NAFTA-ization: Regionalization and Domestic Political Adjustment in the North American Economic Area
School of Social and Political Studies
University of Edinburgh
Edinburgh EH8 9LL, Scotland
Tel +44 (131) 6511730
Europeanization is an example of initial bargains between states leading to ongoing political adjustment within the states. In this article I apply the concept to NAFTA and look at two of its member states, finding that despite the low level of institutionalization, NAFTA has set in motion new forms of political organization and behaviour, and new demands for political action. This is especially marked in Mexico, and in certain sectors. It is also clearly visible in the changing patterns of cross-border bureaucratic communication. The main conclusions are that: (1) even in a lightly institutionalized regional trade agreement, the institutional, legal and civil society capacity of less-developed members is strengthened; (2) despite the absence of a formal process of policy or institutional development and the lack of legislative instruments, NAFTA has begun a hidden process of domestic adjustment in technical and specialized areas; and (3) like the EU, pressures to expand and strengthen NAFTA have emerged as a result of the initial agreement as well as extraneous factors. These conclusions may offer lessons to the study and practice of regional organizations elsewhere.
The North American Free Trade Agreement (NAFTA) is the result of contentious negotiations between the US, Canada and Mexico which began in June 1991 and culminated in August 1992.1 Numerous studies have examined the effects of NAFTA from an economic or social perspective (Middlebrook and Zepeda, 2003; Wayne, 2004), and while the agreement was highly controversial, official data make it clear that NAFTA brought impressive growth in trade, investment and movement of people (Wayne, 2004).
What is less clear is the impact NAFTA has had on the political institutions and practices of its member states. This article applies a concept developed in the context of European integration to NAFTA by asking how domestic politics in the US and Mexico have been ‘NAFTA-ized’.2 It summarizes the concept of Europeanization, suggests ways to apply this to NAFTA and traces some empirical cases to determine how valid the approach might be. It asks whether institutional changes are appearing in the politics of the member states after nearly 15 years of NAFTA, as they have done with the EU, and if not, what the constraints may be.
Insights from the Europeanization literature help us to understand the processes of domestic political adjustment in North America, particularly in Mexico. Domestic political adjustment, for the purposes of this study, means change to political institutions, policies and procedures that were not required by the NAFTA agreement or foreseen by the member states. Specifically, it means: (1) creation of new domestic institutions, such as ministries, parliamentary committees, working groups or advisory panels; (2) new standards or norms beyond those specifically enumerated in the NAFTA text; (3) new forms of cross-border interaction between public officials, including new mechanisms of co-ordinating policy between the member states governments; and (4) new public expectations, expressed through the creation of new civil society groups and/or cross-border links, and the emergence of pressures to deepen the institutions and policies of NAFTA.
Regional integration is one of many potential external influences on domestic politics. Globalization, external events and crisis, and bilateral relations also lead to changes in the domestic political consensus. Mexico gradually transformed beginning with the debt crisis in the early 1980s, abandoning import substitution industrialization, joining the Gatt/WTO in 1986, the OECD in 1994 and NAFTA in the same year. It experienced a profound economic shock in the peso crisis of 1994–95. All these events are inter-linked and all can be traced back to the debt crisis. Therefore, joining international organizations are the result of a series of decisions made in the wake of a crisis, and while they have subsequently had independent effects on domestic politics, they must also be seen as inseparable in their origins.
So why study NAFTA as a causal factor rather than one (among many) results of ongoing processes of change? The answer is both deductive and empirical. The large literature on Europeanization, without overtly calling for comparison, suggests that regional agreements may have measurable and significant independent impacts on members. Also, certain factors are thought to be conducive to greater levels of commitment and adjustment within regional agreements – including the presence of a regional identity, higher levels of social and economic interaction, and fewer actors. While North American regional identity is not high in the sense of commitment to a common endeavour, interaction is high and the number of members is low. Fewer actors means that there is less likelihood of divergent preferences, and greater possibilities for overcoming problems of monitoring, distribution of gains and enforcement (Haggard, 1997; Mansfield and Milner, 1997). Studying the effect of regional integration on domestic politics in a comparative way will help determine the generalizability of the Europeanization approach. Moreover, as this article shows, the empirical record of NAFTA yields strong evidence that it was in fact an important cause of change, especially in Mexico.
I. Europeanization and Domestic Adjustment
Europeanization refers to the reciprocal influence of European integration and the domestic politics of its Member States. It is usually conceived in top-down terms: as the EU forms new policies and institutions, Member States are faced with adjustment pressures. Domestic politics has long served as an explanatory factor in accounts of the integration process, but only recently has itself been viewed as a dependent variable.3 Europeanization is also conceived in bottom-up terms, though less frequently (Green Cowles et al., 2001). Here the emphasis is on how Member States seek to ‘upload’ domestic approaches to the EU because this minimizes the cost of adjustment (Börzel, 2002; Jordan, 2003).
Nonetheless, Europeanization in current literature normally refers to domestic transformation under pressure from EU institutional and policy change (Ladrech, 1994 is often cited as an original definition; for a wider set of definitions see Olsen, 2002; Ladrech, 2002). For Olsen, domestic change is only one of several possible conceptions of Europeanization. At the domestic level, Europeanization is about ‘adapting national and subnational systems ofgovernance to a European political center and European-wide norms’ (Olsen, 2002, p. 924). His definition of Europeanization in this context is a ‘change in core domestic institutions of governance and politics, understood as a consequence of the development of European-level institutions, identities and policies’ (Olsen, 2002, p. 932).
