The North American Free Trade Agreement was only a first step toward free and fair trade among the United States, Canada and Mexico. A recent report to the Federal Reserve is evidence of that.
According to the report, in the eight months that NAFTA has been in effect, all three countries have found ways to impose new barriers that skirt the agreement.Some of the methods have been blunt and violent. In the Mexican border town of Juarez, angry milk producers have torched and slashed the tires of trucks bearing milk across the border from the United States. The reason? NAFTA has eliminated licensing requirements, making U.S. milk, with its date-stamped freshness and high health standards, affordable in Mexico. On the other hand, Mexican milk producers can't sell in the United States because they don't meet U.S. health rules.
Other methods are more subtle. All three countries have imposed new inspections and regulations, as well as anti-dumping duties and taxes. The result is a new list of non-tariff barriers that tend to thwart the positive effects of NAFTA.
A quick reading of the report would lead one to believe NAFTA is a failure, its touted benefits illusory.
But what the report doesn't explain is that these new obstacles to trade are hardly surprising. Neither were they unexpected. As Jeffrey Garten, undersecretary of commerce for international trade, said in a recent interview, "The history is that as tariffs are reduced, non-tariff barriers are raised to substitute."
However, history also shows that these other barriers eventually also come down.
NAFTA was drafted with the belief that neighbors can prosper better together under a system of free and open trade than they can under a system wherein they try to gain at each others' expense. Not withstanding the incidents highlighted in the report, the agreement is a success. Already, it has pulled Mexico into a position to replace Japan as the second largest export market for U.S. goods - right behind Canada.
Any agreement that radically alters trading rules among unequal partners is bound to result in problems at first. Eight months is hardly a long enough time in which to judge NAFTA. Given time, the agreement will yet prove to be in the best interest of all concerned.