Elisabeth HillerUD4023BBA9204

February 2008

Andragogy Essay about the Growing Panic over a North American UnionResearch Project

An Assignment Presented toThe Academic Department

Of the School of Business and EconomicsIn Partial Fulfillment of the Requirements

For The Degree of the Doctor of PhilosophyIn Business Administration

ATLANTIC INTERNATIONAL UNIVERSITY

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Introduction

Trade liberalization in the North American area came into life when in 1964 the United States

of America cancelled the bracero-agreement with Mexico which allowed Mexican seasonal

workers to move to the US. Later, factories - maquiladoras – with special rights in customs

and easier access towards US re-export were founded, and in 1990 custom-free imports from

the US facilitated liberalization. The initial opening of the Mexican economy towards free

trade happened with the 1986 access to the General Agreement on Tariffs and Trade (GATT),

whose successor the World Trade Organization (WTO) started its task in 1995. History shows

that trade, access to resources and the acquisition of new markets improved human life,

supposed the participants were of economic equality. Tendencies of inequality direct to

colonization and slavery. This report deals with the continuing cooperation of the US, Canada

and Mexico economically tied together in the North America Free Trade Agreement

(NAFTA), signed in autumn 1992 and came into being on January 1st 1994 with a maximum

transition time of 14 years. In contrast to the European Union - which is a custom union –

NAFTA was constructed as preference agreement which allows free trade within geographical

borders. But, it was even more. Border-crossing services were agreed, financial services

included and energy services as well. In so far NAFTA exceeds pure free trade agreement

status. Political will of the majority of citizens – represented by democratically elected

politicians - shapes a mother country`s attitude towards economic and social issues – and vice

versa. The North America Agreement (NAU) affects all people in America, Canada and

Mexico, directly or indirectly as the NAFTA did and still does. Conspiracy theories are

around, suggesting that `the United States will soon merge with Canada and Mexico to form a

single large `country` called the North American Union… with a common currency` (Trends

E-Magazine, 2007). In short, all of the above uttered issues are neither true nor intended.

Much has changed since November 19, 1493, when Christopher Columbus reached Puerto

Rico. In the 15th century, Europeans settled down and brought horses, cattle and hogs to the

Americas. Independence from the British Empire was declared in 1776, and in 1823 the

Monroe Doctrine expressed the United States` unwillingness to further European colonization

or interference in the Americas.

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The Security and Prosperity Partnership (SPP) emerged as dialogue between the US, Canada

and Mexico, `open to legitimate trade and closed to terrorism and crime` … and `in no way …

considers the creation of a European Union-like structure or a common currency. The SPP

does not attempt to modify … sovereignty or currency or change the American system of

government designed by … Founding Fathers. … The SPP does not seek to rewrite or

renegotiate NAFTA. It creates no NAFTA-plus legal status`1. The main goals of the SPP are

cooperation, information sharing, improving productivity, reduction of costs of trade,

protection of people from disease, as the US government website at spp.gov2 clarifies.

Corn production in the United States of America happens significantly different from corn

production in Mexico. First, US corn farmers use technology-driven production, highly

mechanized processing included. Adequate resources of money assumed, farmers in Mexico

find mountainous areas to work on, so the average output per hectare is expected to be

dramatically smaller than in the US. Second, in the US heavy chemistry triggers bigger yields.

Adequate resources of money assumed, chemistry cannot compensate the productivity gap of

1.7 tons per Mexican hectare to 7 tons per US hectare. Third, the variety of sorts of corn is

much bigger in Mexico than in the US. White corn is used for food mostly, has been cultivate.

Most significantly, differences emerge between Mexican economy and the pace of change of

US and Canadian economies. This research project analyzes the reasons for different

developments stressing Mexican economy as it is obviously left behind and in need of help.

Then, recommendations of how to deal with the differences are introduced, suggesting that

both the United States and Canada as prospering partners are in charge of supporting their

poorer partner Mexico. The report does not provide a recipe of how to change the point of

view towards friendly partnership instead of supporting a poor brother of the South for the

sake of getting access to a relevant export market. However, the report deals with attitudes,

behavior, and mind-sets all of which determine economic, social, and political policies.

Heavily relating to the North American Free Trade Agreement (NAFTA) which started

between the US and Canada and in 1994 welcomed Mexico on board, the report recommends

learning of failures of the past. The evidence suggests that keeping the goal of prosperity in

mind, free trade agreements do not fit all needs in general, NAFTA, the Security and More Publications | Press Room – AIU news | Testimonials | Home Page 3

Prosperity Partnership of North America (SPP) as well as the North American Union (NAU)

in particular. Indeed, there are not only conflicts between the linked three nations. US-

internally, there are different views towards an agreement, too – the planned super-highway

stretching from Canada into Mexico, through the state of Texas, fear of vulnerability, losing

national sovereignty and prosperity.

All fear of a merger with other nations needs to be taken serious and tackled, but `The Star

Spangled Banner`3 by Francis Scott Key (September 20, 1814) declares

…

Then the conquer we must, for our cause it is just,

And this be our motto: `In God we trust`.

And the star-spangled banner forever shall wave

O`er the land of the free and the home of the brave!

This historic document expresses a strong belief into one`s own power, into religion, and into

the mother country. Awareness of national identity serves as strong power towards both the

own country and other nations. This report is organized as follows. First, historic events

demonstrate the direct dependencies of the past for the future as the past shapes both the

present and the future. Second, the interrelationships between politics and economies are

demonstrated because both politics and economies influence each other. Third, the pros and

cons of diverse interest groups or individuals are introduced because they are different and

sometimes contradict each other. Fourth, market forces and their automatic search for balance

are discussed, following current ideology and acknowledging that different systems require

different markets. Fifth, recommendations acknowledge both market forces as the power for

economic success and an attitude of `live-and-let-live` - strongly advocating to accept weaker

subjects as partners. Finally, the personal opinion reveals education as strategic goal for all

societies as education irrevocably alters life.