Simplifying Europeanization to the question of ‘domestic adjustment under conditions of membership of regional organizations’ it is possible to see several important ways in which Europeanization could inform the study of other regions.
First, where does the pressure for adjustment come from and what are the mechanisms of adjustment? Much of the pressure to adjust in the European case stems from the ‘misfit’ between EU requirements and national policies and institutions (Green Cowles et al., 2001; Börzel, 1999; Börzel and Risse, 2000). ‘Goodness of fit’ provides the theory of transformation in the EU. Where the misfit is high, the pressure to adjust is greatest. This pressure is felt in domestic policies and institutions alike. It is usually assumed that this adjustment pressure is coercive, though Zahariadis (2004) shows in a study of competition policy that Europeanization may occur without explicit pressures from the EU level, but rather as a result of certain domestic groups using European-level ideas or approaches selectively to pursue their own domestic agendas.
The hierarchical relationship between the EU and its Member States means that commonly agreed policies or institutional changes bring automatic adjustment pressure at the domestic level, reinforced by rulings of the European Court of Justice where necessary. But adjustment may occur through more social means as well. Bureaucratic cultural change is one such means. Adaptation may mean that new domestic norms and collective understandings are inculcated. These can be accomplished by norm entrepreneurs and depends on the compatibility of domestic political culture (Börzel and Risse, 2003). Norm entrepreneurs include epistemic communities, whose force relies on knowledge (usually scientific or technical-based), and advocacy or principled issue networks, who share beliefs and values (Börzel and Risse, 2003, pp. 67–8). Through persuasion, mimicking and social learning, actors’ identities and interests may be changed, resulting in policy and even institutional adaptation.
Informal institutional environments, such as political culture, and ‘collective understandings of appropriate behaviour’ (Börzel and Risse, 2003, p. 68) affect the acceptance of Europeanization. For example, norm entrepreneurs and consensus-oriented cultures affect whether European ideas, norms, and the collective understandings which do not resonate with those at the domestic level, are internalized by domestic actors, giving rise to domestic change. In addition, the EU experience shows that there is clearly a reciprocal feedback effect in which (for instrumental or other reasons) Member States and civil society groups contribute to a changing set of policies, institutions and shared understandings. This was partly the premise of neofunctionalism and the utility of this in understanding regionalism more widely is an important question.
Second, what causes variation in acceptance or resistance to adjustment pressures? Unacceptably high adjustment costs and political uncertainty may cause resistance to Europeanization (Cowles et al., 2001, pp. 6–9; Knill, 2001), but this does not tell us a priori where we are likely to find high adjustment costs and political uncertainty. It seems plausible that such factors as domestic traditions, institutions, identities and resources (Olsen, 2002), or economic vulnerability, political institutional capacity, policy legacies, policy preferences and discourse (Schmidt, 2002), may contribute to perceptions of high adjustment costs and political uncertainty. One possibility, mooted in various studies, is that different types of policies result in different kinds of adjustment pressures. Positive policies, requiring adoption of new regulatory approaches, are more likely to result in adjustment pressures than negative policies which simply require deregulation or liberalization (Knill and Lehmkuhl, 1999). Framing policies lead to new expectations or beliefs about politics and are less explicit (or not explicit at all) in their adjustment requirements.
Moreover, institutional adjustment is thought to be less susceptible to Europeanization than domestic policies. Institutions – especially the core executive comprising central administration and the government – are resistant to transformation (among others see Knill, 2001).4 Börzel shows that the domestic territorial structure also has an effect on the variability of adjustment, with federal and regionalized political systems facing greater adjustment pressures and the differences between them being determined by whether regions interact with the centre on a co-operative or confrontational basis (Börzel, 1999).
But institutional adaptation may be cultural rather than structural, as Jordan (2003) points out. It is not just institutional structure that is important when considering Europeanization of domestic institutions, but institutional culture, too. In addition, domestic groups may vary in their acceptance of (andability and inclination to push for) Europeanization, depending on the sector and the power of organized interests. Changing domestic political opportunity structures provide opportunities for actors to push or resist adaptation (depending on the number of veto players; Börzel and Risse, 2003).
Likewise, the influence of power asymmetries is an important but sometimes overlooked variable that affects acceptance of Europeanization pressures. The case of eastern and central European accession to the EU is a good example. Notwithstanding assertions of institutional resistance to change, in these cases the EU had a profound impact on domestic institutions. New public agencies and new co-ordination mechanisms between and within them were created, along with civil service reform, public procurement, budget procedures and regional governance (see Grabbe, 2001). Grabbe enumerated five mechanisms by which the EU can influence accession country Europeanization: gatekeeping (indicating when states can progress to the next stage of negotiations); benchmarking and monitoring (e.g. best practice); providing legislative and institutional models; financial aid and technical assistance; and advice and twinning (Grabbe, 2001, pp. 1020ff). But there are limits to the EU's influence too, stemming from its diffuse, highly politicized nature, and from the influence of other sources of reform pressure, including the OECD and the World Bank.
The concept of Europeanization is helpful to understanding the process of adjustment in NAFTA member states because it draws our attention to pressures which require, encourage or create incentives for change, whether to domestic institutions, policies, domestic norms of governance or to civil society groups. Yet unlike the EU, NAFTA requirements were negotiated at the outset. NAFTA lacks legislative instruments; it is an intergovernmental agreement and provides far more scope for national autonomy. It has little in the way of ongoing policy or institutional change, and without an independent supranational body it is unlikely to develop such pressures. That makes NAFTA a much less likely motor of domestic change, since it is a far weaker agreement.
