Wednesday, 27 February 2008

NAFTA and the EU

For all the bad press that the EU gets, it is important to understand what can happen if a free trade area does not have institutions with bite and rules that are enforceable to go with the removal of barriers to trade. The debate last night dwelt quite intensively on the issue of NAFTA. There is little doubt that NAFTA has benefited Canada, the US, and Mexico significantly. Alongside that, certain areas have had to face industrial change that has hit them hard over the last two decades.

It would be foolish to focus on NAFTA to the exclusion of everything else. But it is a justifiable hypothesis that competition from near neighbours could be one of the factors behind industrial decline that has befallen states such as Ohio and Pennsylvania.

Both Senators Clinton and Obama support the need for tighter social, environmental, and health and safety standards within NAFTA combined with more enforcement. The only way that can be realistically achieved is to deepen NAFTA and give it legal authority, an identity beyond the three signatories in other words. That is exactly the theory behind the development of EU institutions such as the Commission and the European Court of Justice as well as principles such as legal primacy for European legislation. I am sure that no Presidential candidate will grasp this particular nettle. Without institutional deepening and the right legal foundations for free trade, however, any reform of NAFTA will be purely superficial.

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