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Different perspectives about the trilateral agreement

The 1989 US-Canada Free Trade Agreement and the 1994 North American Free Trade

Agreement (NAFTA) embracing US, Canada and Mexico fostered extremely positive

economic changes in the participating countries. The currently discussed Security and

Prosperity Partnership of North America (SPP) `is a White House-led initiative among the

United States and the two nations it borders – Canada and Mexico – to increase security and

to enhance prosperity among the three countries through greater cooperation. The SPP is

based on the principle that … prosperity is dependent on … security and recognizes that …

[the participants] share a belief in freedom, economic opportunity, and strong democratic

institutions. … comprehensive agenda for cooperation … while respecting the sovereignty

and unique cultural heritage of each nation`4. Supporters believe in the `long-term goal of

dramatically diminishing the need for the current intensity of the governments` physical

control of cross-border traffic, travel, and trade within North America`5 as Jerome R. Corsi,

author of diverse macro-economic and political books, states. But, along with other critics, he

assumes a hidden agenda by President Bush to dissolve the United States of America into the

North American Union. Further concerns deal with new agreements that are expected to limit

national prosperity and sovereignty – Canadian concerns argue that the Central America Free

Trade Agreement (CAFTA) were part of the scheme, and, CAFTA was passed in the US

House of Representatives by a 217-215 vote in July 2005.

History shapes the future. The United States of America came up as a nation when Britain`s

American colonies `broke with the mother country in 1776` and formed the new nation More Publications | Press Room – AIU news | Testimonials | Home Page 5

consisting of 13 original and 37 additional states, following CIA documentation6. Despite the

`traumatic experiences` of the Civil War (1861-65) and the Great Depression of the 1930s the

US `remains the world`s most powerful` nation with an economy `marked by steady growth,

low unemployment, … and rapid advances in technology` (op. cit.). This position was

overwhelmingly impacted by natural resources, tolerance in politics, and clever agreements to

support citizens` expectations. Copper, coal and other natural resources attracted lots of

people in the eighteenth and nineteenth century to settle down in the New World and make a

living gold, for example think of the `forty-niners` of California, the gold-diggers of 1849.

During the twentieth century thousands of politically prosecuted Europeans emigrated and

established new homes in the US, and today both politically and economically motivated

migrants make up plus 3.05 (2007 estimated, op. cit.) which means that the US is more

attractive than the mother country. Evidences of liberal politics is revealed in the variety of

executed religions, e.g. Protestant 52%, Roman Catholic 24%, Mormon 2%, Jewish 1%,

Muslim 1%, and the occurrence of different languages, e.g. English 82%, Spanish 11%, other

Indo-European 4%, and the Hawaiian as an official language in the state of Hawaii (cf. op.

cit.). Independence of Great Britain is celebrated on 4 July, a national holiday, but the roots

are still visible, for example in US legal system. The federal court system is based on English

common law and each state exercises its own unique legal system with the exception of

Louisiana which is still affected by the Napoleonic Code (op. cit.).

Politics forms economy. In 1988 the US developed the Free Trade Agreement (FTA) with

Canada to push forward continental integration by removing barriers to trade. By not only

accepting but welcoming Mexico as partner, on January 1st, 1994 the North American Free

Trade Agreement (NAFTA) between US, Canada and Mexico started life. As part of the name

is `free trade` the primary goal becomes clear – focusing on trade all attempts are to be done

to improve conditions for trade. Led by `large American owned corporations, which operate

freely on both sides of the border, and with the new security concerns of the U.S.

administration, the initial trade objective is being further expanded and pushed to a much

higher level`7 to serve as a means for political reasons analogous the European Union. There

the participating countries exercise control over their foreign policy and their armed forces -

no single country is able to control the entire union. Participating in international More Publications | Press Room – AIU news | Testimonials | Home Page 6

organizations as for example NATO, OECD, UNESCO, WHO or WTO underlines the

attempts to globally exercise political power.

The possible effects of NAU trigger concerns of groups and single persons of the United

States and Canada. Mexican critics are underrepresented as advantages of NAU outweigh

risks by far. The planned integration and harmonization of the US, Canada, and Mexico into

the North American Union `has unleashed a stormy debate`8 spanning from Canada to the US

and reaching Mexico at last. What is so frightening – or are critical voices single concerns

only? The three countries have increased their economic ties for political and economic

reasons. The New York Times, dated February 18, 2007, reported critically about the NAU:

`When Nafta finally became a reality, on Jan. 1, 1994, American investment flooded into

Mexico, mostly to finance factories that manufacture automobiles, appliances, TV sets,

apparel and the like. The expectation was that the Mexican government would do its part by

investing billions of dollars in roads, schooling, sanitation, housing and other needs to

accommodate the new factories as they spread through the country. … Mexican

manufacturers, once protected by tariffs on a host of products, were driven out of business as

less expensive, higher quality merchandise flowed into the country. Later, China, with its

even-cheaper labor, added to the pressure, luring away manufacturers and jobs. … A financial

crisis also dashed expectations. One expectation was that the Mexican economy, driven by

Nafta, would grow rapidly, generating jobs and keeping Mexicans home. The peso crisis of

1994-5, however, provoked a steep recession, and while there was some big growth later, the

average annual growth rate over Nafta`s lifetime has been less than 3 percent. … `We

underestimated Mexico`s deficits in physical and human infrastructure` said J.Bradford

DeLong, an economist at the University of California, Berkeley, and a Treasury official in the

Clinton administration` that stressed the importance of trans-national agreements. Compared

to the European Union, entering countries like Portugal, Spain, Greece and Poland, all of

which equipped insufficiently, needed and received massive subsidies by the union. Critics

also state that common economic aims come first, and a common constitution is the final goal

– analogous to the European Union: `A key activity of the EU is the establishment and

administration of a common single market, consisting of a customs union, a single currency

(adopted by 12 of the 25 member states), a Common Agricultural Policy and a Common More Publications | Press Room – AIU news | Testimonials | Home Page 7

Fisheries Policy. On 29 October 2004, European heads of government signed a Treaty

establishing a Constitution for Europe, which is currently awaiting ratification by individual

member states`9. The NAFTA superhighway, the Trans-Texas Corridor or TTC raised

questions in April 2006 when a `draft environmental impact statement on the proposed first

leg of the `NAFTA super-highway` … is completed`10. Kevin Parkinson goes back in detail:

`… the SPP lead up to the NAU is the sequel to the Free Trade Agreement and we all

remember the Mulroney promises of 1989. We were to have more jobs, more prosperity, more

investment and the middle class and the working class would benefit, right? Wrong. Many of

the jobs and companies went south, unemployment rose, Canadian companies suffered

takeovers, but the political pundits keep talking about the increased wealth in North America.

