Removal of internal quotas and tariffs
Common external customs tariff
Free movement of labor and services
Harmonization of economic policies and political unification
Free Trade Area
Customs Union
Common Market
Economic and Political Union
Comparing the northern border regions of the North American Free Trade Agreement (NAFTA) to those of the European Union (EU), numerous similarities and differences are evident. Border regions have been the loci of interaction between the countries of Europe for hundreds of years. Within these regions, regional identity takes on much greater significance than within the border regions of NAFTA. People of different nationalities living along border regions of Europe tend to have more in common with eachother than with their respective compatriots. Even today, dialects are still spoken within some regions of Europe that differ significantly from their respective national languages. Throughout hundreds of years of war and shifting territorial boundaries, distinct regional identities are more commonly felt than are feelings of nationalism.
The formation of the European Coal and Steel Community (ECSC) in 1951, which laid the foundations of today's EU, has also represented a certain set of contradictions that have lasted to the present day. Economic and environmental problems resulting from integration are common within border regions. Striking similarities can be seen when comparing these problems to the northern regions of NAFTA along the US-Canadian border. It is the goal of this chapter to look at some of the common problems faced by both the northern border regions of the EU and Canadian-US border regions NAFTA. How the EU is addressing these similar problems will be compared with approaches of the northern border regions of NAFTA in an effort to provide policy lessons for NAFTA.
The first section of this paper will look at the historical background of the EU and how it compares to that of NAFTA and CUFTA. In looking at the history of these two agreements, we see the reasons leading to the deepened integration of each treaty and how that can be interpreted in the decisions made by policy makers today with respect to border region development. One key difference that comes to light is the amount of sovereignty withheld by the member states of the respective agreements. Individual state sovereignty within the EU is much less than that seen between the US and Canada. This measure has proven extremely beneficial in coping with matters of regional development.
In the second section, this chapter will address the political economy of institutions. Within the EU, two levels of institutions are crucial to successful regional development. The supranational institutions of the EU as well as programs such as the European Structural Funds have provided an impetus for regional development programs throughout the EU. Funding for these programs comes directly from the EU and remains strictly in the best interests of regional growth, instead of the individual member states. Regional institutions have become important because of the role they play at the micro, multi-lateral level for the benefit of the region. These institutions provide the remaining money for development projects in the different regions through collections from both local and regional governments and businesses. In the absence of institutions with regional policy-making ability, governments tend to act in their own personal self interest, rather than in the interest of the greater region. Similarly, the Great Lakes and Cascadia regions of NAFTA are plagued by a lack of supranational institutional direction and a multitude of local interests groups that work against one another instead of for the greater benefit of the bi-national region.
Finally, comparisons will be made between both the Cascadia and Great Lakes border regions of NAFTA and that of the EUREGIO region (encompassing the border regions of Germany and the Netherlands) and the Nord-Pas de Calais Euroregion (comprising of the border region between Belgium and France). These regions are both similar in origin as well as in their visions for future development. They were areas of devastation and high unemployment after World War II and have since worked cooperatively in promoting themselves as the regions of most rapid growth along the northern borders of Europe. Many of the problems experienced within these regions are relevant to the North American situation in that they are similar in nature to problems seen there; as such, the EU's policy solutions can provide valuable lessons to NAFTA policy makers.
The first comparison will look specifically at problems of infrastructure. High-speed rail links and increased highway capacity have all been problems faced by the Euroregions, and are beginning to be faced along the US-Canadian borders. The ensuing comparison will address the problems faced in Europe with respect to job loss and investments in human resources. Increased trade along the US-Canada border has led to a job sector transformation toward high-tech industries. With the transition from one sector to another comes a certain level of worker displacement within the low to medium- technology sectors. Europe's approach to this similar problem points towards a system of reeducating and retraining displaced workers as quickly as possible within the most efficient and productive sectors of the region in order to further the region's comparative advantage and deepen economies of scale. By ignoring this, the US and Canada allow for job loss along the border to continue and thus hinder any future growth.
