after(prenominal) a nix eventful election in the 1988 (Philip, 2008). The administration likewise vauntd corrupt and authoritarian episodes. Inflation was collision the country at a high rate, economic g rowth was stagnant and vivification standards were worthless.Additionally, Mexico had a significant amount of national debt that was un-payable. Trade liberalization seemed the most political consequential (Faber, 2007). On the some other and, in that respect was a looming fear in the US that the economic integration would lead to loss of jobs in the US while in the South in that location were cries for transition (Pastor, 2004). Neverthe little, Mexico was eager to access the bigger U. S. market in spite of the observers opinion that the U. S. is unlikely to abide by the art accord (Castaneda, 2008). U. S.had been known of having a poor set brush up in international treaties implementation and its previous interposition towards Mexico in issues like immigration policies left a doubt on Mexico as to whether the country would be left out of the musical arrangement implementation disrespect their being one (King, 2005). The Central America and Caribbean countries that we re confederative to Mexico feared that in that respect could be an erosion of the already existent throw preferences if the NAFTA was formed (Baker, 2008). The countries faced the dilemma in the midst of vindicate trade in the open regionalism and protectionism.moreover critics viewed the formation of NAFTA as a state-led project although the portions denounced the untarnished state intervention implements in bid to stop the globalization take. The Founding of NAFTA The formation of NAFTA was subscribeed inevitable because of the market and trade conditions in the globalization period that necessitated an economic integration (Baker, 2008). However, the formation process was non smooth-sailing because of the various un realties that occurred in the wake of head true countries wishing to merge their economies with the less(prenominal) developed ones.This was evident in the negotiation process in which there was asymmetry of both political and economic powers and Mexic o needed a non- transcription alternative. The formation of NAFTA to a fault wishinged the accompaniment of institutionalization and there lacks a putting green memorial tablet unto which NAFTA can be identified. In northerly America, the Uruguay Round of tripartite trade negotiations in the nineties was progressing slowly and thus this made the regional integration an attractive option (Carranza, 2002).The formation of NAFTA started as a unique regional economic integration process between a less developed country, Mexico in this representative and two industrial powers- the U. S. and Canada (Davidson, 2008). This was the first economic apprehension on a regional root word to hold various forms of integration. Some of the integrated economic activities cited in most literatures include unusual investments, monetary services, government procurement and intellectual property rights. On the contrary, the Uruguay Round global trade negotiations did non feature all of thes e revival strategies. The U.S. presented NAFTA as a trade liberalization model in the western cerebral hemisphere in the early nineties as a way of continental regionalism. On the other hand, the Latin American countries were non ready to embrace this model because of the doubt they had on the U. S. intention of seeing the agreement through with(predicate) the future. It was easier for the U. S. to control the agenda if the negotiation was on a regional quite a than a multilateral level (Hufbauer& Yee, 2003). This would enhance more of the countrys economic, political and institutional perspectives in comparison to the rest of the world.It was paradoxical that the economically successful U. S valued a emancipate trade agreement with the less developed Mexico. Carranza (2002) asserts that the U. S agreed to negotiate with Mexico astir(predicate) the issue trade on condition that Mexico did non invoke any exclusion of key areas such(prenominal)(prenominal) as the area of oil that is sovereign sensitive. On the other hand, Mexico did non have any merry concession to base its negotiations in the status of a developing country. Nevertheless, despite this unequal negotiation ability, Philip (2008) highlights the banter by showing that the process was presented as a negotiation of the equals.NAFTAs goals, objectives and economic models NAFTA is a trade treaty which aims to eliminate custom duties on achievement between the U. S, Canada and Mexico. NAFTA has formed the worlds liberalst free trade zone whereby around 406 million peck produce more than 11 billion U. S dollars worth of products (Page, 2002). The agreement which establishes NAFTA entails that the U. S, Canada, and Mexico pursue reliable third estate objectives. Trade in services has been liberalized and government procurement markets including construction and services procurement markets have been loose through the NAFTA.Therefore, through the agreement it is illegal for the parties to abstract between the domestic and foreign producers in the government markets, investments and trading of services (Adikson, Zimmerman, 2004 Diep, 2008). NAFTAs objectives therefore include eliminating custom barriers and enhancing cross-b outrank trade in products and services (Vaughan, 2004). The treaty is in any case to guarantee conditions of equitable competition in the free trade area. The treaty strives to mitigate mutual cooperation so as to extend the benefits of the agreement.One of the master(prenominal) goals of NAFTA was the need to increase the flows of trade and investment in North America. Consequently, the agreement has succeeded in increasing Mexicos and Canadas trade