Introduction
Reform strategies, including abolishing price restrictions, deregulation of capital markets, reduction of trade-based barriers, and commercialization and austerity, are examples of neoliberalism today. Mexico, Canada, and the U.S. came into agreement with the North American Free Trade Agreement (NAFTA) in 1994. The free-based trade agreement went into effect on January 1st, 1994, intending to remove all investments and international trade barriers between the three countries mentioned above. Besides being among the most comprehensive trade deals ever, NAFTA established the world’s most extensive free-trade zone (Villarreal & Fergusson, 2020). The United States and Canada were joined by a somewhat lesser developed state called Mexico and two affluent, developed nations. This paper will argue how the CUSFTA exemplified an overall emerging neoliberal-based consensus regarding the function of trade throughout Canada’s economy.
The CUSFTA (the Canada-United States Free Trade Deal) was the foundation for this agreement, which took effect on January 1st, 1989. Despite NAFTA’s rapid expansion regarding trade and investments, political-based cooperation between the three nations remained poor. NAFTA remained a hot-button issue, particularly in North America, so did the debate. President Trump of the United States vowed to effectively renegotiate or terminate the agreement as recently as last year. CUSMA, termed (the Canada-United States-Mexico Agreement) emerged more than once or a year from discussions as the new name for NAFTA (CUSMA). On July 1st, 2020, CUSMA came into operation effectively.
NAFTA was formed due to several prevailing economic and political circumstances in the late 1980s and early 1990s. At the time of his presidential announcement in November of 1979, Ronald Reagan raised the prospect of a North American-based Free Trade Area (NAFTA). Neither Canada (under the leadership of Prime Minister Trudeau) nor Mexico (under the supervision of President López Portillo) was interested in that agreement because they were concerned about American domination in the region (Villarreal & Fergusson, 2020). Nevertheless, in 1984, when Brian Mulroney was elected Prime Minister for Canada and was able to negotiate the CUSFTA agreement. Resistance toward CUSFTA remained strong within Canada’s New and Liberal Democratic parties and the general public.
However, there was little pushback from labour unions and the general public throughout the United States. As a result of NAFTA, trade relations across North America have been profoundly changed, resulting in unprecedented interconnectedness between the industrialized neoliberal economies of North America and Canada in connection to the overall developing economy within Mexico. Throughout the United States, the NAFTA was initially supported by both Republicans and Democrats; it was proposed by Republican-based President Bush, enacted by an overall Democratic-controlled House, and enforced by Democratic President Clinton during his administration.
Neoliberalism as a Break with Postwar Keynesianism
In the post-World War II period, a sequence of incidents started in the later periods of the 1940s, which mostly went unnoticed until the early 1980s. These incidents happened when they culminated in substituting Keynesian-based economics as an overall dominant theoretical impact on overall economic output in the modern era. A related field termed development-based economics has mainly been superseded as the dominant influence upon economic-based policies enacted by developing economies in the same way (Villarreal & Fergusson, 2020). Those nations favored actual free market-based policies instead of mixed economies, which need a significant function for government interventions. They were the driving force behind the demise of Keynesian ideology.
Their overall motivations would include a disdain for larger governments, something that they perceived as being particularly susceptible to interfering exceedingly with the lifestyles of their inhabitants. In certain instances, an intelligent choice for Neoclassical or Classical economics and associated school systems is critical. A presumption that boosting a restricted role for the state was their most significant advantage (Brown, 2019). Anti-Keynesianism campaigns got waged on three major dimensions: throughout the academic-based and political realms and outside of academia in the fields of business states and popular opinion.
How NAFTA Fitted into the Bigger Picture
Mexico’s integration into the high-waged economies of North America and Canada seems to have been a critical objective for the three nations when NAFTA discussions started around 1991. Trade liberalization hoped to boost Mexico’s economy by creating opportunities and jobs for the country’s rapidly expanding labor force and encouraging illegal immigration. As a potential export industry and a low-cost investment destination, Mexico was considered a boon for the productivity of American and Canadian businesses alike. Although North America and Canada had signed a free trade-based agreement (FTA) earlier in 1988, Mexico’s inclusion was unusual.
An important argument against NAFTA was the pay disparity between the United States and Mexico, whose per income scales per capita were just 30% higher (Villarreal & Fergusson, 2020). Perot campaigned against trade openness in 1992, saying that it would result in a “great sucking sound” involving American employment exported to Canada. Many argued that the deal could generate tens of thousands of new employment opportunities annually. Mexican President Salinas de Gortari would see it as a chance to revamp Mexico’s economy to export commodities, not people.