The last comparison will look at environmental problems linked to increasing international trade within each region. Since the signing of the Maastricht Treaty, sustainable development has become EU policy, whereas the concept of sustainable development has been ignored within the official goals of NAFTA. EU efforts towards promoting sustainable development provide guidance for the US-Canadian border regions in the future.
It becomes immediately clear that institutions play a much more important role in Europe than they presently do in North America. Institutions have the ability to analyze a specific problem from a multi-lateral perspective and suggest options for the benefit of a region, instead of the strictly nationalistic or individualistic interests of national parties or actors. Further, what makes Europe more unique is the ability of these institutions to enact legislation and provide funding. The EU differs from NAFTA, both in its beginnings and goals for the future, but what is ultimately important are the lessons that NAFTA can learn from the EU.
Immediately following World War II, Winston Churchill was quoted as saying that the countries of Europe need to form a kind of "United States of Europe", in which the countries of Europe would join their economic interests in such a way as to make war between the countries unthinkable. After Mr. Churchill's comments in 1946, action was quick and a European Council was formed in 1949 (See table 1). In 1951, the European Coal and Steel Community was formed with the signing of the Treaty of Paris. The treaty of Rome was signed by the core "Six" members, forming the outline of all future European integration. The union first formed between the core countries of Europe was both economic and political in nature. In linking together the major wartime industries of Europe they would be dependent upon one another, hoping that countries sharing large economic interests would be less likely to go to war with one another.
The period 1960-1985 was marked by a further expansion of member states, combined with increasing deepening of the EEC. Non-EEC members created the European Free Trade Area (EFTA), a free trade area without many of the political requirements of the EEC that abolished tariffs and quotas on industrial goods only. Following the signing of the Merger Treaty, the core "Six" consolidated their efforts in establishing the European Community (EC). Seeing it to be to their benefit to participate in a more deeply integrated Europe, Britain, Ireland and Denmark joined the EC shortly thereafter. By 1986, the EC had expanded to 12 countries, and the Single European Act moved Europe toward a true single market. The Delors Report outlined the requirements and deadlines of full economic and monetary union of the EC, and in 1991, the Maastricht Treaty was signed by the member states of the EC, establishing the EU. In addition to the EC requirements, joining the EU entailed a common security/foreign policy that was to be implemented along with a common internal affairs policy. Deadlines were set for further economic,
Table 1: Key developments in the history of the EU
1951: The Treaty of Paris is signed, creating the European Coal and Steel Community (ECSC) which comes into existence on July 23, 1952. Membership comprises West Germany, France, Italy, Belgium the Netherlands, and Luxembourg (the "Six")1957: The Treaty of Rome is signed, creating the European Economic Community (EEC) and Euratom, the European atomic energy agency with effect from January 1, 1958. Membership comprises the Six.
1960: The European Free Trade Association (EFTA) is established, with membership comprising Britain, Spain, Portugal, Switzerland, Finland, Sweden, Norway, Denmark, Ireland, Iceland, and Liechtenstein.
1965: The Merger Treaty is signed, bringing together the three 'communities' of the ECSC, EEC and Euratom with effect from 1967 and naming the merged grouping the "European Community" (EC).
1966: The Luxembourg compromise is agreed, allowing member states to veto proposals which threaten 'special national interests'.
1973: Britain, Ireland and Denmark accede to the EC. Norway votes 'No' to membership in a popular referendum.
1979: The European Monetary System is established. Britain declines to place sterling in the exchange rate mechanism (until October 1990).
1981: Greece accedes to the EC.
1985: The White Paper published, setting out the measures necessary for the completion of the internal or 'single' market.
1986: The Single European Act (SEA) is signed (taking effect on July 1, 1987); Spain and Portugal accede to the EC.
1989: The Delors Report is published, setting out a blueprint for economic and monetary union.
1990: Stage One of the program for economic and monetary union begins on January 1.
1991: The European Union is established with the signing of the 'Maastricht Treaty' (taking effect following ratification by member states on November 1, 1993). The Maastricht Treaty establishes the EC as being just one 'pillar' of a new European Union (EU), the other two being a common security/foreign policy and a common internal affairs policy.
1992: The single market program is completed on December 31.
