When the North American Free Trade Agreement (NAFTA) was implemented in 1993, friends and foes thought that the agreement would produce dramatic change within the U.S. But economists Mary Burfisher of the U.S. Department of Agriculture, Sherman Robinson of the International Food Policy Research Institute, and Karen Thierfelder of the U.S. Naval Academy believe NAFTA has actually had a greater economic impact and “relatively large positive effects” on Mexico.
NAFTA did not prevent the Mexican peso crisis of 1994, but it probably made Mexico’s depression shorter than it might have been by locking in Mexico’s commitment to open markets. Indeed, NAFTA prevented Mexico from “returning to a protectionist policy stance,” ensuring that Mexico could not prolong economic misery by raising tariffs. Moreover, NAFTA prevented the U.S. from raising trade barriers to Mexican products made more competitive by a weaker peso.
The authors note that there is strong evidence of increased integration in the North American auto industry since NAFTA went into effect. Before NAFTA, the U.S. was already a net importer from Mexico of vehicles and parts. According to the U.S. Department of Commerce, auto imports to the U.S. from Mexico more than doubled over five years since NAFTA took effect: from $11.1 billion in 1993 to $27.7 billion in 1998. One reason is that U.S. manufacturers were using their Mexican plants during this period to augment U.S.-based production to meet high demand.
Mexico also became a better market for U.S. manufacturers, thanks to an easing of domestic-content manufacturing requirements and the end of the ban on used-car imports. U.S. auto exports to Mexico increased from virtually none in 1993 to $2.4 billion by 1998. U.S. auto-parts makers also increased their exports to Mexico by 30 percent during this period. After five years, Mexico increased its imports from the U.S. by 16 percent.
But the larger significance of NAFTA is the signal it has sent to investors that trade between the U.S. and Mexico is stable and increasing steadily. NAFTA is now the cornerstone of Mexico’s “continuing commitment” to economic reform.
The Future of European Unions
Paul Teague, “Macroeconomic Constraints, Social Learning and Pay Bargaining in Europe,” British Journal of Industrial Relations, Blackwell Publishers Ltd., September 2000 www.blackwellpublishers.co.uk/asp/journal.asp?ref=0007-1080
Although the euro is already dramatically affecting Europe’s corporations and governments, Paul Teague, a management professor at Queens University in Northern Ireland, thinks it’s unlikely that a unified currency will usher in an era of transnational union negotiations.
Multinational corporations will continue to deal with the idiosyncrasies of national labor organizations. Some nations, such as the Netherlands and Ireland, have national wage negotiations. Other countries, such as Germany, have regional and national labor contracts. Britain, since the fierce labor battles of the 1980s, has the freest labor market, with most negotiations conducted on a company-by-company basis.
There are also substantial differences in how each member state handles unemployment insurance and retraining. Finnish unions have negotiated a “buffer-zone” fund, which grows in good economic times and is spent in hard times. The fund is also designed to provide assistance to workers when there are business or factory closures or disruptions caused by single-market reforms. Dutch unions and corporations have a new training system wherein workers accumulate “training miles,” which increase the longer a worker stays in the labor force. These “miles” can be used for retraining after layoffs, or to assist with voluntary career changes.
As the euro’s introduction draws closer, national unions are starting to consider labor practices beyond their borders. Belgian unions require, as part of national wage negotiations, that their pay increases are comparable to raises in Germany, the Netherlands, and France. Belgian, Dutch, German, and Luxembourgian unions recently concluded a cross-border pact to share information and coordinate wage demands. The European Metalworkers Federation has also begun to share information among national branches.