Nafta's Mixed Message: Open The Floodgates, But Filter The Flow

Was the North American Free Trade Agreement an example of economic integration? No, it's more like "a continuation of a Hegelian dialectic over trade policy," say William C. Gruben of the Dallas Fed and John H. Welch, a vice-president at Lehman Brothers Inc. The trade pact reflects the synthesis of two clashing movements in trade policy--liberalization and protectionism. For example, parallel negotiations were conducted over environmental and labor-rights issues, and the result was trade restrictions, not liberalization. The pact also imposes stricter new criteria to determine North American content for autos and textiles.

NAFTA's biggest effect is in Mexico, where trade barriers had been highest. Yet barriers still remain: The agriculture, minerals, banking, textiles, and apparel industries there are all protected by long phase-in periods.

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