1994: The European Economic Area comes into effect on January 1, extending the main provisions of the single market program to the members of EFTA. Stage Two of the program for economic and monetary union begins on January 1; the European Monetary Institute is established in Frankfurt.
1995: Finland, Sweden and Austria accede to the EU political and monetary integration and in 1995, the EU expanded its borders once again to include Austria, Sweden and Finland.
The EU consists of four major branches: the Commission, the European Parliament, the Council of Ministers, and the European Court of Justice. The Commission consists of 20 commissioners who oversee 23 departments of state. The Commission is the executive branch of the EU, whose main function is to act on behalf of the Union in implementing legislation. The European Parliament consists of 626 members and plays the consultative role of amending legislation passed down from the Commission, which is eventually passed into European law by the Council of Ministers. The Council of Ministers is the ultimate decision-making body within the EU. The Council of Ministers is not actually a single council, but rather many different councils, each specializing in their respective field. For example, 'Ecofin' is the EU's Financial Council, made up of the 15 Ministers of Finance of the member states. The European Court of Justice deals with disputes over EU law, and their decisions take precedent over members' national law. But, in accordance with the Luxembourger compromise, a small reservation of national sovereignty still does exist in the EU. Members may still veto the Court of Justice's decision when the veto can be justified as being in the member's national interests.
"Looking back on more than three decades of European institutional evolution, the process may appear as two interrelated and linear trends: economic integration proceeding in tandem with stronger institutions." The reasoning behind the EU is multi-faceted. After World War II, the EU was devastated and the shadow of the Cold War focused upon western Europe. European integration was seen as being a means of bringing peace to former rivals and of strengthening the US-backed European Anti-Communist movement.
Since the beginnings of the EEC, a war between member countries has become unthinkable. It is in the best interests of the member states to fight common battles on the foreign policy front rather than battle with one another. Together, the EU has more influence on world politics and economics than would individual states. Regional development policies in reducing asymmetries between states can be better supported on an institutional level. The benefits of creating a true internal, borderless marketplace groups the countries of Europe together on a level playing field with Japan and the USA, whereas any single country within the EU, with the possible exception of Germany, would not have had the capability to compete. With the interest of achieving and maintaining sustainable growth for the EU, European-wide environmental policy has bridged the gap of individual state policy to that of the interests of the regions as a whole.
The level of individual national sovereignty within the EU differs from the level in NAFTA. The member countries of the EU have delegated more important and extensive functions to the European institutions than has been the case with the US and Canada. EU law takes precedence in the question of regional development, except for matters deemed to be of national importance, covered by the Luxembourger Compromise. It is this "pooled sovereignty" that allows common approaches to regional development, and the lack thereof amongst the US and Canada that sparks cross-border conflict. Members of the US Congress see NAFTA as eroding state decision-making authority. Canada remains concerned over both the social and cultural implications of further integration. Integration resulting from NAFTA is not justified by national defense arguments, but rather out of the need for a prosperous North America.
Although there exist a number of significant differences between the EU and NAFTA, similarities do also exist. The momentum toward integration in both the EC and North America rapidly increased in response to the recession of 1982. In Europe, individual member attempts at battling the recession were doomed, and a consensus was reached for a "deregulated European relaunch through an internal market." The key difference in the move toward integration in Europe and North America was the level of integration which was sought by the respective parties.
The different levels of economic integration that exist between NAFTA and EU highlight typical integration models of the post World War II era (See table 2). Economic integration is defined as the merging together of national economies and the blurring of the boundaries that separate economic activity in one nation from another. NAFTA, as CUFTA before it, is a "free trade area" (FTA). A free trade area is the weakest form of economic integration. It involves the removal of tariffs and quotas. Through the elimination of a tariff, the price of imported goods drops, allowing the consumer to buy more of the good. Imports increase and the more expensive, domestic substitute is, in theory, produced less. Countries within a free trade area retain certain amounts of individual sovereignty not seen in higher levels of economic integration. The key feature of a free-trade area is the members' ability to retain individual external tariffs against third parties. This can in turn lead to trade diversion, with imports being brought into the country of higher tariff through another country in the FTA charging a lower tariff on imports. In addition, many non-tariff barriers (NTB's) remain between countries, raising the prices on goods much like a tariff would. The costs incurred by combating the problems of trade diversion and NTB's often leads toward the impetus to form a customs union.
