This book is interesting for two reasons. First, it reveals that economists are no better at predicting the future of hemispheric integration than historians; and second, the best chapters in the book are historical. This collection of essays is the first of several to come out on the subject of hemispheric integration.
The volume consists of eight essays, all written by economists, for a March 1994 hemispheric integration conference. The year 1993 was highly productive in terms of global market integration and trade. The Asia Pacific Economic Cooperation (APEC) forum successfully concluded an ambitious agenda for the establishment of the region-market in Seattle. The North American Free Trade Agreement (NAFTA) squeaked through the U.S. Congress, establishing the trilateral free trade accord among Canada, the United States, and Mexico. The Uruguay Round of the General Agreement on Tariffs and Trade established the World Trade Organization, implanting a backbone in multilateral free trade as of January 1, 1994.
It is curious that the contributors fail to respond either to the rising tide of global economic integration or to the contrary trend of world fragmentation into a series of region-markets. None of the eight contributors foresees the collapse of the Mexican peso and its impact on NAFTA and the Americas. Obviously, economic indicators are not reliable predictors of the future.
Sidney Weintraub, the editor of the volume, points out that Latin America has abandoned the inward-looking import-substituting industrialization and embraced export promotion as policy of growth. This trend will continue. Joseph Greenwald recognizes the shift in U.S. trade policy from multilateralism to a mixed bag of multilateralism, regionalism, bilateralism, and unilateralism, and wonders where the Clinton administration’s liberal trade policy will lead. Nora Lusting and C. A. Pinto Braga are cautiously optimistic about the trade liberalization trend throughout the hemisphere; they point out that a similar trend in the 1970s was quickly reversed once the debt crisis had engulfed Latin America.
Moíses Naím disputes the view that subregional free trade agreements such as NAFTA and MERCOSUR can lead to an Americas free trade zone. He doubts that Brazil would let Mexico and the United States into MERCOSUR or want to share its domination of the market with outsiders. He overlooks, however, that Brazil itself may not be able to access NAFTA if it specifically discriminates against NAFTA members applying to join MERCOSUR. Leonard Waverman predicts that NAFTA will fall apart because there are too many nontariff barriers that Canada, the United States, and Mexico are still loath to give up.
Albert Fishlow questions the efficacy of U.S. liberal multilateralism in trade when it offers nothing special to Latin America. If all nations are treated equally in the U.S. conception of global free trade, why bother to forge a hemispheric integration? Fishlow even predicts that Korea and Taiwan might want to join NAFTA. He also warns that free trade can lead to excessive imports of U.S. goods by Latin America with little productive investment going south.
María Beatríz Nofal predicts here that MERCOSUR will be a free trade zone by 1995. As it turned out, the region-market became an external tariff agreement, or customs union, short of becoming a common market. The trade dispute between Argentina and Brazil over automobiles and auto parts almost wrecked the agreement in July 1995. Like the U.S. trade with Japan, Argentina imports more automobiles and parts from Brazil than it exports. As long as Brazil behaves like a Japan, this will lead to future conflicts in MERCOSUR. Also unforeseen in this chapter are the European Union’s enthusiastic courting to work out a special relationship with MERCOSUR, and MERCOSUR’S invitation to Cuba for a special trading agreement, possibly offering it a membership down the road. Both will have an impact on U.S.-Latin American relations and on the future of the Free Trade Area for the Americas, the 33-nation accord produced in December 1994, which excludes Cuba for U.S. domestic political reasons.
Ippei Yamazawa imparts an Asian (read Japanese) perspective on NAFTA but also, indirectly, on hemispheric integration. He asserts that Asia is not worried—except for Southeast Asian countries that are preoccupied with Mexico’s future competition against them—once the third member of NAFTA begins to sharpen its competitive edge with the help of the United States and Canada. The diversion of capital and technology to Mexico is a legitimate concern. As for Japan, Yamazawa says there is nothing to worry about, because Japan has extensive investments in all three NAFTA countries. But he wishes that NAFTA could include Japan and the Asian Tigers.
Finally, Eckart Guth offers a European view. Free trade undoubtedly exists in the EU-15, but this market is an example of closed regionalism in that it discriminates against nonmembers, while NAFTA does not. The EU’s attempt to build a bridge with other European countries (a European Economic Area) as well as with MERCOSUR is commendable, but it does put pressure on the U.S. plan. The EU needs to do more than market approximation, however, to overcome the image of “Fortress Europe.”