What, therefore, causes adjustment in the NAFTA member states, and how does it vary? The pressure for adjustment is not likely to come directly from the institutions and policies of the agreement as it does in the EU, since in the NAFTA agreement there is no autonomous supranational power. Moreover, the mechanisms of adjustment, unlike the EU, are not to be found in legislative or other supranational instruments, but rather may be found in processes of socialization. However, variation in adjustment, as with the EU, may emerge from distinct domestic traditions and legacies, which resist adjustment. These are primarily empirical questions since it is not clear a priori that the EU serves as a valid point of comparison. The next sections begin this empirical work, and though they are only an initial study they do point to a pattern of domestic political adjustment under NAFTA from which conclusions can be drawn.
III. Contractual Sources of NAFTA-ization
NAFTA is a detailed and precise agreement, containing 22 chapters and numerous annexes establishing the obligations of member states. It refers to the internal legislation of member states and its coverage extends to ‘terms of trade’ obligations, such as sanitary and phytosanitary (SPS) measures and intellectual property rights.
NAFTA creates strong pressure to harmonize tariffs, update rules of origin and harmonize other standards in order to promote trade (Wayne, 2004; Baker interview, 2005). This pressure occurs through the committee on standards-related measures and through sectoral subcommittees. Moreover Clarkson claims that NAFTA may generate ‘supranational’ regulations – citing an example where a working group agrees to a common standard for cross-border transport of dangerous chemicals which the member states ‘have agreed in advance to accept’ (Clarkson, 2002, p. 7). There is a norm among public officials of the need to move toward similar practices.
Legal changes were required in all three member states as a result of NAFTA. Chapter 19, Annex 1904.15, contains a schedule of changes required in order to implement the dispute settlement procedures in anti-dumping and countervailing duty issues. The Senate Finance Committee Report listed 43 changes to US law that were required under NAFTA, though there was no supranational effect to these legal changes: they were made through the normal legislative process. Also, the House Ways and Means Committee made it clear that US law is superior to the NAFTA agreement, though it also stated that the NAFTA agreement is superior to state and local law which conflicts with it.5 The executive branch also submitted its required statement of administrative action, detailing administrative changes that would be made under NAFTA.
However, Mexican legal and administrative adjustment was more profound. NAFTA-induced changes occurred in Mexican policy on telecommunications, intellectual property rights, automotive sector, competition, monetary policy, inward investment and others. For example, legislative changes were made to allow more liberalization in the auto sector – all three member states created uniform regulations ‘regarding the interpretation, application and administration of the rules of origin that they would then entrench in each system of national law [. . .]. NAFTA caused a direct change to the legal and administrative orders affecting auto manufacturing’ (Clarkson, 2002, pp. 31–2). Mexico agreed to phase out its ‘auto decrees’, which included restrictions on imports and foreign ownership of auto producers, as well as domestic content requirements (Burfisher et al., 2001, p. 136). Likewise, in a 1992 law on anti-trust, Mexico created the Comisión Federal de Competencia. The approaches to property rights, land ownership and the legal framework on competition and corruption all were transformed, according to one observer (Lopez-Guerra interview, 2005).
NAFTA resulted in wholesale legal changes to the Mexican trade regime, because it did not have laws on anti-dumping or countervailing duties. It amended its Foreign Trade Law regarding administrative procedures and made adjustments to allow access to information and widen participation in dispute settlement (Clarkson, 2002, pp. 14–15). It also reformed its 1994 Federal Act of Administrative Procedures in 2000 with four main objectives: to increase transparency in drafting regulations, promote public participation, increase legal certainty regarding enforcement and provide that benefits outweigh costs of regulation. In December 1993 Mexico passed a Foreign Investment Law that removed most of the existing restrictions on inward investment (Vega and de la Mora, 2003, p. 165; Lustig, 2001, p. 95). This change was prompted by NAFTA. Thirteen sectors remained shielded from foreign investment, including oil, energy, mining, telecoms and transport. The 1993 law was amended in December 1996 to permit greater foreign investment in communication and transport sectors, and again in September 1998 to streamline administrative procedures (see Máttar et al., 2003, p. 131).
These adaptations were not accidental but were directly the result of the NAFTA agreement. For example, the Chapter 19 dispute process was intended as ‘an instrument for change in the Mexican legal framework regarding countervailing and antidumping legislation since this aspect of Mexican law will now be subject to scrutiny by the international panels’ and this would ‘aid domestic reformers to accomplish their goal of making the Mexican legal process more transparent and comparable in certainty to the Canadian and US systems’ (cited in Clarkson, 2002, p. 22). Other observers confirm the NAFTA-induced nature of these changes in both institutions and legal systems. Ibarra-Yunez (2004, p. 2) asserts that NAFTA has strengthened Mexican institutions in the areas of competition policy, consumer rights, property rights, bankruptcy laws and the environment. Quintana Romero (2004, pp. 58–9) claims that Mexico sought NAFTA even before it had an institutional framework with sufficient capacity to respond to subsequent developments and demands. The reforms which followed were intended partially to comply with prerequisites ‘implicitly demanded’ by the other member states.
All these analysts point out that there were other pressures on Mexico too, including the WTO and its own process of internal reform. Quintana Romero (2004, p. 60) for example states that ‘radical modifications’ to the Mexican legal system were initiated in 1991, to enable the Mexican economic, trade and financial systems to face open competition. He also looked at various measures of openness, political and civil freedoms, attitudes to corruption and similar measures, and concluded that NAFTA has brought new institutional structures and important changes to the legal system, although insufficient social support undermines its development (2004, pp. 63–4). Ibarra-Yunez (2004, p. 5) likewise suggests that faced with increased competition from China, India and other developing countries, Mexico's reforms have been about preparing for globalization as well as about deepening NAFTA.