By eliminating the NTB's, a customs union is formed. The EU can actually be characterized as a customs union in the process of progressing further into a true common market with aspects of economic and political union. In a customs union, member's goods are allowed into a country to compete at the same level as domestic goods. Countries and regions focus on production of goods in which they have a comparative advantage. Trade is created where it did not exist before due to tariffs and NTB's. The key feature of a customs union is the ability to move goods, capital and labor freely across borders. A common external wall of tariffs among member states is erected toward third party countries, with the free trade of members' goods within the union.
|
Removal of internal quotas and tariffs |
Common external customs tariff |
Free movement of labor and services |
Harmonization of economic policies and political unification |
|
|
Free Trade Area |
|
|||
|
Customs Union |
|
|
||
|
Common Market |
|
|
|
|
|
Economic and Political Union |
|
|
|
|
Table 2: The different levels of economic integration.
In dealing with the different currencies of the EU members, the simple transaction costs involved with converting currencies can lead to firms charging higher prices for their goods than they would in a true common market. Economic union works toward reducing transaction costs between member countries through the use of a common currency. A political union, such as when countries share a common foreign and security policy, will allow for the EU to have a collective voice on the international level.
While deepening the level of integration is attractive within the EU, US and Canadian policy makers are not moving as quickly toward deepening. Growth rates along the US-Canadian border since the implementation of NAFTA bring to light the fact that national sovereignty does not have to be sacrificed to increase economic growth. The question becomes: How much more could they grow by further deepening their integration? Europe has proven that deepening can be done successfully amongst countries with similar political and economic structures. The economic returns, as well as sustainable harmonization of environmental regulations, could far surpass the positive results of the EU. The question of whether or not a more deeply integrated relationship along the US-Canadian border is desirable will be looked at in more detail by Colin Johnson in Chapter 6 of this volume.
It is essential that an inter-regional body provide a forum where cross-border regions can get together to exchange experiences and, more importantly, define their future.-Claud Haegi, President of the Association of Local and Regional Authorities of the Council of Europe
Institutions play a key role in regional growth. Problems related to international trade, whether economic, environmental or both, are felt most predominately in the border regions of countries. Both NAFTA and the EU are, in effect, trade agreements based upon the neo-liberal theory of international trade. The neo-liberal free trade argument can be generalized as: through free trade, everyone will be better off. Changes in socio-economic and environmental conditions are seen, in the long run, as self correcting via specialization of a region's comparative advantage and the efficient allocation of resources. The creation and expansion of economies of scale leads to gains for the consumer via higher rates of production and lower costs. The role of government intervention should be limited to that of providing common public goods, or, those goods that would not normally be provided by the public sector (i.e. education, infrastructure, etc.).
However, the effects of trade between asymmetrical and disparate economies in the short run can be particularly detrimental to cross-border regions to a point where some form of intervention is needed. In a free trade system, government policy often focuses upon improving the comparative advantage of that particular country's industries and maintaining policies that further their distributional interests. This leads to nationalistic competition among governments on both sides of a border. Regional institutions have the ability to look at a specific problem from a multinational perspective and form opinions and a plan for action on behalf of a region, instead of individual states. This pertains to providing the regional public good of trans-border cooperation.
Key to the capacity of multi-lateral institutions in regional enforcement is both their international aspect and their autonomy. They are formed by experts in government, business, and interest groups on each side of the border, so-called epistemic communities. They look at the problems which arise from international trade, and how to solve them in the best interests of improving a region's growth. Institutions vary in size and policy implementing authority. Some institutions possess the ability to provide funding and legislation within regions. It is these institutions that work, either directly or indirectly, in promoting "sustainable growth" within their respective regions.
Within the context of the EU, smaller, regional institutions play a critical role in supplementing the larger institution's initiatives. Along the border regions of the EU, these smaller institutions are also international, being comprised of members of local governments, businesses and special interest groups across borders.