dependence on the U. S. NAFTA similarly incorporated the less developed Mexico, in order to give the country a adventure to succeed by joining the North America economies (Flores & Lankshear, 2000). NAFTA is a widely researched economic phenomenon that occurs as economists try to sympathise t he troika NAFTAs economies models.The gravity model has been apply to explain the trade flows as the function of the importer and exporter market size a well as the blank between the two. Funk, et al. (2006) asserts that any extraordinary flows can be accredited to free trade agreements only after the market size and importer-exporter distances have been accounted for in the trade flow process. This has led to some economists showing that NAFTA mostly does non have a significant effect on bilateral trade flows although it has the impact on the net trade creating.Benefits of NAFTA to the US, Mexico and Canada The implementation of NAFTA inspired the economists to invoice the treatys effect on the three NAFTA economies-U. S, Mexico and Canada (Funk et al. , 2006). The North America economic integration was seen as one that would be of benefit to the participating countries. Mexico would have a notice to turn in access to the larger U. S. market while the U. S. excessively sea rched for new-made foreign investment opportunities in the country (Carranza, 2002).Proponents of NAFTA view the agreement as detailed and comprehensive and have forever and a day given the accord praise for showing that less developed countries like Mexico can accept new rules in international politics in this globalization era and thus improve their situation. On the other hand, critics assert that NAFTA lacks basic safeguards to protect the masses who are excluded from liberalized trade and investment benefits con locationring that almost over half of the Mexican population lives below the poverty eviscerate (Baker, 2008 Serra, & Espinosa, 2002).The critics further launch out that NAFTA is just a clean element of a larger problem that is, globalization has a disintegrating effect on a obscure economy and the peoples genial contract. On a moderate view, critics agree that formation of NAFTA was not a bad idea at all save without regional administration and regional inst itutions, the agreement remains unfulfilled (Pastor, 2004). Hufbauer and Yee (2003) cites NAFTA as an exemplary agreement for a new or an open regionalism that opens a whole range of novel issues which are intentional to prepare the less developed countries of Latin America and Caribbean for the globalization challenge.The issue of why the U. S pulled Mexico into the North integration is very controversial although the positivists assert that the U. S government has a very strong divert in the political and economic stability of Mexico (Skonieczny, 2001). Mexico was able to attract a considerable ratio of foreign direct investment in the nineties as a result of NAFTAs negotiations. The predicted economic crack-up of Mexico in the early 1990s never lived to encounter as the country underwent economic transformation. Philip (2008) asserts that NAFTA is responsible for the economic and political stability in Mexico.NAFTA has given this materialize to Mexico through encouraging tr ade and investment opportunities. The social progress of the country is also underway and NAFTA aims to rule out the high poverty levels in most of Mexicos dwellings. NAFTA also provided the hope for Mexico to transform its worsening economic condition and urban challenges in the City of Mexico (Stracke, 2003). The Mexican government adopted the policies of democratization and free trade policies amidst controversies with the aim of preventing the country from an economic breakdown. Currently, Mexico could not be as developed as the U.S. and Canada for that matter moreover looking way back in the 1990s to early 200s, it can be said that the country has become macro-economically stable (Philips, 2008). Mexico is among the richest Latin America countries in terms of per capita and has more than twice export per head as compared to Brazil. Exports of manufactured goods from Mexico to the U. S alter to around 25 percent of Mexicos gross domestic product and the market is even more li beralized than it was in the years ago. Another benefit of NAFTA to the Mexican economy includes the checking of inflation (Stern, 2007).Although inflation occurs at some instances it does not reach three digits as in the 1990s but securely maintained at wizard digits. Other areas of the economy that have improved with the economic integration include the education system. The number of Mexicans with degrees from important world universities has increased and expected to rise. The condition in the Mexican universities has also improved as come apart preparation of lectures takes place and a fairer parliamentary environment ensures that there is a stable learning environment.Mexicos rapturous population growth also slowed down with the implementation of NAFTA as most of the population started migrating North in search for better living conditions. A slower population growth enhances strategic think and development of the country. However, as much as the conclusion of economic t ransformation is noticeable in Mexico, the economic growth rate is disappointingly low. Philip (2008) and Stern (2007) states that the cadence of economy is determined by oligopolies and specifically Pemex, the state-owned crude company in Mexicos case.Mexico continues to suffer from ascetic social and urban problems such as high poverty rates, organized crime, drug trafficking, and corruption among others (Stern, 2007). As much as these are domestic problems, it is unthinkable to separate them from Mexicos particleship to NAFTA because domestic institutions also influence the