Is NAFTA a Dead Parrot?

Depending on when you decide to mark the occasion, the North American Free Trade Agreement (NAFTA) turned twenty years old this year. In last week's Edmonton Journal, former federal MP Rob Merrifield, and current Alberta Envoy to Washington, along with Congressman Bill Owens (D-NY) penned an op-ed piece extolling the virtues of the NAFTA at Twenty (link to story here). For Merrifield and Owens, the NAFTA has been a tremendous success and remains a golden opportunity for all three countries. I agree!

The problem with some of this happy talk about North America is that it increasingly resembles Monty Python's Dead Parrot skit (linked here). Like the shop-keeper who insists the parrot isn't dead, only resting, some advocates of North America seem stuck in a time-warp, unaware of how far away from the North American vision we've actually drifted.

Op-ed pieces (and blogs like this one) should probably always been treated with suspicion, but op-ed pieces about the NAFTA should be given a bit of extra scrutiny. Almost invariably over the last two decades, opponents of the NAFTA have exaggerated the negative impact of the Agreement while advocates have oversold its benefits.To detractors, the NAFTA has single-handedly brought the world's ecosystems to the brink of collapse. To proponents, the NAFTA has created billions of jobs. The Merrifield-Owens piece oversells what the NAFTA did. For example, in the first paragraph, they say that in the first four years after the NAFTA's entry into force, 800,000 jobs were created in the US. Sure. But, as much as politicians would like to be able to tie each of those jobs to the NAFTA, sorting through which of those jobs were created due to trade liberalization vs. the economic boom of the mid-1990s is problematic. Even if you argue that the economic boom itself was partly driven by trade liberalization, untangling the NAFTA's job creation prowess from that of the Uruguay Round of the GATT, also completed in 1994, is tough.

Moreover, Merrifield and Owens do the NAFTA a diservice by writing "the combined domestic product of NAFTA members is more than $19.2 trillion, more than double the pre-NAFTA GDP...," implying a direct link between the two. Firstly, more than $17 trillion of that is US GDP alone, but attributing a direct cause and effect between a doubling of GDP and a shallow, limited agreement like the NAFTA oversells what it was designed to do. Sales pitches such as this have provided fodder for critics and help transform the NAFTA into a political football.

The NAFTA has been important, and an unambiguous driver of the expansion of trilateral trade and investment activity. It has largely done what it was designed to do. One of the best examinations of the NAFTA's impact was produced in 2005 by Jeffrey Schott and Gary Hufbauer at the Petersen Institute for International Economics, and largely reaches this same basic conclusion (Link here).

It is a shallow stage of integration that liberalizes trade and investment flows, but little else. To some, including me, the shallowness of governance in North America is a weakness in jointly tackling a number of shared problems; among them, climate change, immigration, and, of course, security. The NAFTA might only be 20yrs old, but it's needed a boost for some time. In fact, longest of the NAFTA's phase-in periods expired five years ago.

What troubles me about op-eds like Merrifeild-Owens is not that they are right or wrong. Indeed, apart from the exaggeration in their presentation of the benefits of the NAFTA, I largely agree with the point of their piece: the NAFTA area represents an economic zone of tremendous opportunity.

Yet, the happy talk of pieces like Merrifield-Owens is at odds with the reality of where we are in North America; a tale of two bilateral relationships anchored by Washington and dominated by a single issue, security.

I have repeatedly lamented the descent into dual-bilateralism on this blog (linked here, here, and here), and won't beat a dead horse here except to reiterate (and again lament) the fact that vast output of academic and public policy thinking went into what an integrated, secure, prosperous, cooperative, and increasingly green post-9/11 North America could look like.

The scale of this missed opportunity is hard to over-state, and it's left North America looking more and more like a dead parrot.