Clarkson echoed this, stating that Mexico was adapting not simply because of NAFTA, but also the WTO. However, he concluded that NAFTA went well beyond what the WTO required, enumerating 21 alterations to Mexico's administrative procedures, prompting one observer to note that it was ‘obligated to make significant, substantive revisions to its antidumping laws and regulations’ (cited in Clarkson, 2000, pp. 15–16). They included such reforms as maintaining an administrative record and publishing the administrative and final determinations. Of these 21 required changes, 20 were made, but one was considered incompatible with the domestic legal system.6
These changes have brought new standards of reporting in Mexico (spurred by the 1994–95 financial crisis as well). INEGI, the statistical agency, publishes statistics more often and more quickly. The Public Function Ministry oversees the transparency of all ministries as well as the new transparency law (Carrera interview, 2005). The result is that business has more confidence at the federal level (Commerce Department interview, 2005). Mexico used to change regulations without warning or pre-notification. Now they offer opportunities to comment and take these comments into account. However, there is less change and less transparency at the state level.
IV. Institution Building
NAFTA created several intergovernmental bodies that act to gather information and set the agenda for co-operation regionally. They all act as potential generators of new forms of behaviour and identity. They are the Free Trade Commission, the Commission on Labour Co-operation, the Commission on Environmental Co-operation and two institutions created by the Mexican and American governments: the Border Environment Co-operation Commission and the North American Development Bank. The two latter institutions were intended to promote investment, development and implementation of environmental projects in the border region. In this section I concentrate on the non-border trinational agreements.
The Free Trade Commission
The FTC oversees the implementation of NAFTA, makes recommendations, selects dispute arbitrators and negotiates agreements, but must act on a consensus basis and does not promulgate secondary legislation. The three trade ministers manage the NAFTA agreement through the FTC, meeting once per year under its guise, but also in other forums such as the margins of WTO meetings. The ministers have a formal role in the dispute settlement chapter, but there is much delegation, and ministers are not usually personally involved in dispute settlement. At lower levels there is greater formal interaction between the three member states (since the second Clinton administration); this is driven by the need to produce deliverables prior to ministerial meetings.
NAFTA created 25 committees and working groups within the FTC, including a textiles working group which was added later. Some of the committees and working groups have produced changes to national practices. Clarkson (2002) points to the NAFTA Telecommunications Standards Subcommittee, which agreed technical standards, despite much resistance. Other committees, such as the Sanitary and Phytosanitary Committee, provide forums to discuss national animal and plant health concerns. The intent is to improve mutual understanding of regulatory systems, maintain pressure for market access and build confidence.
NAFTA did not result in permanent organizational changes in the office of the US Trade Representative (USTR). Temporary geographic offices were created for the negotiations – the ‘Office of Canada’ and the ‘Office of Mexico’– but these were folded back into the Western Hemisphere group afterwards. However, NAFTA had a direct impact on the Commerce Department, because two desk officers and a NAFTA compliance team were created. A database on cases was also created in an effort to track compliance. In Mexico the under-secretariat for international trade negotiations (in the Secretariat of the Economy, known as Economía) has NAFTA officers in the Mexican embassies in Washington and Ottawa which are accountable to the under-secretariat, not the foreign ministry.
Yet while institutional adjustment is light, officials from numerous agencies on both sides of the border state that NAFTA has produced a denser network of departmental contacts between US and Mexican agencies. There has been an evolution in the relationship, more conversations about a broader range of issues and a recognition that ‘we're all in this together’ (vis-à-vis competition with Asia and Europe). According to a USTR official, NAFTA ‘has made an enormous difference’ to contacts with Mexico (Melle interview, 2005). Cross-border contacts are very frequent between lower-ranking officials. The discourse has changed as well. Mexico became a promoter of, and believer in, free trade. Incentives have increased to harmonize standards and minimize differences. The member states have initiated a dialogue over BSE, for example, because of the highly developed and integrated nature of meat markets. The same is true of intellectual property rights. Prior to NAFTA, Mexico did not talk about piracy and intellectual property rights issues.
A State Department official also stressed that NAFTA had institutionalized US–Mexico contacts (Emrich interview, 2005). Increased trust resulted from more frequent and less politicized meetings, such as within the FTC working groups. Disputes have been taken off the political agenda into institutionalized dispute resolution mechanisms.7 In terms of contacting counterparts in Mexico, Emrich works mainly through the US embassy in Mexico for reasons of protocol, but does call her counterparts in Presidencia and sees Mexican foreign ministry staff directly on occasion as well. She is sometimes in contact with Economía, too. Contacts go through the US embassy during slower periods, but she is on the phone one to two times per week during high activity times, with daily email contact.
For Commerce, likewise, the first point of contact is through the foreign commercial service in the US embassy.8 But there are also direct communications with Economía. The relationship has become less formal. On urgent issues, or to follow up an ongoing issue, one interviewee said he would call Economía directly. Channels of communication between civil servants have diversified – they are more frequent and deeper. Communication is not just about the ‘conflict of the day’, but about new ventures and projects. Attitudes and expectations are evolving. Moreover, working relationships have moved beyond trade and commerce interaction, to health, agriculture and DHS issues, among others. Communication has become depoliticized and increasingly technocratic.
