Organizations Influencing Global Trade

NAFTA & WORLD BANKBy: Rebecca Lee and William

Kim

NAFTA

 

N.A.F.T.A (North American Free Trade Agreement)

    HISTORY OF NAFTA

NAFTA is short for the North American Free Trade Agreement. 

NAFTA was signed by U.S. President George H.W. Bush, Mexican President Salinas, and Canadian Prime Minister Brian Mulroney in 1992. It was ratified by the legislatures of the three countries in 1993. 

It was signed into law by President Bill Clinton on December 8, 1993 and entered force January 1,1994. 

In 1984, Congress passed the Trade and Tariff Act. 

GENERAL INFORMATION

Regions/countries involved

• Canada, United States and Mexico

WHAT THE AGREEMENT AFFECTS

• NAFTA covers Canada, the U.S. and Mexico making it the world’s largest free trade area in terms of GDP. 

• As of January 1, 2008, all tariffs between the three countries have been eliminated. 

• Between 1993-2007, trade tripled from $297 billion to $930 billion. • Trade and Tariff Act is important because it gave the President "fast-track"

authority to negotiate free trade agreements, while only allowing Congress the ability to approve or disapprove, not change negotiating points. 

• Meanwhile, Mexican President Salinas and President Bush began negotiations for a liberalized trade between the two countries. 

• Prior to NAFTA, Mexican tariffs on U.S. imports were 250% higher than U.S. tariffs on Mexican imports. In 1991, Canada requests a trilateral agreement, which then led to NAFTA. In 1993, concerns about liberalization of labour and environmental regulations led to the adoption of two addendums to NAFTA

FACTS ON AGREEMENT BENEFIT

• Grant the signatories Most Favoured Nation status.• Eliminate barriers to trade and facilitate the cross-border

movement of goods and services.• Promote conditions of fair competition.• Increase investment opportunities.• Provide protection and enforcement of intellectual property rights.• Create procedures for the resolution of trade disputes.• Establish a framework for further trilateral, regional and

multilateral cooperation to expand NAFTA's benefits.

NAFTA & ITS IMPACT ON CANADA • NAFTA created the largest free trade area in the world, covering at the time some 360

million people and nearly C$500 billion in yearly trade and investment.• Canadian businesses wanted Mexico to open up to them. Organized labour and workers

feared Canadian businesses would relocate to Mexico to take advantage of lower labour costs and lower environmental standards. Canadian nationalists wanted assurances that Canadian sovereignty would be respected and that Canada could protect its culture, water resources, and standards on health, safety, labour and social programs. Some provinces however worried about NAFTA’s effects on regional industries, such as British Columbia’s softwood lumber and Ontario’s car manufacturing. 

• NAFTA maintained the tariff elimination schedule established by the CUSFTA for the bilateral trade between the United States and Canada. Separate bilateral schedules were negotiated by both countries with Mexico for the elimination of tariffs. 

• The agreement also sets out rules in areas such as investment, services, intellectual property, government procurement, competition policy and temporary entry of business persons. As was the case in the CUSFTA, Canada made no commitments to liberalize trade in social services or cultural industries. 

• To promote the effective enforcement of each country's labour and environmental laws and regulations, separate agreements were negotiated. The North American Agreement on Labour Cooperation was designed to facilitate greater co-operation between Canada, the United States and Mexico in this area. 

• NAFTA has had some clear effects on Canada’s economy. Canadian product exports to both Mexico and the United States roughly doubled between 1994 and 2000, from C$1 billion to C$2 billion to Mexico, and from C$183 billion to C$359 billion to the United States. NAFTA has made Canada more attractive to foreign and domestic investors.

RECENT NEWS ON NAFTANAFTA Toll-Highway Destroying Prime

Agricultural Land• excerpt from the article: The Trans-Texas Corridor (TTC) is

its official name. Critics call it the NAFTA Highway. The publicized TTC is being treated as a regional story because of the disruption to Texas farmers and other property owners.