…`11. Fears are rising because of the `harmonization of everything from immigration

screening and terrorist watch-lists to drug-safety and consumer-protection regulations`12. The

`stop-the-North-American-Union`-website utters concerns about democratic rights: `Trial by

Jury [is] to be suspended, guilty until proven innocent, no double jeopardy [protection],

Habeas Corpus suspended. … The EU has eliminated the law of double jeopardy. That means

if a person is adjudged `not guilty` and a government prosecutor is not happy with the

decision … can be tried again … for the same crime … until they get the guilty verdict …` 13.

Jurisdiction in Europe is different to Anglo-Saxon countries, and the fear of assimilating US

law to European standards is obvious relating to the cited source. But, in the United States the

Military Commissions Act of 2006 was signed into law in 2006, including the suspended

Habeas Corpus detail. In Europe, everybody who feels to have not been treated adequately by

law is able to acquire the European Court, and that cares for security, even against

government and jurisdiction.

The Canadians have two major NAU-related concerns. First, there are content-related

concerns. Canadian concerns deal with the fear of becoming a colony of imperial US, thus

losing national identity and sovereignty, losing access to natural resources, and even losing

the currency. Unlike the European Union, `the countries joining the NAU are not roughly

equal in size and power and this means the U.S. will most certainly be setting policy for all

three countries` and along with the expected loss of sovereignty and democracy Canadian

critics of the NAU are afraid of `unelected corporations`14 to take over control. Large More Publications | Press Room – AIU news | Testimonials | Home Page 8

Canadian companies and Canadian subsidiaries of American corporations have been the

`driving force behind the push for a North American Union`, `regrouped within the Canadian

Council of Chief Executives (CCCE)` and willing to support the U.S. Council on Foreign

Relations and the Mexican Consejo Mexicano de Asuntos Internacionales (op. cit.). `Building

a North American Community` was the title of a report in May 2005 by their joint task force,

recommending erasing borders by 2010. Their `deep integration` project embraced one

market, one economic border, and one official security apparatus` (op. cit.), a proposal that

was subject to political summits in Waco, Texas, in March 2005, then in Cancun, Mexico, in

March 2006, and at Château Montebello, Québec, in August 2007. Second, there are

transparency-related concerns. Due to discussions behind closed doors Canadian citizens feel

to be badly informed about ongoing issues, because there were only a few public debates

during the last years. The question is raised whether the outcomes of the `deep integration

project` will be legally binding.

Now is the time for economists – they believe in market forces, international division of labor,

and the benefits of trade. Michael Porter introduced the Five-Forces-Model, Adam Smith

came up with the needle example, and David Ricardo stressed the importance of dealing with

foreign nations. Talking in terms of macroeconomy, balanced budgets, stability of currency,

low inflation rate, low country risk, flexible labor force are goals for every economy, just to

name a few. The US, Canada and Mexico are in favor of free markets which means only few

corrective interventions by national governments. Those who prefer communistic style in

politics and economies can be convinced of free trade by comparing Cuba`s monocultures and

outdated Soviet machinery to state-of-the-art equipment and methods of the United States.

The fall of the Berlin wall in 1989 serves as another example for meeting public demands.

When Germany was divided into two parts on August 13th 1961 the Western economy style

was based on individual striving for success, and the Eastern one allowed limited space for

individual economic development – each of the systems offered advantages, but the

citizenship voted for the free trade system, welfare state included. Free trade means laissez-

faire economics across borders – or after erased borders. Laissez-faire itself requires a set of

rules by the government and the ignorance of supporting weaker or non-performing subjects.

The economies of the US, Mexico, and Canada need to be analyzed for the sake of finding More Publications | Press Room – AIU news | Testimonials | Home Page 9

similarities to build on as well as differences to make the most of it. All three nations created

market-oriented economies with the US representing the `most technologically powerful

economy`, Mexico enjoying free market economy, and Canada living as `an affluent, high-

tech industrial society in the trillion-dollar class`15. Similar are the US and Canadian

economies, Mexican success is not represented in financial figures adequate their partners.

Now the economies of the three NAFTA-, SPP- and NAU-partners are object to scrutiny in

turn.

US economy enjoys market orientation by which both private individuals and business

companies are able to make most of the decisions. Compared to counterparts in Western

Europe or Japan – both of which are economically highly developed economies - they can act

more flexible concerning access to capital or developing new products. Technologically, US

firms `are at or near the forefront in technological advances, especially in computers and in

medical, aerospace, and military equipment; advantage has narrowed since the end of World

War II`16. With a GDP (purchasing power parity) of $13.86 trillion (2007 est.) and GDP per

capita (PPP) of $46,000 (2007 est.) the US employ 0,9% of GDP in agriculture, 20,6% in

industry, and 78,5% in services (2007 est.) – figures that need to be supplemented to reveal

dependencies: export-partners Canada 22,2%, Mexico 12,9%, Japan 5,8% and import-partners

Canada 16%, China 15,9%, Mexico 10,4%, Japan 7,9% (2006)17. Strong relationships and

thus mutual dependencies are visible in trade, US and Canada as well as US and Mexico. But,

