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Americas

20 years on, does NAFTA need an overhaul?

The North American Free Trade Agreement starring the United States, Canada and Mexico is a vintage 20 years old. It's been quite a success story, however problems and stumbling blocks remain.

It created the world's largest free trade zone, linking more than 450 million people and producing $17 trillion worth of goods and services. These are the latest available statistics from 2010, so it's likely those figures have jumped further. Literally millions of well paid jobs have been created in the three countries -

all in all, an ongoing success story.

To celebrate and honor NAFTA's achievements two decades on, COMEXI - the Mexican Council for International Affairs - recently held a landmark event in Mexico City, bringing together some of the key people, who were trade and commerce midwives, guiding and easing the birth pangs of history's greatest landmark trade accord.

Of course,

NAFTA

wasn't as natural as falling off a log. In a recorded message, former Canadian Prime Minister Brian Mulroney, who was one of its power brokers, explained that initially the US wanted separate trade agreements with Canada and Mexico, but the idea of a combined trio was adopted and it flourished.

He praised Mexico's then-President Carlos Salinas for persevering with Mexico's inclusion. "I think President Salinas' action, which required courage and vision, to enter into these negotiations and conclude them as he did, will be perceived 50, 100 years from now as a transformative decision."

Shared commitment

In a message, former US President George HW Bush, said: "It was only by our shared commitment and vision, which we firmly believed would lift our people and our continent, that we were able to overcome the steadfast and occasionally shrill opposition. In so doing, we took a decisive step to shedding the old ways, the old attitudes and embraced the promise of this globally integrated economy. In the intervening years since its passage, trade and investment flows throughout North America, increased sharply. That means more jobs and more opportunities for our peoples."

Jaime Serra Puche was Mexico's Trade and Commerce Secretary 20 years ago. "NAFTA created an incentive to export. This country was heavily protected for many decades and not competitive, so when Mexico via NAFTA was able eliminate all of the distortions to export, then it started to grow with an engine called exports. So the trade balance in Mexico, became a stabilizer, whereas in the past it had been a destabilizer," he told DW.

But Dr Serra, co-founder and president of consultant group SAI, is now looking very much to the future. "As the integration between the two regions grows, we're going to be facing more and more issues. So if we're able to find the mechanisms to coordinate we'll be able to expand and become more competitive and generate more jobs."

All winners, no losers?

Former US Trade Representative Carla Hills, who was the primary US negotiator for the NAFTA, is now CEO of Hills and Company international consultants. She said Mexico had gained so much from NAFTA.

containers MANUEL PEDRAZA/AFP/GettyImages

Mexico has benefited hugely from NAFTA

"I like to think that NAFTA has established the most creative partnership in the World, and Mexico has benefitted. Its middle class has grown, its small and medium sized companies are increasing and it has created jobs. A recent study by Yale University and our Federal Reserve shows our three economies have gained in jobs. When you look at the data, adjusted for inflation, I know that Mexico has advanced very considerably as a result of opening its market," she told DW.

Carla Hills' forward vision encompasses the

Trans-Pacific Partnership, which she predicts is the first step to Asia Pacific economic cooperation.

Membership is now up to a dozen including the US, Canada and Mexico.

"If we were able to negotiate a first-class trade agreement that stretched across the Pacific among those 12 economies that include Japan, it would set an example for the rest of the world and generate considerable benefits. My hope would be by doing this to get the rest of the APEC economies to join us, so that we would do what we promised to do after the NAFTA. There was great excitement about NAFTA when it went into force in 1994. The Western Hemisphere was going to have free trade by 2005. APEC was going to have free trade for the industrialized nations by 2010 and free trade for the developing nations by 2020. Neither has come to pass, but we shouldn't give up. It's the right thing to do, and we could do it."

Herminio Blanco, Mexico's chief negotiator on NAFTA, who later became its trade and industry secretary, said NAFTA's success had exceeded his expectations.

Viva Mexico!

"I thought then that this would be a significant change for Mexico," the president of business think-tank Intelligencia Comercial told DW. "I never imagined that in 20 years Mexico would be able to export $1 billion per year. It has completely exceeded my expectations in investment and change. Mexico obviously needs to do much more, but the center/north part of Mexico has been a revolution. NAFTA has brought competitiveness to a great part of our industrial manufacturing."

Blanco also points out that the 20th anniversary of NAFTA coincides with other important changes. "The reforms that President Enrique Peña Nieto has been able to launch will be the turbo for the free trade agreement of North America. The opening of energy, telecommunications, the improvement in our education, improving our labor law. All of that will make Mexico much more capable of benefitting from the NAFTA."

He stresses that problems and issues still remain, for example the free trucking/international cargo provision still hasn't been properly implemented. "We need to go to pre-clearing. Clearing at the border is the old regulatory mental structure, while pre-clearing is the name of the game. We need to do that in Mexico. That would be one of the key to advance the competitiveness of North America."

Jaime Zabludovsky is the president of COMEXI. Two decades ago he was Mexico's deputy chief negotiator and in charge of organizing the negotiating team.

"This has been much more successful than anyone thought," he told DW. "Perhaps 2 million jobs are related to the exports sector and we used to receive less than $3 billion in foreign direct investment before NAFTA. Today we're receiving between $15 and $20 billion."

Going strong, but problems remain

Protesters

It's not all been plain sailing: Certain areas of NAFTA still need some tweaking

Hindsight is a luxury to envy, and several of these experts have very definite views of what they would have tried even harder to achieve in one specific area if they'd known then what they know now.

"Within the political limits, President Salinas was the leader and he defined NO oil. For me, I would have loved to have opened that and probably we would have grown much faster," says Herminio Blanco.

"I think the only thing that has not functioned very well is the dispute settlement mechanism. The structure is very good. However it trusted in one thing - that the government was going to be responsible enough to provide a list of panelists without conflict of interest. At that time Mickey Kantor (Carla Hills' successor as Trade Representative) sent me a rainbow list which was an accommodation for all the political sector of the democratic left. And it was unacceptable, because everyone had a conflict of interest. So when we said that, Mickey Kantor answered 'it's that or nothing!' Since then we have not be able to have a permanent list that would make the dispute mechanism act automatically."

Jaime Zabludovsky agrees. "The disputes procedure is a fault that we have in NAFTA particularly related to the appointment of panelists. I don't think it would have been possible to have included oil at that time, but I would have included more service sectors like all forms of transportation and also the telecommunications sector."

Flaws in NAFTA were always inevitable. As George HW Bush put it: "Of course NAFTA wasn't perfect. No legislation that complex and comprehensive is. But we should never retreat from the construct of open markets and competition. To me the greatest failure would have been the development of trading blocks that excluded willing and able trading partners, or even worse excluded Mexican, Canadian or American products or services from their markets."

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