direction of negotiations in the association (Carranza, 2002). Philip (2008) argues that the U. S is also benefiting from NAFTA because the treaty has enabled the existence of a politically and economically conducive environment that Mexico now offers as compared to the times before the treaty.Flores and Lankshear (2000) assert that the developed North America countries in the treaty could benefit from Me xicos low absorb cuts in the labor force. Mexico large population of semi-skilled doers would provide cheaper and abundant labor for the national and transnational companies that seek low wage work. However, Flores & Lankshear (2000) argue that this dependence on a low wage economy undermines the development of a well educated, Challenges in NAFTAThe major challenges facing the NAFTA involve the lack of regional constitution, asymmetry negotiations, lack of a stabilized relationship between the North and South American countries and lack of special K market policies and common cash. Forces of market and trade integration publiciseed the economies of the U. S and Mexico together but there was little institutional change that took place to rebound the real degree of economic integration among the countries (Adikson, & Zimmerman, 2004). Economic integration in the north occurred without an established regional institution or governance.It is sweard that it will be problematica l for the North America decision makers to effectively move to fluidity, competitiveness, and complexity of the world economy without a form of regional convergence. Lack of regional governance also indicates a lack of a permanent mechanism for consultation among the three governments (Heron, 2002). This proves difficult especially in cases which the countries have to deal with other common challenges like drug peddling and immigration and this sometimes push for a bilateral involvement, for instance between the U. S and Mexico.The lack of common or institutionalized NAFTA governance has led to the in dependent pursuance of other third party treaties by Mexico and Canada (Heron, 2002). NAFTA also promised to cause regional barriers to the outsiders so that the insiders would receive relative gains as far as trade and other economic gains are concerned (Flores & Lankshear, 2000). However, Cavanagh and Anderson (2002) argue that NAFTA simply put on that this would take place magica lly enabling the people to benefit from the free market policies, and that the three governments-U. S., Canada, and Mexico-would resolve older and newer problems naturally. However, through the condition in Mexico, it is certain that the agreement has not brought much change to the living standards of the individuals. The countrys record is extremely immix concerning the free trade policy and the country is yet to unanimously agree on the agreement (Carlsen, 2006). Mexico has not gained the privileges that were promised if the country joined the North America relationship. Mexico did not gain a greater place in the Northern-dominated international institutions such as the International monetary fund (IMF) or the gentleman Bank.Mexico remains poor and less developed despite being part of the supposedly economic rejuvenator-NAFTA. NAFTAs negotiations did not consider the economic and development asymmetries between Mexico and the U. S and this also contributed to the exclusion of m ajority of Mexican population from the free trade benefits (Cox, 2008). NAFTA was supposed to give Mexico a chance to prosper through joining the Northern club. However, the bit Mexico decided to start negotiations with the U. S for a free trade agreement, it was found that Mexico still needed to make other sweeping concessions in order to gain access to the U.S market. Mexico presented an overstaffed and underperforming institutions, an opposite of the North America countries which have the most performing institutions (Flores & Lankshear, 2000). Mexico was forced to make the bigger compromises and adjustments because after all, it was the weaker party. This also shows that majority of the decisions were made by the tremendous powers in the agreement-the U. S, and Canada. This can be proved from an economic angle in which the gross domestic product of the U.S alone forms 90 percent of the essence North America economy (Carranza, 2004). It is unrealistic that during negotiations, Mexico would be expected to steer the decision-making process into finality. How does Mexico and Canada establish strategies on how to access the U. S over 8 one million million dollar market when all the 2 countries can offer is 250 and 500 billion dollars markets respectively? The Mexican experience has proved that the Southern countries cannot necessarily experience economic development with social justice through seeking alliances with the U.S even in this globalization era. Mexico also undergoes a painful adjustment process because being part of NAFTA it is forced to compete openly with the far more advanced economies of the North America countries (Cavanagh & Anderson, 2002). NAFTA if implemented strategically can have a voice in the global trade talks. However, the lack of a common governing in institution hinders this representation because it would appear as though one country or the other is representing its own views rather than that of NAFTA.Cavanagh and Anderson (2002) argue that the failure of NAFTA to meet its alleged expectations can be blamed on the current economic conditions. The marketplace is globalized and thus highly mobile employers gain more power to suppress workers who fight for a fair gain of their benefits. However, this remains unchallenged because such firms ally with governments who in turn are epic for foreign investment. This leads to the suppression of the hoists nations labor force through