1 http://www.spp.gov/myths_vs_facts.asp2 dto.3 http://www.ushistory.org/documents/banner.htm4 http://www.spp.gov/myths_vs_facts.asp5 http://www.humanevents.com/article.php?print=yes&id=149656 https://www.cia.gov/library/publications/the-world-factbook/geos/us.html7 http://onlinejournal.com/artman/publish/printer_2284.shtml – authored by Rodrigue Tremblay who published the book `The New American Empire`.8 http://www.canada.com/ottawacitizen/news/story.html?id=5a5921ee-d1ca-4679-be3a-e5d34d6e4a969 http://www.channelingreality.com/NAU/NAU_Main.htm10 http://www.vivelecanada.ca/staticpages/index.php/2006083013370253911 http://www.globalresearch.ca/index.php?context=va&aid=653912 http://www.canada.com/ottawacitizen/news/story.html?id=5a5921ee-d1ca-4679-be3a-e5d34d6e4a9613 http://www.stopthenorthamericanunion.com/TwoPeas.html14 http://www.vivelacanada.ca/staticpages/index.php/2006083013370253915 https://www.cia.gov/library/publications/the-world-factbook/geos/us.html16 https://www.cia.gov/library/publications/the-world-factbook/geos/us.html17 https://www.cia.gov/library/publications/the-world-factbook/geos/us.htmlMore Publications | Press Room – AIU news | Testimonials | Home Page 10

there are some threats: exports are dominated by Japan (after Canada and Mexico), and

Chinese imports are nearly as big as Canadian ones. Internationally, the US `has intensified

domestic security measures and is collaborating closely with its neighbors, Canada and

Mexico, to monitor and control legal and illegal personnel, transport, and commodities across

the international borders`18. Searching for security in 2005 the US spent 4.06% GDP for

military expenditures19, employing Army, Navy and Marine Corps, Air Force, and Coast

Guard. Thus, in case of erased borders less costs of national military service are to be

expected, that means free capital that can be invested otherwise, for example in social

projects. The American economy is highlighted often as a very effective economy – it is, of

course, efficient. But, there are some segments that need consideration, housing for example.

`Residential construction is plunging, house prices are dropping, consumer spending is

slowing and the economy shed 17,000 jobs in January, the first such decline since 2003` The

Economist reported (Feb 7th 2008) using the `R-word` - R for recession – in its headline20. All

effective economies have their shadows, the US economy is very effective, the gap between

affluent and poor people is widening, and there are some ineffective sectors which from time

to time care for natural smoothening – according to Adam Smith the `invisible hand`

emerged. The problem with housing is not only the prices themselves, but the immobility of

job-seeking workers who are not able to sell their homes as debts remain. So they stay, too, as

people`s ability to move is constrained. Affected areas include California, Nevada, Arizona

and Florida, the four `bubble states` (op. cit.). Additionally, the weak dollar and a decrease in

consumer spending are causing a slow-down in imports and in total a recession is alive.

For decades `Mexico`s economic fortunes used to be tied to the price of oil. But with the

signing of the North American Free-Trade Agreement in 1992, Mexico`s economy became

inextricably linked to the American economy`21. This could be seen when the American

economy in 2001 slowed, Mexico suffered of stagnation. This dependency can be overcome

by introducing economic reforms, for example by improving the `inadequate tax system`22, to

increase Mexican competitiveness. Energy is government-controlled and can be opened to 18 https://www.cia.gov/library/publications/the-world-factbook/geos/us.html19 https://www.cia.gov/library/publications/the-world-factbook/geos/us.html20 http://www.economist.com/world/na/PrinterFriendly.cfm?story_id=1065072721 http://www.economist.com/research/backgrounders/PrinterFriendly.cfm?bg=62958922 http://www.economist.com/research/backgrounders/PrinterFriendly.cfm?bg=629589More Publications | Press Room – AIU news | Testimonials | Home Page 11

private investments. Threat of inflation which is felt by sensitive food prices triggers reform

thinking. `Mexico`s growth [of about 3.2% in 2008] is expected to perk up in 2008, despite

the general slowdown for the region` as The Economist (Jan 17th 2008) reported. Joining the

NAFTA meant a 14-year transition from tariff-protected deals to free trade between Mexico,

US and Canada. It is a pity, if protection is removed, but it also can be a chance. In case of

Mexico, `non-oil exports have grown fourfold, while the stock of foreign direct investment

has expanded by 14 times. Even the country`s farm exports to its NAFTA partners have risen

threefold` as The Economist tells (Jan 24th 2008). The 14-year transition to free trade included

a big portfolio of goods, with corn to be of special concern to US and Mexican negotiators.

Besides, US exports to Mexico embraced non-fat dried milk and dried beans, and vice versa

Mexican exports included asparagus, peanuts and sugar. Loosened trade restrictions allowed

the US to hugely increase corn exports to Mexico, with exports of yellow corn, white corn,

and cracked corn. `Yellow corn is primarily used as animal feed and to manufacture ethanol,

high-fructose corn syrup, corn starch, … In contrast, white corn is cultivated mainly for direct

human consumption. There is some substitutability between yellow and white corn, however.

Food-grade yellow corn is used to make corn flakes, chips, beer, and other foods, and white

corn can be used as animal feed` (Zahniser and Coyle, 2004). Concerning the feed market,

Mexico cannot meet domestic demands, so the US supplements Mexican production by

exporting yellow corn. Since in 1994 NAFTA took effect, US corn exports to Mexico has

increased by 240 percent, `compared with their average annual level during 1984-93` (loc.

cit.) which were the decade prior to NAFTA. To facilitate free trade `NAFTA specified the

conversion of these import licenses into a duty-free, tariff-rate quota (TRQ) during the period

1994-2007` (loc. cit.). Prohibitive tariffs which gradually decrease towards free trade in 2008

was agreed by NAFTA at a level of 2.5 million metric tons for 1994. The US export volume

of 7.7 million metric tons triggered some prohibitive tariffs. Mexican corn demand is

`expected to grow faster than domestic production … reaching 14 million metric tons by

2013` (loc. cit.). Related to 2003, Mexico absorbs one-ninth of US corn exports and is the

second largest buyer after Japan. The question is why Mexico accepted the agreement -

supposed it was an agreement, then the Mexicans did not reckon the immense increase in

imports - and why the huge imports were necessary.