Many of these new modes of interaction and behaviour were confirmed by Rafael Serrano, head of Mexico's NAFTA Secretariat. He stated in a 2007 interview that NAFTA had improved the trade relationship between the member states by contractualizing it. Trade is now less nationalistic. A form of camaraderie appears to have evolved among the bureaucrats working on these issues in the member states, with much informal and friendly communication, as well as a common technical understanding of problems and solutions. In the interview, Rafael Serrano was asked for the phone numbers of his counterparts in the US and Canada. He turned to the phone and mock-dialled in order to remind himself – the habit of phoning is so ingrained he could see the pattern of numbers more easily by pretending to dial them. According to him the individuals working on these issues have become friends. The spouses know each other, they are invited to each other's homes, families accompany officials on visits and tour the cities, sometimes accompanied by staff. He sees this good relationship as very important because it builds trust, links technical experts across borders and depoliticizes the issues. He repeatedly stressed the importance of not being nationalistic or self-promoting, but rather keeping a low profile and working on the basis of technical interpretations. Their informal and personal interaction (as well as shared expert technocratic knowledge) is crucial to the success of their relationship.
In September 2001, the US and Mexican governments signed the Partnership for Prosperity (P4P) Agreement, which sought to upgrade the relationship between the two countries (State Department, 2004). Two of the most important stated aims were to build a private–public partnership and to increase development in the areas that had fallen behind. The impact of this agreement was limited by the events of September 11 and it was bilateral rather than trilateral (Canada and Mexico signed their own P4P in October 2004). However, several important political changes were brought about. One is that a ‘North American Competitiveness Committee’ was established, involving government and business representatives from the two countries. Numerous other agreements were mentioned in the report, including a social security tax agreement between the two countries, housing and educational agreements, expediting financial interactions, official US investment agency support for Mexican investment, small business training, infrastructure development and others.
There are two interesting points to note. First, the introduction to the report states clearly that the P4P is intended to build on the success of NAFTA. Second, many of these initiatives had the effect of broadening official participation with counterparts in Mexico, so that officials from numerous US federal agencies interact directly and routinely with their counterparts in Mexico. From the US side it involves State, Treasury, Commerce, SBA, Agriculture, AID, OPIC, the Exim Bank, HUD (which is very active), Peace Corps and the US Trade Development Agency (conducting pilot projects and studies). These agencies use their own existing federal funds to underwrite projects; they are not getting special NAFTA authorizations from Congress. Interaction between the Commerce Department and Economía is low-key but institutionalized, with the creation in June 2003 of a P4P Contact Group at the Deputy Assistant Secretary level. Another example of how P4P drove co-operation was the initiative between the US Federal Reserve Bank and the Banco de México, Mexico's central bank, to expand the Federal Reserve Automated Clearing House International service to expedite and reduce the costs of remittances to Mexico (Hernandez-Coss, 2005, pp. 247–8).
This has helped depoliticize issues and encourage their resolution at lower levels. There are eight working groups within P4P on competitiveness, infrastructure, housing, rural development, IT and other issues. Agencies are encouraged to speak to each other, and according to one participant they look to circumvent Presidencía, the Mexican agency which is the counterpart to the US National Security Agency, and which tries to control interaction. It is under-resourced and so incapable of doing so, but the important point is that cross-border interaction has spread, with the apparent blessing of technocrats on both sides of the border. In the US, NAFTA has also changed the interaction between the State Department and DHS. Increased pressure from trade means there are more complaints from the private sector, and the State Department is having to work with DHS more to address security concerns quickly and expedite trade flows.
The success of this interaction has helped bring the Security and Prosperity Partnership (SPP) on to the agenda. SPP is a trilateral agreement dating from March 2005 (State Department, 2005). SPP established 20 working groups and announced agreements on e-commerce, liberalizing rules of origin, harmonizing textile and apparel labelling, harmonizing the approach to BSE and taking steps to harmonize air navigation and safety, among others. Some of the working groups existed before, some were bilateral and are now trilateralized, others are new. The working groups are intended to interact with stakeholders and Congress. In the US they are led by Commerce and DHS (ten each). Some of the additional steps announced were bilateral (especially on the security side, where the US has taken different initiatives with the different countries), others trilateral.
The document also set out an agenda to further harmonize regulatory standards, liberalize rules of origin, come up with a common approach to protecting intellectual property and integrate numerous sectors, such as automobiles, steel, energy and air transport. Some of these commitments, especially in the area of security, were vague, but in several areas progress had already been made to harmonize standards and liberalize rules.
The North American Agreement on Environmental Co-operation (NAAEC) is one of the side agreements that were the product of late negotiations undertaken by the new Clinton administration. The NAAEC created a Commission on Environmental Co-operation (CEC), led by a Council of Ministers (the environment ministers from the three member states). Citizens are entitled to petition the CEC if they feel national environmental laws are not being enforced. A factual record may be developed. Two-thirds of the Council must agree to this step and also to making the factual record public. This enables an independent case to be established on specific environmental issues. However, there is widespread criticism from practitioners and academics that the side agreement is ineffective at promoting greater domestic commitment to the environment (Abel, 2003).
Yet the Joint Public Advisory Committee (JPAC) is potential agent of NAFTA-ization. It is a transnational body, with a remit to promote environmental co-operation, ecosystem protection and sustainable development. It gives advice to the Council of Ministers (for example on the enforcement of environmental law) and information to the Secretariat and meets three to four times per year with representatives of the public. It does not act on behalf of governments, but sets its agenda in response to public input, through its own ideas and in response to Council requests. In the first ten years of its existence (1994–2004), it held 93 meetings, made 79 recommendations and produced a number of reports (Bourget, 2004).