Implementation of a Continental Free Trade Agreement
The overall implementation of the continental free trade-based agreement marked a shift towards a neoliberal economic approach to Canadian development. Neoliberalism is characterized by policies that promote fiscal austerity. The openness of the market, privatization of public assets, and a reduction in overall government expenditure are fundamental to neoliberalism. Neoliberalism is frequently related to economic measures that have expanded the entire Canadian economy. Economies accessible to cross-continental trade grow more swiftly, are more innovative, and are more productive, resulting in greater wages for their population. Open trade benefits lower-income households because more affordable goods and services are offered.
Outcomes for Canada
As a result of NAFTA, Canada has seen significant increases in cross-border investments. Investments from the United States and Mexico in Canada have significantly increased greatly since 1993. 50% of Canada’s foreign-based direct investments originate from North America, which jumped from $71b in 1993 to $367B in 2013 (Van Haren & Masferrer, 2022). As more than just a result of the entire Canadian U.S. Free-based Trade-based Agreement signed in 1989, North America became Canada’s economic powerhouse (Chatzky et al., 2020). There was a rise in agricultural output within Canada due to the agreement. From 1994, Canadian-based agricultural commerce with the entire United States has witnessed an increase by more than thrice, as have the country’s overall agricultural shipments to NAFTA member states (Chatzky et al., 2020). As a result, Canada’s exports to North America accounted for 76% of its total exports (Van Haren & Masferrer, 2022). Most other high-income nations have a far more diverse economy, with no single partner contributing upwards of 21% of their total GDP.
Outcomes for Mexico
sEver since the pact’s adoption, Mexican farm-based exports to North America have tripled. Since the deal, hundreds and thousands more automotive manufacturing jobs have been created throughout Mexico, improving efficiency and reducing consumer costs. The deal aided Mexico’s transformation from overall trade protectionism to an entire open economy (Chatzky et al., 2020). Mexico’s economic changes were seen as a chance to expedite and secure them through NAFTA. Additionally, Mexico’s government decreased public debt, instituted a balance-of-payments norm, stabilized hyperinflation, and developed the nation’s forex reserves. According to some analysts, a rise in joblessness or unemployment could be attributed to NAFTA’s exposure of Mexican farmers to competitiveness from highly subsidized American agriculture and its impact on the Mexican economy.
Outcomes for the U.S.
Commerce between the U.S. and its North American-based neighbors has over tripled after NAFTA, outpacing the growth of U.S. trading deals with other countries. The United States exports overseas to Canada and Mexico account for upwards of one-third of overall export sales. It is estimated that the pact boosted GDP by far less than 0.5%, adding up to $81B to the overall U.S. economic system upon complete implementation, or perhaps several billions of dollars for significant growth annually (Van Haren & Masferrer, 2022). Trade between Mexico and Canada is estimated to sustain 14 million American employees, and the almost 250,000 export-related employments created each year by NAFTA compensate 16% to 21% more than lost positions (Van Haren & Masferrer, 2022). Opponents claim that NAFTA is responsible for rising unemployment and pay stagnation throughout the United States due to low-wage competitiveness and a growing trade imbalance (Chatzky et al., 2020). They also claim that the agreement adversely affects manufacturing jobs in Mexico. The new North American-based trade pact (CUSMA, 2020) greatly continues the overall neoliberal period.
Conclusion
Neoliberalism’s current reform methods include removing price controls, regulating capital markets, reducing trade barriers, and promoting commercialization and austerity. 1994 saw the signing of the North American Free Trade Agreement (NAFTA), which brought together the three nations of North America: Canada, Mexico, and North America. On January 1st, 1994, efforts began to eliminate all impediments to commerce and investment between the three countries stated above. NAFTA became the largest free-trade area globally and one of the most comprehensive trade agreements ever. The United States and Canada were joined by Mexico, a less developed country, and two more developed countries.
References
Brown, W. (2019). In the ruins of neoliberalism. In In the Ruins of Neoliberalism. Columbia University Press.
Chatzky, A., McBride, J., & Aly Sergie, M. (2020). NAFTA and the USMCA: Weighing the impact of North American trade. Web.
Van Haren, I., & Masferrer, C. (2022). Mexican migration to Canada: Temporary worker programs, visa imposition, and NAFTA shape flows.
Villarreal, A. M., & Fergusson, I. F. (2020). NAFTA and the United States-Mexico-Canada Agreement (USMCA).