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Thus, extraordinarily big imports of corn need to be scrutinized. First, there is a difference in

size of US and Mexican corn farm. 270 hectares in US face about 10 hectares in Mexico with

roughly one third devoted to corn in America. More than 60 percent of the farms were smaller

than 5 hectares in Mexico as `Mexico`s 1991 National Agricultural and Livestock Census`

(loc. cit.) revealed. `Tillage, planting, harvesting, and the application of farm chemicals are all

highly mechanized` (loc. cit.) and permanent improvements in technology and production

during the last four decades allow about 8.5 metric tons per hectare in US today. In contrast,

Mexican farmers are less equipped - `35 percent had tractors, and 9 percent had access to

irrigation, a critical input to the Mexican corn sector …` - but `persistent efforts to improve

corn production in Mexico have raised yields to about 5.8 metric tons per hectare on irrigated

land and 2.0 metric tons per hectare on rain-fed land during 2000-02 … compared with a

national average of just 1.0 metric ton per hectare in the early 1960s` (loc. cit.). During the

twentieth century farmland in Mexico was redistributed among the rural people, and these

small parcels of farmland `provide the basis for the subsistence of lower-income rural

households` (loc. cit.). Many of these small-size parcels form so-called ejidos in which the

government `grants user rights to farmland to specific individuals` (loc. cit.). Along with

retirements of farmers and the conversion of arable land to non-agricultural use, many of the

ejidos have been consolidated. Thus, the number of private agricultural producers fell from

1.2 to 1.0 million between 1991 and 2000, while the number of farmers of ejidos declined

from 2.1 to 1.6 million. A similar program has been successfully installed after World War II

to settle down rural refugees in South Germany. Up to the present, the ejidos can be farmed

for life time and heritage is not possible, so most of the farmland has been returned to

communal authorities. In Mexico, thanks to governmental financial support, the total amount

of corn producing farmland has been stable, despite the declining number of both private-

sector and communal producers.

John Maynard Keynes, the English economist, highlighted governmental corrections in case

of extreme ups and downs of both demand and supply by countercyclical support programs.

Following Keynesian theory, Mexican political leaders had to establish a program in case of

emergency. And they did – in Mexico, `the vast majority of agricultural producers receive

direct payments through the Program of Direct Support for Agriculture (PROCAMPO). This More Publications | Press Room – AIU news | Testimonials | Home Page 13

program, launched in 1994, was designed to provide transitional assistance to Mexican

producers during the course of NAFTA`s implementation and the elimination of guaranteed

prices for corn and other basic staples` (loc. cit.). The advantage of governmental support is

evident – the receiver of payments does not have to suffer, s/he can trust in economic

survival. However, there are disadvantages, too. A lack of the ability to switch to another

fruit, a lack of knowledge of how to successfully run a farm, financials included, and a lack of

trying and testing producing new items or change processes. Further negative effects deal

with the roles children learn. Systems theory suggests that initial learning happens in family

life, and ceases in bad consequences for children who learn that government will care for

individual economic life. Instead, the support of learning, of schooling for grown-ups, of

training-on-the-job for unemployed workers can be exercised. Therefore, short-term support

must be welcomed, but in the long run additional learning programs need to be applied.

PROCAMPO payments relate to hectare basis. PROCAMPO`s payments make the biggest

component of the Mexican agricultural secretariat`s (SAGARPA) budget. `For spring-summer

2004 and fall-winter 2004-05, PROCAMPO payment rates equal 1,120 pesos per hectare for

producers with less than 5 hectares and 935 pesos per hectare for all others … (11.02 pesos

per dollar)` (loc. cit.) as SAGARPA (2004) reports. Besides the PROCAMPO payments some

Mexican corn producers enjoyed direct payments through the Program of Direct Supports for

Marketing and the Development of Regional Markets, known as the Marketing Support

Program. In 2003 Mexico`s agricultural secretariat provided a budget of 40.1 billion pesos –

which is about $4 billion – 35% of which were used for the PROCAMPO initiative, and 16%

were spent for the Marketing Support Program, so half of the budget served to support rural

poor. If support programs are started, corn farmers can be lucky – but if not, they are left in

the cold.

Expectations of the futures shape economic and political behavior today. For generations corn

has been cultivated in Mexico, starting about 5,000 years ago, and thus representing social

significance in Mexican society. If corn is of such a big importance, why do so many Mexican

corn farmers suffer of poverty? Corn production dominates farm economy in the central and

southern parts of Mexico – the areas around Chiapas, Guerrero, Hidalgo, Oaxaca, and

Veracruz depend on corn and at the same time they represent `the highest incidence of More Publications | Press Room – AIU news | Testimonials | Home Page 14

poverty` (cf. Henriques and Patel, 2004). Trade liberalization has affected Mexican

agriculture, especially corn farming, and has not offered adequate opportunities to respond to

major changes. Characteristically, corn farmers there have limited access to capital and credit

services, they are limited in adjusting to changes in prices, their facilities to store crops are

limited as well, and due to outdated technology they are left behind. Limited access to capital

markets hinders corn farmers from improving production, so compared to US farmers who

have been enjoying opportunities of adjusting to technological changes for more than four

decades Mexican farmers are still lacking availability to change their situation. They need

help.

Henriques and Patel relate to a World Bank paper which `found that greater openness to trade

is negatively correlated with income growth amongst the poorest 40% of the population` (op.

cit.). So, what about the poor? Do they threaten society? Are they critical to politics? Yes,

they do, and yes, they are. Inequality has often been the soil on which political and social

unrest grows. A measure of inequality is the Gini index ranking which has been increasing

since the mid 1980s (cf. op. cit.) – the increasing percentages reflects growing inequality

which means a growing gap between rich and poor people. The Gini ranking does not indicate

sources inequality derives from, but it reveals potentials of future societal disharmonies.

Canada`s economy and technology have been developing parallel with the US23, and political

challenges relate to public demands for better service and quality improvements in health care

and education. In 1989 Canada joined the Free Trade Agreement (FTA) with the United

States and the NAFTA in 1994 – both economic ties led to a dramatic increase in trade and

economic integration with the US. Due to its `natural resources, skilled labor force, and

modern capital plant, Canada enjoys solid economic prospects`24. Net migration rates of plus

5.79 per 1,000 population in Canada, plus 3.05 in US, and minus 4.08 in Mexico, all based on

2007 estimation25 are alarming signals for demographic changes. A trend towards migration

due to economic pressure can be recognized, despite most Mexican migrants choose the

United States of America to settle down. The next decade will be about `deregulation` as 23 https://www.cia.gov/library/publications/the-worls-factbook/print/ca.html24 dto.25 https://www.cia.gov/library/publications/the-world-factbook/geos/us.htmlMore Publications | Press Room – AIU news | Testimonials | Home Page 15

Kevin Parkinson states, and when protection is mostly needed governmental support `will

vanish into thin air`26 he fears.