JPAC has witnessed consistently high engagement with environmental NGOs. The Secretariat has provided funding for groups to attend JPAC meetings, a mechanism which in the EU has enabled interest groups to participate in the policy-making process more effectively and may contribute to a similar effect in NAFTA. In terms of public participation and input, therefore, JPAC plays a potentially significant role, although its capacity to generate transnational interests and identities is limited by the power of the member state principals. However, there are other means of access to the CEC for the public, including the submissions process of Articles 14–15, as well as ad hoc public meetings (Dannenmaier, 2005, p. 2 fn2).
While the Council has made progress in developing a number of environmental initiatives, the perception of a lack of commitment to consultation and advocacy may undermine the creation of a strong regional institution. The process of citizen input has been criticized for being weak. Dannenmaier (2005, p. 12) claims that the member states tried to constrain the citizen submission process but that this was resisted, notably by JPAC and the Independent Review Committee which reported in June, 1998. JPAC asserted that limiting the development of strong civil input ‘did not advance key issues of accessibility, transparency, independence, balance and impartiality, which JPAC deemed critical to the integrity of the Article 14/15 process’. JPAC indicated its ‘genuine concern that the credibility of the CEC was at stake’ (both quotes cited in Dannenmaier, 2005, p. 13). However, the fact that member states are ultimately in control of the process suggests that civil society interests may well seek national solutions rather than solutions through NAFTA organizations; likewise, political elites and civil servants may be less inclined to think and respond regionally than nationally.
The environmental side agreement has produced some results, however. It has supported and encouraged Mexican environmental statutes and institutional capabilities. NAFTA brought benchmarking of environmental norms – including harmonization of toxic release data and development of criteria for air emissions (see Vaughan, 2003, p. 66). NAFTA has helped bring about a new registry on emissions in Mexico and has worked with NGOs to help improve Mexican environmental conditions, according to the director of CEMDA (Alanís interview, 2005). According to a US-based environmentalist, the border area has improved because of NAFTA, and more resources are available for technocrats, experts and scientists (McGraw interview, 2005). NAFTA has also induced the EPA to integrate some funds for the border region which had been dispersed in various parts of the agency previously (Carrillo interview, 2005). Carrillo also claims NAFTA has created a sense of North American environmental identity and constituency. Yet it has also raised expectations among the environmental community that have gone unfulfilled, and so the political adjustment that has occurred is partial.
These points were confirmed in a 2007 interview with Hernando Guerrero of the Mexican environmental secretariat SEMARNAT. He asserts that NAFTA has helped strengthen environmental law, standards and the environmental ministry. Public participation has also grown. In 1990 environmental issues were dealt with in SEDESOL along with social and housing issues, and the environment was represented by an under-secretary with only 10–20 environmental inspectors for the whole country. In 1992 the Instituto Nacional de Ecología (INE, for environmental policy) and PROFEPA (for enforcement) were created out of the environmental part of SEDESOL. Some of these changes were supported by World Bank loans. These structural changes to environmental organization were the direct result of NAFTA, according to Guerrero. In 1994 SEMARNAP was created from INE (PROFEPA remained independent and continues to be separate from the policy sections). In 2000 SEMARNAT was created.9 INE remains as the technical and research branch.
At the same time employee numbers grew from about 1,000 in 1990 to about 30,000 in 2007. According to Guerrero interaction with EPA has ‘without doubt’ increased and it is as a direct result of NAFTA. His office has daily communication with the EPA, through conference calls, emails and visits. At the time of the interview (September 2007) there had been three ministerial meetings under NAFTA in only three months. The communication mostly deals with NAFTA business, but handles some other things as well. Some EPA staff are based at the US Embassy in Mexico.
The CEC has had a big impact on civil society, acting as a catalyst and promoter of better environmental behaviour. Mexico created a hazardous waste unit as a result of NAFTA. Right-to-know issues are better developed, a national pollution registry has been created, NGO participation has been promoted and public participation has been facilitated. Expectations have also changed: NGOs want results, although Guerrero feels they have lost the capacity to guide government on important issues because they oppose too much, including hydro-electric facilities and new hazardous waste facilities. They are less interested in a sustainable development policy than in saying no. ‘But thank god we have NGOs with the technical capacity to discuss issues. Capacity-building for Mexican society was very important’ (Guerrero interview 2005). NAFTA is the reason for this growth.
On the other hand, although his agency would welcome more measurable results, he does not detect spillover pressures giving new powers to the CEC because of reluctance in both the US and Mexico. Mexico has developed forms of public participation at the state level through the Consejo Nacional Consultivo (CNC) although these do not always reflect public opinion. Likewise, there is a unit on public participation and transparency. At the elite and federal level communication between NGOs and public officials is much better according to Guerrero. Much of the interaction is informal – the actors know each other well and have become friends, speaking on the phone frequently. There is a fluid, informal, strong network.
The North American Agreement on Labor Co-operation (NAALC) created a Commission on Labor Co-operation (CLC), with a similar though slightly different organizational structure to CEC.10 Eleven principles were specifically enumerated, and the agreement was intended to promote enforcement of these principles, but not to enumerate new ones; moreover enforcement was only to take place through national channels. The CLC contains working groups and committees, such as on occupational safety and health. Some are trinational, others not. Ministerial meetings occur once per year and there are three or four meetings per year with national administrative offices.