low wages and poor working conditions.The unfortunate side is that the agency that is set up under the labor side agreement of NAFTA has proved incapable of dimension governments and corporations accountable for violating the rights of workers (Cavanagh & Anderson, 2002). There have been alleged complaints of workers rights violations in all of the three NAFTA economies but other than a bit of public exposure, not much justice has been yielded. Lack of common governance is to blame for the loose policy of ensuring that all the parties i n the agreement benefit positively.There is also a looming fear that a future Mexican leaders could decide to pull out of the NAFTAs agreement because of the countrys inconsistent views on NAFTA and the lack of institutionalized rules for the agreement. Recommendations NAFTA took place amidst controversies especially from part of Mexicos population and the South and Central America countries. Moreover, a supranational institution and an ideal NAFTA identity are lacking. This poses a danger to the stability of the economic integration of the North American countries.North America take to tackle the geological faults in the North-South relationships and also increase blend wealth. One way of doing this is through enhancing regional governance through the use of common currency for the member states. However Cavanagh and Anderson (2002) assert that the issue of establishing a common currency can lead to further controversies. low gear of all, the U. S. and Mexico are not in the sam e currency zones as compared to the likeability of the U. S. and Canada. This will negatively alienate Mexico further. inactive on the issue of a common currency, Carranza (2002) argues that it is certain that the U.S public opinion would not ache a monetary union between U. S. and the two countries. The U. S needs to come to terms with having adjacent countries with difficulties in tackling money integration issues and the de facto dollarization of the economy of Mexico. This should also be accompanied with the building of appropriate institutions that would realistically introduce North America as a community of nations. The NAFTA countries need to establish a regional governance system that would ensure that all the member population is fairly treated without prejudice (Carlsen, 2006). kind justice should be enhanced within the NAFTA economies and the established policies should fairly uplift the standards of all the countries (Anderson, 2003). Rather than utilize the large s emi-skilled Mexicos labor force for cheap, low-wage labor, there should be policies or strategies in which NAFTA can contribute to the establishment of better education and vocational facts of life systems (Ma del Rosio, Camen, & Humberto, 2007). The reproach directed at the treaty will subside if it is observed that the member states are pains to raise the standards and conditions of one another rather than using each other for selfish gains.Conclusion This essay has comprehensively discussed the factors pertaining to the formation and implementation of NAFTA. The North America economic integration awakened the interest of umteen economic researchers and observers because of the coming together of powerful North America economies and a southern least developed economy. Although the reason for such a relationship was met with criticism and a lot of controversies, proponents viewed it as an opportunity for Mexico to improve its political, economical and social environment. The U. S the most developed North America country viewed the relationship as an opportunity to expand its globalization boundaries as well as create a stable economic and political condition for trade in the region. However, critics believe that it is for the best interest of the U. S while Mexico risks the chance of being sidelined. Nevertheless, Mexico has recorded an economic transformation and it is believed that if policy makers implement some strategic measures in the treaty, and then Mexico stands a greater chance of becoming a developed nation.This has provided the U. S with a stable political and economic environment without which the security of the U. S whitethorn have been at stake. NAFTA faces various challenges but the lack of regional governance is seen as the source of most of the challenges. NAFTA lacks international identity in contribution of international trade discussions. Additionally, treaty are known to be created where all the participants have an almost equal ta lk terms power even though they will not be dealing with exchange of similar products or services.However, in this case, the negotiations take an asymmetry approach because Mexico is in a compromised state in which its position does not allow it to challenge the decisions of the U. S. , the most developed economy. As a result, the negotiations are based, on an unequal level. NAFTA leaders especially from the North need to understand the gap between the north and south populations and provide democratic decisions that will be best appreciated by both sides. Economic integration is significant in this global era in which market and trade forces have pushed for market liberalization conditions.List of References Adikson, R. , Zimmerman, L. 2004. retail trade on the US Mexico order during the NAFTA implementation era, Growth & Change, vol. 35(1) 77-89. Anderson, S. 2003. The equity factor and free trade, World insurance diary, vol. 20(3) 45-51. Baker, L. 2008. Local food networks and m aize agrodiversity preservation Two case studies from Mexico, Local Environment, vol. 13(3) 235-251. Carlsen, L. 2006. Armoring NAFTA the battleground for Mexicos future, NACLA Report on the Americas, vol. 41(5) 17-22 Carranza, M. 2002. Neighbors or partners? 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