Tariffs care for those who need support, and at the same time tariffs exclude the others –

political economy suggests that protecting one party is discriminating the other ones. Dwight

D. Eisenhower (1890-1969), 34th US President, Farewell Address, January 17th 1961 stated:

`In the councils of government, we must guard against the acquisition on unwarranted

influence, whether sought or unsought, by the military-industrial complex. The potential for

the disastrous rise of misplaced power exists and will persist`27. Knowledge about power

prevents from trustful acting without thinking about negative usage of power. In so far

Eisenhower was right. But, would he utter similar words today? It must be acknowledged that

egoism to some extent is necessary to survive, and a form of altruism is necessary, that others

are able to survive, too. The richer the neighbor, the more s/he is able to deal with others.

Despite economic desires originate in egoism, their inherently altruistic function aims at other

parties. Decreasing prices trigger decreasing production – suggests economic theory.

Therefore, if producers receive these price signals they should stop growing corn because of

diminishing profitability.

Following David Ricardo`s theory of `comparative advantage`, a nation that deals with

another nation will get richer than without dealing, even if each nation were able to produce

all items itself. Trade relates to goods and work force. According to the Organization for

Economic Cooperation and Development (OECD) there are some economic deficiencies for

Mexicans, for example the lack of formal education in comparison to the American education

system, little training on-the-job, heavy bureaucratic burdens on firms and high crime rates.

Outsourcing is a management method to gain independence of routine work and to lower risks

and dependencies. If US companies tried to outsource labor to Mexico, assuming to

compensate domestic labor shortages by skilled and less expensive Mexican work force, they

would recognize that labor is not scarce there, but staff is not skilled enough even for routine

26 http://www.globalresearch.ca/index.php?context=va&aid=653927 http://onlinejournal.com/artman/publish/printer_2284.shtmlMore Publications | Press Room – AIU news | Testimonials | Home Page 16

work, for example to operate machines. Thus, one critical moment concerning trade and work

between US and Mexico is the low level of education – despite the Ricardian trade theory.

Recommendations

Above all, public participation is necessary. National governments and parliamentary

processes need to be involved, including the media to inform the citizens. However, it must be

acknowledged that not all details are worth reading. Rules exist on everything `from food to

how to respond to health scares and tainted imports`28. Despite, they need to be communicated

– the reader decides what s/he is willing to consume. Summit meetings need to be announced,

too. In case of the Ottawa summit on February 23rd 2007 a narrow time frame of

announcement made the majority of the public nearly ignore the event. Some issues that

concern all three partners need to be re-agreed, for example a customs policy, common

market, energy strategy.

Basically, the attitude towards respect for nature and life dominates further thinking. In case

individual and nation-wide mindsets are prone to egoistic striving for success – which is

defined mostly in financial terms or equivalents – people indulge in selfish behavior

regardless the harm they do to nature. Economically convergence requires more than financial

support only. Thus, the agreements need to be re-arranged and should employ both economic

and social suggestions of how to subsidize companies and to set up operations in the three

countries. The counterpart of economic welfare is environmental concern. Air pollution, acid

rain, Mexican deforestation, widespread erosion, desertification, Canadian contaminated

ocean waters, and US water pollution from runoff of pesticides and fertilizers are some of the

consequences of usage of nature.

Adam Smith told the world of the invisible hand that ruled markets – what would he say

today? Competitiveness sorts out the less competitive ones, and what about nature? What

about respect of neighbor`s religious and traditional convictions? Economy needs to keep in

mind that nature will strike back, as global warming and increasing numbers of tsunamis,

hurricanes and tornados reflect. Economic laws of supply and demand require slowing down

28 http://www.economist.com/world.1a/PrinterFriendly.cfm?story_id=9688072More Publications | Press Room – AIU news | Testimonials | Home Page 17

corn production in case of decreasing corn prices. However, corn production remains at stable

levels. How can this paradox behavior be explained?

There is a range of reasons why corn farmers keep on producing maize. First, `[c]orn … is

used in rituals, ceremonies, religious services, traditional culinary practices, and healing. Corn

historically forms the backbone of Mesoamerican cultures` (Henriques and Patel, 2004), so it

is part of the Mexican culture and identity. Second, many farmers, small-scale farmers in

particular, grow corn for family consumption despite the development of corn prices, even in

case of extremely decreasing prices. Consequently, there is a part of corn farming that is

continuing throughout economic pressures. Third, due to high governmental protection corn is

regarded as a safe crop (cf. Henriques and Patel, 2004). Learned from parents and

grandparents, and observed continuously, risk-averse corn farmers tend to keep on producing

corn. Fourth, love for land and nature requires careful usage of fertilizers and pesticides.

Avoiding exploitation of natural resources keeps the environment in balance. People who

behave this way should be awarded. Fifth, available options for farmers are prerequisite to

switch to a more competitive crop. Limited access to capital markets, technology and

knowledge fosters underdevelopment and poverty. But, Mexico itself must reform its energy,

fiscal and labor policies to catch up with its partners.

The spiral seems to appear as a circulus viciosus, a circle that triggers negative issues again

and again. It is of a certain importance that all participating countries have strong leaders.

Currently, Mr Bush`s presidency `is in its twilight and Mr Harper leads a minority

government. …Mr Calderon`s … domestic position is the strongest of the three`29. And, the

`North American common market would help control Mexico`s financial instability and, more

important, solve the problem of practically uncontrollable illegal immigration to the United

States` as the New York Times reported on April 18th 199030. If the US is such an attractive

place to work and live, the question should be raised, how to create nearly equal conditions

otherwise how to generate better living conditions in Mexico.

29 http://www.economist.com/world.1a/PrinterFriendly.cfm?story_id=968807230 http://query.nytimes.com/gst/fullpage.html?res=9C0CE7DA1E3FF93BA25757C0A966958260&sec=&spon=&pagewanted=printMore Publications | Press Room – AIU news | Testimonials | Home Page 18

The five above shown most relevant reasons for continuing production of Mexican corn

despite falling corn prices ask for recommendations of how to stop the critical development.

