Free Trade in the Americas

Free Trade in the Americas

Economic and Political Issues for Governments and Firms

New Horizons in International Business series

Edited by Sidney Weintraub, Alan M. Rugman and Gavin Boyd

This book examines the Free Trade Area of the Americas (FTAA), an ambitious venture in regional market integration which builds on the principles of the North American Free Trade Agreement. It assesses the long-term corporate and public policy measures to cope with the increased monetary, fiscal and structural interdependence that will be required if the benefits of the FTAA are to be realized.

Chapter 4: Economic integration in North America: implications for the Americas

Alan M. Rugman

Subjects: business and management, international business, economics and finance, international economics


Alan M. Rugman SUMMARY In this chapter I build on the ten years of experience of economic integration that companies have enjoyed under the North American Free Trade Agreement (NAFTA). This started on 1 January 1994, but was negotiated and largely in its final shape for all of 1993. The role of foreign direct investment (FDI) undertaken by multinational enterprises (MNEs) has been of critical importance in NAFTA. I examine the economic integration of Canada and the United States and draw implications for all of the Americas. The increasing degree of intraregional trade and FDI in North America, both before and during NAFTA, is likely to be repeated across the Americas in the future. INTRODUCTION The Free Trade Area of the Americas (FTAA) is going to build on the basic principles of NAFTA. There are two of these: first is the negotiated reduction of tariffs on mainly manufactured products (with agriculture and most of traded services exempted); second is the principle of national treatment, again for manufacturing but also for resource investment (and with most of the service sectors exempted). The nature of NAFTA, and its implications for corporate strategy, have been discussed in Rugman (1994). Logically, the FTAA, being based on NAFTA, will have similar implications for business strategy. Rather than revisit this topic in this chapter, I assess the nature of economic integration under NAFTA over the last ten years. With this focus upon the actual outcome of NAFTA on business strategy, I am then in a better...

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