The striking difference between the institutions of NAFTA and those of the EU is the supranational institutions' cooperation and interest in providing funding and guidance to regional development. Smaller, regional institutions play the crucial role of enacting the supranational policy on the local level. Without these institutions in place, irreversible damage could occur that not even market forces could change.
Since the founding of the ECSC in 1957, Europe has witnessed a growing movement toward the creation of semi-official transboundary regionalism. The so-called "Euroregions" have made their voices heard in establishing a political agenda for greater central government support for transboundary cooperation and development. The EUREGIO between Germany and the Netherlands, formed in 1960, was the first true European transboundary organization and set the precedent for all Euroregions to follow.
The role of regional institutions within the EU is advisory and promotional with respect to EU's supranational institutions. Euroregions are created by local governments looking to benefit from the increasing European integration. Euroregions receive funding toward regional development projects either through petitioning the Commission to be recognized as a region eligible for the European Structural Funds, or through so-called Community Initiatives, designed by the EU to develop cross-border cooperation. The amount of funding is then decided on by the Commission, and represents a percentage of the total costs of a project. This figure is usually quoted in millions of Ecu, or abbreviated mecu. The excess cost of EU development programs is made up by the regional institutions, through petitioning the governments, businesses and NGO's within the region for money.
Both the EUREGIO and the Nord-Pas de Calais Euroregions share many characteristics in terms of the need for cooperation. Both regions are centrally located within the EU (See Figure 1) and are plagued by similar problems of structural unemployment and under-investment. The EU's INTERREG Initiative has played a crucial role in setting a number of measures designed to develop cross-border cooperation. The EU's portion of funding of INTERREG programs within the two Euroregions is provided through the European Structural Funds. A more detailed explanation of these funds is given by Dominik Karelus in Chapter 11 of this volume. The current time table of the INTERREG II development initiative covers the period 1994-1999.
These programs are complemented by smaller, more specific programs within different parts of the region, enhancing cross-border cooperation. The problems incurred within these sections of the region also result from further integration. The success of these smaller programs is detrimental to promoting regional growth and cross-border cooperation.
Regional development programs within the EUREGIO and Nord-Pas de Calais regions are funded by four specific areas of the European Structural Funds: the INTERREG II Initiative, Objectives 1 and 2, and Objective 5b (See table 3).
Table 3: Development programs of the European Structural Funds, specific to the EUREGIO and Nord-Pas de Calais Euroregions.
|
Program |
Specific Structural Funds Responsible |
|
INTERREG II Initiative encourage cross-border cooperation within the EU |
ERDF, ESF, EAGGF |
|
Objective 1 regions of lagging development |
ERDF, ESF, EAGGF |
|
Objective 2 areas of industrial decline |
ERDF, ESF |
|
Objective 5b low levels of economic development in the rural sector |
ERDF, ESF, EAGGF |
As stated above, the EU's contribution toward these development programs accounts for just a part of the total costs of the programs. Regional funding, coordinated through local Councils of Government (COG's), accounts for the rest. With respect to the total costs of all programs within the context of this chapter in the EUREGIO and Nord-Pas de Calais, regional funding accounts for a large proportion of funding (See Figure 2). It is this cooperation across borders that leads to the program's successes. With large regional contributions, investors are assured of the program's efficiency in meeting their needs most productively.
Figure 2: Total EU Structural Funds Contribution towards development projects in EUREGIO and Nord-Pas de Calais.
With eighty percent of all US-Canadian trade being done through just ten border crossings, traffic congestion and delays at the border are not only troublesome, but also costly. As stated in previous chapters,. increased trade from NAFTA is causing too much stress on the current infrastructures of both countries. With the obvious exception of border controls being virtually eliminated within the EU, a large reason why the EU has not faced extreme infrastructure shortages is that there also exists an extensive system of railroad connections and highway links throughout the border regions of Europe. Still, problems with infrastructure have arisen within the northern Euroregions as well due to increasing international trade. Even within a virtually borderless Europe, semi-trucks transporting goods remain the main cause of major backups at the border. Within the border regions themselves, the quality of local infrastructure is inadequate compared to the infrastructure at the border crossing. This can discourage business owners considering investment within a region.