• The TTC is no ordinary highway. The toll road would be four football fields wide. It includes separate lanes (up to six for automobiles, four for large trucks), plus tracks for freight trains, separate tracks for high-speed and commuter rail, also space for oil and gas pipelines, electricity wires, and broadband transmission cables.

• The implications of this scheme are staggering. Some experts say that up to a million people in Texas stand to lose their homes and 584,000 acres of rich farm and ranchland are to be destroyed, all for a privately funded highway. Of course, this is not the first time property-owners did battle with highway builders. That in itself is getting lots of media attention, but almost entirely in the regional/local media. At first glance, one might say this is a local story, so why should it go national?

• But suppose you were told that this “highway” (to be built largely by foreign investors) could serve as the starting point for a much larger plan whose end result would be to erase the borders (figuratively if not literally) between the United States, Mexico, and Canada? Wouldn’t you be curious, no matter where you live? The national media isn’t interested…

RECENT NEWS ON NAFTAMexican Food Prices Up, NAFTA at Fault

• Mexico, Jan 22 (Prensa Latina) Mexican authorities and university researchers confirmed on Monday that national crisis of alleged corn supply and increased prices of other products is a hint of what s to come with NAFTA (North American Free Trade Agreement).

• The rector of Chapingo Autonomous University, Sergio Barrales, pointed out the situation in the country is the first impact of the step toward free trade, and warned problems will worsen, because effects are already national.

• Though this state of affairs had been predicted, its sudden appearance was not expected and Federal Executive measures to stop the price rise are palliative.

• If the country s course is not corrected, there will be serious shortages of food, Barrales warned.

• If that happens, he noted, it will certainly lead to social instability, because problems turn serious when there is hunger, and Mexico experienced that during the 1910 Mexican Revolution.

• Current difficulties with corn respond to the real effects of international dependence on supplies of basic grains. However, the academic questioned a true lack of corn because the current harvest was good.

RECENT NEWS ON NAFTA

InXvestor uses NAFTA to sue Ottawa over landfill site

• Excerpt: A Pennsylvania investor has served notice that he intends to use NAFTA to sue Canada for $355.1-million, alleging that Ontario unfairly shut down a plan to have a former provincial iron mine serve as a landfill site for Toronto garbage.

• Vito G. Gallo, the U.S. investor, alleges in a notice filed with the federal government that the Ontario government’s 2004 move to ban dumping at the Adams Mine site was tantamount to expropriation.

• He’s arguing Canada breached the controversial Chapter 11 of the North American free-trade agreement, a section that allows investors in Canada, Mexico and the United States to sue other NAFTA member governments if their investments have been unfairly damaged by law or regulation.

THE WORLD BANK

HISTORY OF THE WORLD BANK• World Bank initially helped rebuild Europe after

the world, its first loan being $250 million to France in 1947 for post-war reconstruction.

• Reconstruction has remained an important focus of the Bank's work, given the natural disasters, humanitarian emergencies, and post conflict rehabilitation needs that affect developing and transition economies.

• During the 1980s, the Bank was pushed in many directions: early in the decade, the Bank was brought face to face with macroeconomic and debt rescheduling issues; later in the decade, social and environmental issues assumed center stage, and an increasingly vocal civil society accused the Bank of not observing its own policies in some high profile projects.

• To address concerns about the quality of Bank operations, the Wapenhans Report was released and soon after, steps toward reform were taken, including the creation of an Inspection Panel to investigate claims against the Bank. However, criticism increased, reaching a peak in 1994 at the Annual Meetings in Madrid.

GENERAL INFORMATION• Present

o Today's Bank, however, has sharpened its focus on poverty reduction as the overarching goal of all its work. It once had a homogeneous staff of engineers and financial analysts, based solely in Washington, D.C. Today, it has a multidisciplinary and diverse staff including economists, public policy experts, sectoral experts, and social scientists. 40 percent of staff are now based in country offices.

• Membership of organizationo The Bank itself is bigger, broader, and far more complex.

It has become a Group, encompassing five closely associated development institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), theInternational Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).