Keynesian theory suggests governmental support in case of unwelcome economic

developments. The very first step is to define the spirit of cooperation and collaboration the

three partners will pursue acknowledging that Mexico is in need for help today to be a strong

partner tomorrow. Then, adequate conditions must be elaborated and dealt in a fair way. Open

communication about goals and means to all participating nations is necessary. In the

beginning, a group of experts needs to be created serving the common goal and representing

the three nations and their diverse members. This is important because there are some large

farmers, organized in `trans-national food conglomerates` (Henriques and Patel, 2004) who

prospered from trade liberalization. But, the rural poor need to be adequately represented.

Short-term and long-term expectations must be defined in a project plan. Milestones need to

be agreed and checked by governmental experts from time to time. The project leader should

be a small team of US, Mexican and Canadian experts in economy. Production is one aspect

of collaboration, and creating marketing channels is another one. The goals need to be

discussed with all relevant stakeholders and set as specific, measurable, achievable, realistic

and terminated issues. Government has permanently to be involved and to report to the public.

Coinciding with economic plans Mexican education needs to be adjusted to US and Canadian

standard. Lessons in economy, for example cost theory, recognizing interrelationships,

dealing with figures and facts should be offered to both the working class in rural Mexico and

at schools to create a sense of urgency for the competitive world. The European Union is

often cited as model, and it `represents an important advance in the relations between nations,

transforming once bitter and war-prone rivals into a model of cooperation, prosperity and

community`31, thus there is evidence about reduced aggressive power in case of trade

networks. An additional major challenge is the rise of China as both an economic and political

power to which agreements like NAFTA, SPP or NAU are no sufficient response. Instead,

economic agreements mark the beginning of a consistent relationship.

31 http://www.nytimes.com/2005/03/28/opinion/28fuentes.html?pagewanted=print&position=&st=cse&sq=North+American+Union&scp=6More Publications | Press Room – AIU news | Testimonials | Home Page 19

Usually and especially facing the agreed partners US and Canada, the recommendation builds

on self-management, on individual ways of getting out of the blue, and neglects the powerful

guidance by government support. Compared to raising children, parents know that children

need a helping hand. Compared to Japanese and Chinese economic developments both the US

and Canada need to acknowledge that introducing methods and processes are a first step to

increase competitiveness. Knowledge and education come first, thus creating rural workshops

should be initiated. Every farmer who attends a series of sessions should be awarded by

substantial support, e.g. discount in interest for capital. While nearly everybody has access to

television, the contents of workshops should be communicated to Mexicans, highlighting the

necessity to adequate education. Initiatives for organizing tractors and harvesters should be

taken into life, for example two or three villages buy one harvester and farmers who pay part

of the crop will be allowed to use it. Similar to nineteenth-century operating Germans

Friedrich Wilhelm Raiffeisen and Hermann Schultze-Delitzsch both of whom, but

independently, had the idea to organize common support by building buying circles –

initiatives that exist today in a mostly commercialized manner. Cooperatives in Mexico to

improve bargaining abilities with business partners and the government need to be

implemented.

The Mexican portfolio of a huge diversity of corn should be regarded as a rich source

compared to the few sorts of US corn. Specializing brings out scale effects, but increases

dependencies as mono-cultures reflect. The prognosis for Mexican subsistence farmers is

unhealthy and since NAFTA occurred Mexico`s annual imports of corn `exceeded the allotted

tariff-free quota` (Henriques and Patel, 2004). Thus, the wide range of corn should come

under scrutiny – and alternatives seeking for exploitation of the corn portfolio need to be

worked out.

In search of a political solution of how to manage the three-countries-conflict adequately,

management methods can be applied. The 1972 published Soft Systems Methodology (SSM)

as an action-oriented approach to cope with real-world messy situations can be applied to both

management queries and political challenges as both scenarios deal with problem solving.

Complexity in life derives from pace of change of social, technological, economic and More Publications | Press Room – AIU news | Testimonials | Home Page 20

political issues and is never static, but constantly moving and, hence, difficult to grasp,

especially in cases concerning different worldviews or perceptions of reality, as the US-

Mexico relationship reveals. According to Checkland and Poulter (2006, pp.27-35) `three

elements – the methodology, the use of the methodology by a practitioner and the situation –

are brought together in a particular relationship` to analyze the interacting roles, norms and

values that characterize the `real-world problematical situation`. Therefore, `relevant systems`

of purposeful activity and the `worldviews they encapsulate` (op. cit. p.170) can facilitate

building models of the future cooperation of the three nations by trying to support Mexican

attempts to catch up with the more developed US and Canada, instead of searching for

methods and ways to enhance US wealth.

In case of public discussion on `standing in the shoes of the other` US government has the

opportunity of demonstrating a sense of altruism to the public. But, less nationalism requires

courage and perhaps losing voters. When both theorists and practitioners noticed the `beggar-

my-neighbor-policy` to be a hindrance to prosperity for all attached nations, the willingness to

cooperate increased and economist as well as politicians learned that a rich neighbor serves

better than a poor one. Today, in times of nearly incredible floods of prompt information

which foster quick reaction and response, politicians are in need of adequate ideas to care for

the own nation as well as for neighbors. Pure selfishness which marked former and hopefully

foregone times of colonization and slavery all over the world can be replaced by social and

economic responsibility for the community of the North American Union. The Welfare State

as exercised in Germany since 1949 may serve as model, and its advantages may be

transferred to US demands, for example the guaranteed minimum supply to meet socio-

economic needs of individuals.

Personal opinion

US President Mr Bush presented his record-braking 2009 $3 trillion budget on February 4 th

2008. His fiscal plans include decreasing of some programs, `certain farm subsidies` deserve

cutting. Encouraging Mexico and Canada to agree economic standards raises both hope and

trust into financial support. Behaving in another way is not acceptable, I think. Mr Bush as

president of the wealthiest nation within NAU should offer detailed plans of how to support More Publications | Press Room – AIU news | Testimonials | Home Page 21

his partners. His assumptions concerning spending less aim at government-run domestic

programs and appear as short-term package. He knows that the Iraq war cost more than

double the $70 billion he put aside to finance the war on terror next year, as The Economist

reports32. Because Mr Bush apparently cannot stick to his plan, it seems to be insufficient and

not trustworthy.