In looking at the US-Canadian border regions, problems due to both lack of infrastructure and traffic congestion seem to only be getting worse. North America lacks the vast array of infrastructure existing within Europe. High speed train links are virtually non-existent, and lack of coordination at the borders, coupled with inadequate staff and differing customs requirements, has troubled the US-Canada border with numerous slowdowns.
Within both Belgium and Holland, high levels of infrastructure already exist. On a European-wide basis, the length of all highways in both Belgium and Holland is more than 250% of the European average. With the large amounts of pre-existing infrastructure, the aim of both the Nord-Pas de Calais and EUREGIO Euroregions look toward improving existing infrastructure; new infrastructure's compatibility with existing infrastructure; and most importantly, creating a more profitable infrastructure for the small to medium-sized enterprises (SME's) in the area.
Both the Nord-Pas de Calais region and EUREGIO lie along major transport axes throughout Europe. INTERREG II looks at decreasing border congestion over the period 1995-1999 caused by the increase in international trade through the improvement of existing infrastructure. Local initiatives have worked toward creating better inter-regional infrastructure in the hope of attracting investment to the region. Governments, more often than not, design railways and highways according to their national interests, resulting in delays in changing to a different system at the border. It is in the best interests of the Euroregions to cooperate in working toward improving the transnational infrastructure in a harmonized manner, increasing regional growth.
In the Nord-Pas de Calais Euroregion, 34.782 mecu has been contributed by the EU to projects totaling 70.319 mecu toward the improvement of regional infrastructure for the period 1995-1999. The remainder of funds is provided through both the national governments of the region, as well as local private agencies. The INTERREG II Initiative aims at redeveloping the land from its industrial past and increasing attractiveness of the region for business investment in the region through better networking connections, infrastructure links between the cities of the region, as well as the establishment of regional business centers.
The Nord-Pas de Calais region's central location makes it a natural point of intersection for many international communication and transportation links. Its infrastructure in this respect is already well developed. Future infrastructure projects within the region therefore have to be economically justifiable and comply with the pre-existing infrastructure. Under title XII of the Maastricht Treaty of 1992, money has been made available toward improving Europe's Trans-European Networks (TEN's). Large transportation links already exist within the region, such as high-speed train links like the Dutch Thalys train and French TGV trains connecting Amsterdam with Paris via Brussels. The dense population of this region restricts the effectiveness of the rail links. The primary goal of INTERREG II, with respect to cross-border infrastructure, must look at deepening the pre-existing structures. New tracks for the high-speed rail links are of high priority of the INTERREG II program.
As was stated by Ehlinger in Chapter 3 of this volume, rail links in along the US-Canada border do exist. Initiatives have been taken among local agencies toward implementing high-speed links, but so far to no avail. Projects such as the Cascadian high-speed train links can look toward Europe to see the direct benefits of multi-national funding and cooperation with respect to similar projects. Unfortunately, the respective governments of Cascadia have proven unwilling to invest in long term, bi-national projects. It will not be long before the existing Amtrak connections between Portland and Vancouver, BC become overburdened with traffic from increasing trade in NAFTA, and the costs of implementing such a system at that time would far outweigh current costs. The amount of growth in the future that could be achieved by a high-speed Cascadia link would contribute to making the region into a worldwide contender for further investment.
Under the EU's Objective 1 (regions of lagging development) and Objective 2 (areas of industrial decline), border regions on both sides of the Euroregion have received funds toward the development of infrastructure, complimentary to the aims of the INTERREG II Initiative. Combined, these funds represent more than 110 mecu of funding toward implementation of proposed projects totaling approximately 250 mecu, the difference again being provided by local and regional governments and businesses. These projects consist of further establishing infrastructure that is compatible with the existing infrastructure within the region as well as the further development of high-speed train links both within the region and throughout all of Europe. Currently, in southern Belgium, the high-speed train infrastructure is largely incomplete. As of February 1996, there were only 13 TGV's running daily from Paris to Brussels, as well as 4 daily trips of the Thalys from Paris to Amsterdam. As the TGV and Thalys run through highly populated areas, the trains are required to run at slower speeds. The primary aim of these Objectives is the implementation of new compatible high-speed rail links through less populated areas, allowing for the Thalys and TGV to function more efficiently and at higher speeds with more daily trips between the European capitols.