However, there are some important differences between CLC and CEC, reflecting the higher political sensitivity associated with labour issues and the deep reluctance to permit any supranational authority to emerge. The labour side agreement is about enforcing national law, not harmonizing law. The CEC has the authority to collect facts and information, and convene dispute panels, while the CLC does not have these powers (although it does produce reports on the North American labour market). Public submissions on labour matters get resolved with ministerial negotiations and are channelled through national governments. No expert panels are convened by the CLC, which is not part of the public information process. There is no interaction with the public or with interest groups. The CLC must communicate with National Administrative Offices to get information, and communications tend to be on routine administrative issues only. The CLC plays a limited role in forming relationships with NGOs, and there is no direct official contact. Staff must get permission for meetings and get approval for their research. The level of funding for the CLC is lower than for the CEC – about $2.1 million per year from the three governments, whereas the CEC receives about $9 million.
However, despite the nationalistic and intergovernmental approach, NAFTA has brought some important changes. First, according to a well-placed official in the US Labor Department, there is greater collaboration with Mexico and Canada than ever before on this issue, and without the side agreement there would not be this level of interaction (Karesh interview, 2005). The creation of the CLC and National Administrative Offices brought structures which helped institutionalize co-operation, including information sharing, expertise, meetings, seminars and outreach/education. Moreover, the US government has tended to look more legalistically at Mexico following NAFTA to determine whether they are meeting their legal agreements.
Because of the sensitivity in Mexico about accepting US assistance, there is often a better working relationship on technical rather than political issues. For example, Mexico accepted US help when it wanted to improve its electronic job banks and employment service centres. This has led to a deepening of technical-level contacts between the two countries. Technical assistance personnel in the Department of Labor have direct contact with their counterparts in Mexico. Contacts have spread beyond the international affairs offices. When members of staff see something of interest in the newspaper or on the internet they contact counterparts in Mexico to discuss it. Discussions extend beyond NAFTA to ILO issues as well. This level of contact did not exist prior to the creation of the NAFTA NAOs.
A further sign of political change in this area is that Mexico is more committed to women's rights in the workplace, combating discrimination and harassment. Mexico must explain what it is doing in terms of labour law. They want to have positive things to say, and the external pressure of the labour side agreement helps them. No arbitral panel/dispute settlement has been undertaken in labour. Instead moral suasion and consensus is the modus operandi. Therefore, despite the criticisms of ministerial consultation – its lengthy process, the fact that it has no teeth – placing issues on the agenda at high level has important consequences (Karesh interview, 2005).
However, an official at the Mexican Secretariat of Labour stated that sovereignty, nationalism and domestic politics have limited adjustment in Mexico, and that rather than creating a new approach to labour politics she sees the role of her department to communicate more effectively the approach taken in Mexico (Valencia interview, 2007). Likewise, whatever pressures for normative or ideational transformation may be coming from NAFTA, she does not see it making an impact. On the other hand, while labour co-operation with the US and Canada existed before NAFTA, it has been consolidated and formalized since, with a more direct relationship having emerged as a result. Contact occurs directly, via emails, phone calls and meetings, without the presence of foreign ministries.
Conclusion: The Promises and Limitations of Regional Adjustment
It is important not to overstate the extent of political adjustment. First, national interests and power and the intergovernmental nature of the agreement limit the scope for domestic political change. NAFTA lacks a sense of ‘actorness’ through supranational institutions and is unable to promulgate secondary legislation. Public perceptions, public discourse, a history of tensions and mutual suspicion, all limit the public and institutional capacity to adjust, even with the pressures and incentives of a highly detailed free trade agreement. The process of adjustment in Mexico has, according to a high-ranking official in DHS, come slowly ‘with hesitation. It can't break away from its Lone Ranger, Fortress Mexico past’ (Arcos interview, 2005).
Yet, the institutionalization of an economic relationship between the US and Mexico appears to have set in motion certain political adjustments by altering the opportunity structure or by changing the incentives that actors face. One of the most important conclusions is that even though NAFTA is a lightly institutionalized intergovernmental agreement, the institutional, legal and civil society capacity appears to have been strengthened in numerous ways (especially in its less-developed member).
First, the creation of one of the intergovernmental institutions (the CEC) was accompanied by a trinational agency (JPAC) which has shown signs of activism and has the potential to create a common environmental interest among the three member states. By providing funding for interested parties to attend meetings, by promoting a norm of environmental protection and by holding some (albeit limited) powers of investigation and fact-finding, the CEC and JPAC have pushed a common environmental agenda hard enough for member states to push back. This has created new expectations among environmental interests, and although they complain about lack of progress, the very existence of these complaints (and the fact that they are targeted directly at the NAAEC) shows how NAFTA has created new expectations and assumptions.
Second, the obligations of the Treaty have brought legal and administrative changes in both the US and Mexico, though the changes have been most profound in the latter. Similar to the pressures faced by eastern and central European countries prior to joining the EU, Mexico adapted its legal system in numerous and far-reaching ways. Further pressures for harmonization of technical regulations have been apparent and are being pursued, in order to reduce regulatory differences, promote trade and smooth transactions. Likewise, the dispute resolution mechanisms incorporated in NAFTA have meant changed behaviour, in the US as well as in Mexico.
Third, governmental communication at both political and technical levels has changed dramatically. Communication has trickled down to lower non-political levels in the bureaucracies of both governments; it has seeped sideways into new agencies and departments; it has become more frequent, more direct and less formal – that is, not through the traditional conduits of embassies or trade ministries and often by email or direct telephone calls. Funding for projects in Mexico has been provided by US agencies’ existing funds, not through specially authorized funding. Even on important trade questions, interaction has intentionally been institutionalized and handed from ministerial to lower levels.
Fourth, even in highly sensitive areas like labour where intergovernmental power and a zero-sum-game mentality have limited the emergence of a common interest, there are signs of political adjustment, with both social and instrumental motivations behind them. In the case of labour rights, Mexico has, according to one interviewee, responded to a changing set of expectations and tried to show results by reforming policies and practices even where it was not legally obliged to. Pressures of persuasion, mimicking or shaming have brought change.