Currently I feel an overwhelming dominance of the United States concerning NAU. Mr Bush

should not regard Mexico as poor brother of the South who should be kept down to avoid

rivalry in future years. Some of the intended aims failed, for example substantial job growth

in Mexico – a fact that cannot be neglected. But, who or what caused that? Due to complexity

of economic life a straight-forward answer is surely not easy to give. Otherwise, could the US

have helped to create jobs? Yes, they could. Foreign direct investments are one way, and they

should be extended, initiated by governmental incentives to activate private business. Nation-

related egoism can destroy the successes of the past. Mexico needs to be strengthened for the

sake of mutual prosperity. Selfish behavior can be observed towards Canada, too, and I

criticize it. In this report I underweighted the Canadian aspect for the sake of Mexico, as I

regard Canadian economic development as less critical than the Mexican. Despite, Canada,

too, should not be treated as unwelcome guest who nolens volens should come on board.

Access to natural resources is only one aspect that raises criticism. I understand Canadians in

fighting against foreign dominance in businesses. The problem of suddenly emerging major

stakeholders in companies is a global one, and I think it should be stopped. Long-term

responsibility instead of short-term focus in managerial art needs to be fostered by adequate

compensation models.

Mexico is a `major drug-producing nation` and known for its cultivation of opium poppy in

2005 estimated to `3,300 hectares yielding a potential production of 8 metric tons of pure

heroin, or 17 metric tons of `black tar` heroin, the dominant form of Mexican heroin in the

western United States`33. Marihuana and cocaine as well are intensely produced in Mexico.

Illegal drug business is controlled by syndicates which dominate money-laundering

32 http://www.economist.com/world.na/displaystory.cfm?story_id=1065071133 https://www.cia.gov./library/publications/the-word-factbook/print/mx.htmlMore Publications | Press Room – AIU news | Testimonials | Home Page 22

companies. I think open borders will not significantly enhance illegal Mexican drug

production and distribution. The problem is not the borders, but information technology

which is hard to control. Drug business is organized as any business and in case of Mafia

organization highest professionalism can be assumed. Thus, in my opinion open borders are

charming for travellers, but surely no significant hindrance in producing and dealing drugs.

Cooperation as it is accepted by a majority of US citizenship deals with military equipment.

Discussions with Mexico `include providing the Mexican military and law enforcement with

surveillance equipment, airplanes or helicopters, computer software that can be used in

tracking ground movements, and extensive training to go with that equipment`34. Technology,

training and military equipment are means to demonstrate immediate support, but they can

only be part of a wider support plan. Mexican judiciary should be professionalized and an

anti-corruption program needs to be created and implemented.

If I stood in the shoes of Mr Calderon, I would initiate a nation-wide literate program to

facilitate communication. This would be no critical issue, as most people know that language

connects people. Communication skills are essential, therefore starting in earliest school days

spelling, reading, communicating, and English as first foreign language should be taught.

Therefore a radical reform concerning learning issues need to be put into life, including

governmental task-forces, teachers, pupils and students – all of which should be given a voice.

For the unemployed workers special literate programs sponsored by the government could

help integrate them into social and work life. Education is a value that irrevocably alters life.

Despite nation-related issues I feel a need of a joint communication program that reveals all

steps of agreements and treaties, and keeping the world on track with state-of-the-art politics.

Transparency and congressional consent need to be communicated to the public to gain

general acceptance. Permanent three-party institutions, annual meetings and adequate public

relations should support the communicative program. The government has facilities and

adequate channels to promote the succeeding milestones. Besides practical activities,

protectionism needs to be identified as a troublesome behavior as it automatically represents

discrimination of the others. Regarding global balance, the triad power should be balanced:

USA, Canada and Mexico are facing the European Union and the other non-EU nations,

34 http://www.wnd.com/news/article.asp?ARTICLE_ID=57132More Publications | Press Room – AIU news | Testimonials | Home Page 23

comprised in the European Free Trade Agreement on the one hand, and the Pacific room

embracing Japan, China and Australia, on the other. Thus, I assess US imperialist behaviour

as globally necessary, but I am concerned in case of the US-Canada-Mexico-arrangement.

References

Checkland, Peter and Poulter, John (2006), Learning for Action – A Short Definitive Account

of Soft Systems Methodology and its use for Practitioners, Teachers and Students, John Wiley

& Sons, Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England,

ISBN-13: 978-0-470-02554-3 (pbk)More Publications | Press Room – AIU news | Testimonials | Home Page 24

Henriques, Gisele and Patel, Raj (2004), NAFTA, Corn, and Mexico`s Agricultural Trade

Liberalization, Americas Program Special Report, February 13, 2004, available at:

www.americaspolicy.org

SAGARPA (2004), Secretaría de Agricultura, Ganadería, Desarollo Rural, Pesca y

Alimentación, Apoyos y Servicios a la Comercialización Agropecuaria

(SAGARPA/ASERCA). `Principales Resultados del Ejercicio Fiscal 2002 del Programa de

Apoyos Directos a la Comercialización y Desarrollo de Mercados Regionales.` January, 2002.

Available at: http://www.infoaserca.gob.mx/programas/sublistaprogramas.html

The Economist (2008), Economic and Financial Indicators, Latin American growth forecasts,

Jan 17th 2008, print edition

The Economist (2008), Tariffs and Tortilla, Latin America, Mexico and NAFTA, Jan 24th

2008, print edition

Trends E-Magazine (2007) The Growing Panic Over a `North American Union`, November

2007, Volume 5, Number 11.

More Publications | Press Room – AIU news | Testimonials | Home Page 25

Zahniser, Steven and Coyle, William (2004), U.S.-Mexico Corn Trade During the NAFTA

Era: New Twists to an Old Story, USDA, United States Department of Agriculture, FDS-

04D-01, May 2004, available at www.ers.usda.gov

More Publications | Press Room – AIU news | Testimonials | Home Page 26