The North American Free Trade Agreement And Pan-European Integration
The North American Free Trade Agreement (NAFTA) and European integration are comparable in more than one way. At the end of the eighties the United States, like Europe, were confronted with an unexpected political and economic challenge: the neighboring region opted for a democratic and liberal society. Both the U.S. and western Europe have a vital interest in the systemic change proving successful, with the political aspects outweighing the economic ones. Thorough economic recovery, of Mexico as of eastern Europe, appears feasible only on the condition of their respective major export markets becoming more open. The U.S. and the European Union were resolved to take the necessary step even if it carried the – hitherto unknown – risks of integration between rich and poor countries. The Mexican crisis at the turn of 1994/95 has shed some light on the vulnerability of the new economic "model". Theoretical considerations as well as empirical research have concluded that both in North America and in Europe the net effects of integration will be positive for all participants. However, the advantages and disadvantages are not evenly distributed. Economic policy, therefore, was looking for ways to limit the negative consequences. In principle, there were several options, such as to restrict the gains for the low-wage countries via extended transition periods or quasi-protectionism, or else to shift the drawbacks towards third countries. Still, the integration of low-wage countries requires a substantial amount of structural adjustment in the "richer", highly developed areas, in North America as in Europe. There is some reason to believe that the states bordering Mexico (California, Texas) were able to draw above-average net gains from integration; in the European context, the same may be the case. For Austria, NAFTA is an interesting trading partner. In 1994 (up to October) its export and import shares were 4.4 percent, respectively, implying a trade deficit of Sch 7.5 billion. Future bilateral trade will largely be determined by cyclical and exchange rate developments. Also, the GATT Uruguay Round agreements should have a lasting positive effect. Particularly high may be the potential for trade expansion with Mexico. The effects of North American and European integration on Austrian trade with NAFTA are difficult to judge. A negative impact from trade deviation through the establishment of NAFTA and Austrian EU membership cannot be excluded. On the other hand, foreign direct investment should stimulate mutual trade. U.S. interest in Austria as an investment target has grown recently, probably leading to higher bilateral trade flows. At the same time, Austria may improve its market position in NAFTA via direct investment, for which Mexico may offer an interesting option.
NAFTA: Ein Modell für die gesamteuropäische Integration?; The North American Free Trade Agreement And Pan-European Integration
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