Like the EU, NAFTA adjustment depends on the existence of common formal institutions. Unlike the EU, however, they are intergovernmental and have been less important in the ongoing processes of domestic political adjustment than other factors. There are several specific mechanisms of NAFTA-ization, some of which are independent of these formal institutions:
- • Institutionalization: through the Free Trade Commission and the side agreements on Environment and Labour, intergovernmental negotiations and some non-governmental pressure has brought about a changed political opportunity structure. Adjustment has been minimal in these areas due to the intergovernmental nature of the agreement.
- • Harmonization (legal): there are incentives to reduce legal and regulatory differences in order to promote trade and smooth transactions. A problem-solving ethic is at work and these incentives have been acted on in technical areas.
- • Communication (both political and technical levels): in order to facilitate understanding, transparency, problem-solving, and because there is a desire to make NAFTA a success, there are greater levels of communication at the bureaucratic level. Communication has seeped sideways into new agencies, has trickled down from political to technical levels and has become more frequent and less formal (including through email and telephone conversations which bypass official conduits).
- • Persuasion/mimicking (social): a desire to show results, shaming or persuading or cajoling member state governments into upgrading standards or enforcing existing standards has also brought change, including the presence of more vocal and insistent interest groups. There is also a growing chorus of academic and think tank reports contributing to a nascent ‘idea of NAFTA’.
The result has been a high level of adjustment in Mexico and in certain sectors, such as automobiles and agriculture, and also in the environmental regime in Mexico.
At the same time, there are national, sectoral and institutional variations in the level of political adjustment. National variability denotes far higher pressure to adjust in Mexico than the US. This is not simply because of the power of the US as a hegemonic force vis-à-vis Mexico but also the latter's decision that it needed to open its economy and reform its political structures. Adjustment depended on the level of development. There are also sectoral variations. Oil in Mexico and shipping in the US were excluded for example, and some sectors faced only partial liberalizing pressures. In affected sectors with exposure to international competition, patterns of interest demands and bureaucratic activity with counterparts from other member states have increased. NAFTA therefore has both a territorial/regional component (in its trinational policies and institutions) and a functional component (in its uneven application to economic sectors).
Variations in institutional capacity also affect political adjustment. Both countries’ Congresses contain sovereignty-conscious nationalist anti-NAFTA opinion, and so efforts have been made to bypass them. Where they can be bypassed, national executives are more able to achieve adaptation (as on SPP issues for example). Executive agreements not requiring legislative approval have been pursued as a more effective way of achieving change.
Alanís, Gustavo (2005, 2007) Centro Mexicano de Derecho Ambiental, Mexico City.
Anonymous official (2005) US Department of Commerce, Washington, DC.
Arcos, Cresencio (2005) US Department of Homeland Security, Washington, DC.
Baker, Juan Carlos (2005) Secretaría de Economía, Mexico City.
Carrera, Olaf (2005) American Chamber of Commerce, Mexico City.
Carrillo, Oscar (2005) EPA, Washington, DC.
Emrich, Sigrid (2005) US Department of State, Washington, DC.
Guerrero, Hernando (2007) SEMARNAT, Mexico City.
Karesh, Lewis (2005) US Department of Labor, Washington, DC.
Lopez-Guerra, Patricia (2005) Commission on Labor Co-operation, Washington, DC.
Melle, John (2005) US Trade Representative's Office, Washington, DC.
McGraw, Dan (2005) Center for International Environmental Law, Washington, DC.
Serrano, Rafael (2007) NAFTA Secretariat, Mexico City.
Valencia, Claudia (2007) Secretaría del Trabajo y Previsión Social, Mexico City.
On the origins of NAFTA, see Hurrell (1995).
Mexico and the US are chosen because it is assumed they are the most extreme cases, with Mexico requiring greatest adjustment and the US least adjustment.
Hix and Goetz (2000); Börzel and Risse (2000); Knill and Lehmkuhl (1999); for one of the earliest efforts to assess the impact of integration on domestic political institutions and policies, see Mény, Muller and Quermonne (1996). For a review of the literature, see Vink (2003); Radaelli (2000).
Knill did not look at the eastern and central European states and their experience of adjustment prior to accession, which would have given a different picture, see Grabbe (2001). On NAFTA: a senior State Department official claimed that one of the major benefits of NAFTA was its potential to bring about significant change in developing countries. NAFTA and other ‘state-of-the-art trade agreements include provisions on transparency, anti-corruption, labour rights, environmental protection, financial services, government procurement, investor protections, dispute settlement, intellectual property’ (Wayne, 2004).
See the House Ways and Means Committee Report, available at: «http://www.customs.ustrea.gov/nafta/nafta000.htm», and the reports of the Senate Finance Committee, the Senate Agriculture Committee, and the Senate Foreign Relations Committee, available at: «http://www.customs.ustreas.gov/nafta/sfc000a.htm».
This was the requirement that decisions issued applied to all other interested parties (not just the one under review).
Interestingly, NAFTA member states are using WTO to resolve disputes between them because it is quicker and binding. Under NAFTA it is possible to block a decision.
There is still a residual worry about ruffling feathers in Mexico because of sensitivities regarding US demands.
The difference between SEMARNAP and SEMARNAT is that the former included responsibility for fisheries policy, the latter not.
In 2005 I interviewed several individuals in the Commission for Labour Co-operation and Lewis Karesh in the Office for Trade Agreement Implementation, US Department of Labor, and have made use of their views in this section.