Fashions of the Times

By Alan Stoga*

Bilateral free trade agreements with the United States are suddenly very chic — everyone wants one. The line stretches around the block: Central America, Colombia, the Andean countries (except black sheep Venezuela), maybe Argentina. Either as an alternative to the frustrations of the FTAA and the WTO, or as sensible agreements on their own, the U.S. has clearly decided to stitch together a series of NAFTA-like agreements around the hemisphere.

But can NAFTA's success be replicated?

In the ten years of NAFTA, Mexico's exports to its northern partners have grown almost 250%, and U.S. investment has poured into Mexico. NAFTA-related trade and investment have become the drivers of the Mexican economy, with exports accounting for more than half of the increase in real national income over the past decade. That has translated directly into job creation and better wages, at least in the export sector.

Of course, there have been tensions and dislocations: that is the nature of dramatic economic change. Individual jobs have been lost and those losses have real human consequences. Neither Mexico nor the United States have done enough to help NAFTA's losers cope with their losses.

Even with that caveat, NAFTA has been an astounding success — and not just because of measurable increases in trade, investment, and jobs. The greater accomplishment was establishing an agreed paradigm between Mexico and the United States whose underlying purpose was to formalize a mutually advantageous relationship. In other words, the real core of NAFTA is the fact of the agreement itself, not the specific elements of the trade deal, which pushed the bilateral relationship into an entirely new space where the national interests of the partners were permanently intertwined by more than geography.

That made NAFTA larger than just a free trade agreement. Over the past decade, the Mexican-U.S. relationship has increasingly been about the flows of people, ideas, and cultures and not just exports and imports-even though not a single paragraph in the NAFTA document talks about those issues.

In practical terms, the success of NAFTA is measured by the ease with which the Mexican diaspora is engulfing the United States. Despite the trauma of 9/11, the U.S. has effectively turned a blind eye toward the millions of undocumented Mexicans living in the country, and the thousands more who are coming every week. Even the loud domestic debate about President Bush's immigration proposal — which will almost certainly become law once this year's election is history — is more Kibuki theater than real policy discussion, in the sense that almost no one can imagine a future without many millions of Mexicans living in the United States.

That is precisely why the NAFTA model is irrelevant to the rest of the Americas. The United States does not want, and cannot afford, as intimate an embrace with the countries of Central or South America. Free trade agreements where U.S. negotiators painfully extract specific concessions for specific benefits are one thing; strategic relationships that change the nature of the country and affect its security are another.

So why are the agreements as fashionable this spring as mini-skirts?

From the U.S. perspective, there are at least four answers. First, the Bush administration clearly hopes that the noise of its multiple negotiations will frighten the Brazilians into serious FTAA discussions, on U.S. terms. Second, in a world where most Latin American governments are unhappy with the Administration's diplomatic and political initiatives, the lure of free trade could at least moderate the volume of their opposition. Third, in an election year, free trade negotiations offer the opportunity to reward the U.S. business community, who will be the most immediate beneficiaries if the agreements are eventually ratified by the Congress. And, fourth, for an Administration with a spotty trade record, all these feverish negotiations certainly make it sound like a committed free trader.

From the countries on the other side of the negotiating tables, the answer seems to be: Why not?

How does the story end? One possibility is that the negotiations succeed, only to be frustrated by a Congress — or a newly elected president — much less enthusiastic about free trade. Another is that they fail because of their inherent asymmetry and the relentless U.S. demand for reciprocity. A final possibility is that they all succeed, but in practical terms amount to a lot less than what Mexico achieved with NAFTA.

But that is the risk when fashion is confused with strategy.

*Alan Stoga is president of Zemi Communications.