Purpose of the OrganizationPurpose(s) of organization

o The World Bank is one of the world’s largest sources of funding and knowledge to support governments of member countries in their efforts to invest in schools and health centers, provide water and electricity, fight disease and protect the environment.

o All support to a borrowing country is guided by a single strategy (in the case of Afghanistan it is the 'Transitional Support Strategy') that the country itself designs with help from the World Bank and many other donors, aid groups, and civil society organizations.

CONTROVERSY SURROUNDING ORGANIZATIONo Arguments Accusing the World Bank

The World Bank has long been criticized by a range of non-governmental organizations and academics, notably including its former Chief Economist Joseph Stiglitz, who is equally critical of the International Monetary Fund, the US Treasury Department, and US and other developed country trade negotiators. Critics argue that the so-called free market reform policies – which the Bank advocates in many cases – in practice are often harmful to economic development if implemented badly, too quickly ("shock therapy"), in the wrong sequence, or in very weak, uncompetitive economies. World Bank loan agreements can also force procurements of goods and services at uncompetitive, non free-market, prices.

A number of intellectuals in developing countries have argued that the World Bank is deeply implicated in contemporary modes of donor and NGO driven imperialism and that its intellectual contribution functions, primarily, to seek to try and blame the poor for their condition.

o Arguments Defending the World Bank Defenders of the World Bank contend that no country is forced to borrow its

money. The Bank provides both loans and grants. Even the loans are concessional since they are given to countries that have no access to international capital markets. Furthermore, the loans, both to poor and middle-income countries, are at below market-value interest rates. The World Bank argues that it can help development more through loans than grants, because money repaid on the loans can then be lent for other projects.

RECENT NEWS ON THE WORLD BANK

1) Latvia: Financial Sector Development Policy LoanWASHINGTON, September 22, 2009 - The World Bank’s Board of Executive Directors today approved the following project: IBRD Loan: €200 million Terms: Maturity = 10 years; Grace Period = 5 yearsProject ID: P115709 Project Description: The Financial Sector Development Policy Loan (DPL) Program for Latvia is to ensure long term financial stability. This loan will support crisis management measures and structural reforms to stabilize the financial sector and increase its resilience to future shocks. The Bank is also preparing a social sector DPL that will aim to minimize the social impact of the crisis by ensuring that safeguards are in place to maintain critical social services in the midst of the economic contraction and fiscal adjustment.

RECENT NEWS ON THE WORLD BANK

2)  VIetnam: Livestock Competitiveness and Food Safety Project

o WASHINGTON, September 22, 2009 - The World Bank’s Board of Executive Directors today approved the following project:

o IDA Credit: US$65.26 million equivalento Terms: Maturity = 40 years; Grace Period = 10 yearso Project ID: P090723o Project Description: The Livestock Competitiveness

and Food Safety Project for Vietnamare to increase the production efficiency of household-based livestock producers, to reduce the environmental impact of livestock production, processing and marketing, and to improve food safety in livestock product supply chains (mainly meat) in selected provinces.

RECENT NEWS ON THE WORLD BANK

3) Nepal: School Sector Reform Program (SSRP) ProjectWASHINGTON, September 22, 2009 - The World Bank’s Board of Executive Directors today approved the following project:IDA Credit: US$71.50 million equivalentTerms: Maturity = 40 years; Grace Period = 10 yearsProject ID: P113441 Project Description: The School Sector Reform Program (SSRP) Project for Nepal aims to increase access to and improve quality of school education, particularly basic education (Grades 1-8), especially for children from marginalized groups. The first component of the project is basic education. The primary objective of this component is to ensure equitable access and quality of basic education for all children in age group 5-12, prepare pre-school-age children through Early Childhood Education and Development (ECED) for basic education and deliver basic numeracy and literacy to youths and adults, especially women and marginalized groups. The second component of the project is secondary education. This component aims to improve equitable access to secondary education by financing: (i) the expansion of physical facilities, including classroom construction and rehabilitation, library and laboratory construction, and the construction of schools for children with special needs (CWSN), and (ii) targeted scholarship schemes for dalits, marginalized groups, disabled, girls and children from poor households.