11 - Regional trade arrangements in North America: CUSTA and NAFTA

Summary

Introduction

Since the mid-1980s, both the profile of and the depth of the debate over regional trade arrangements in North America have grown, first with the 1988 Canada–US Free-Trade Agreement (CUSTA), and subsequently with negotiations in the early 1990s between Mexico, Canada and the United States aimed at achieving a three-country North American Free-Trade Agreement (NAFTA). Recently, debate has intensified even further following a wave of proposed Latin and Central American trade arrangements whose objective, in part, is eventually to facilitate an even wider Western Hemispheric Trade Arrangement (WHFTA). These developments are, however, only part of a global trend towards more extensive regional arrangements in the trading system in the 1990s. In Europe it is manifest in the ‘Europe 1992’ programme, the EC–EFTA pact and other developments; and in Asia it strengthened ASEAN arrangements (AFTA), Australia–New Zealand agreements, and new Japanese regional arrangements.

As elsewhere, the new regional arrangements in North America are driven by a number of factors. A key one is the search for safe-haven trade agreements by smaller countries who now, more than ever before, wish to secure access to the markets of large neighbouring trading partners because of the fear of higher trade barriers in the future. Another is both the frustration felt by larger countries with progress toward new multilateral liberalisation, and their belief that threatening to negotiate, or actually negotiating, regional arrangements on their part may force other reluctant larger powers to make concessions multilaterally.