Like the Nord-Pas de Calais Euroregion, an elaborate system of infrastructure already exists within EUREGIO, including the Intercity high-speed rail link between the cities of Cologne and Utrecht and a number of freeway border crossings, such as the A1/A30 Autobahn, between Germany and the Netherlands. Under the INTERREG II Initiative within the EUREGIO, large amounts of EU funds have been allocated toward the improvement of infrastructure over the period of 1994-1999. The EU has made available 10.884 mecu towards projects costing a total of 27.268 mecu under the INTERREG II Initiative for improvements in infrastructure in the EUREGIO. The majority of these funds go toward maintaining and repairing existing infrastructure, such as highway construction projects and railroad repairs, as well as toward the development of innovative newer, faster, and cheaper means of moving goods across the border. One of these projects was the decision to make funds available for research toward the further development of the European system of canals as an alternative mode of transportation. Within the Netherlands itself, an elaborate system of canals already exists. Commercial use of these canals is increasing in a move to free up highway congestion. The European Commission has named river and canal transport as one of their main priorities in the context of its long-term transportation policies mainly due to its "undeniable" environmental qualities and economic benefits. Valuable lessons can be learned by both the US and Canada in implementing alternative means of transportation within the regions toward reducing automobile congestion.
Under the EU's Objective 5b development program (low levels of economic development in the rural sector), an additional 4.313 mecu will be implemented toward projects costing 40.229 mecu within EUREGIO for the development of more valuable infrastructure helping create more SME's. Through providing better facilities for businesses, as well as diversifying and developing the regional economic structure, the funds will be used in reducing regional unemployment.
Both the northern border regions of NAFTA and the EU share a common interest in using a well developed infrastructure system as a means toward promoting SME investment in the respective agreements. SME's, especially in the high-tech sector, are seen both in NAFTA and in the EU as being an abundant source of long term jobs in the regions, promoting growth. As stated earlier in this volume by both Wolters (Chapter 1) and Ehlinger (Chapter 3), southeastern Canada looks to market itself as a "point of access" to the US economy, and Cascadia markets itself as the perfect half-way point between the economies of Europe and Asia in hope of attracting much needed investment. Lacking sufficient infrastructure, investment in the region by SME's falls short of the level it could, and may lead to some firms withdrawing their investments from the region if nothing is done about it.
In dealing with infrastructure issues across borders, cooperation within the two Euroregions has taken a decisive step toward developing better regional transportation systems, at the same time striving toward increasing small business investment in the region creating long-term employment. In comparison to the infrastructure projects of the Cascadia and Great Lakes regions of NAFTA, the Nord-Pas de Calais and EUREGIO regions not only are far more advanced, but also demonstrate the effectiveness of cross-border cooperation in matters of improving regional growth as a whole. Both the Great Lakes region and Cascadia have been troubled by a combination of lack of interest and funding in promoting international infrastructure links on behalf of the respective governments. Agencies established within the two NAFTA regions working toward improving the infrastructure within the region talk of policy makers in Washington D.C. and Ottawa showing little to no interest in regional planning, combined with almost no funding. It is this lack of interest again that hinders regional growth in NAFTA from achieving its potential.
One of the most common traits of increased international trade is the immediate effect on the regional labor force in and around the border areas. This can be seen clearly in the EU, as well as in NAFTA. As stated by Michelle Wolters in Chapter 1 of this volume, the signing of the CUFTA and NAFTA agreements has led to job losses in Canada's low and medium-tech industries. Almost immediately after the signing of CUFTA, Canadian investment began moving south to the cheaper labor markets of the United States. The effect on Canada's social programs led to provincial protectionist policies to shelter the affected industries. US countervailing trade measures have led to governmental conflict within the region instead of the cooperation needed in solving the problem on a regional level.
In looking at Europe, one key difference between the EU and NAFTA is Europe's failure to fully recover from the 1982 recession. The time period immediately following the recession brought about an increased drive toward producing regional economic partnerships. The Nord-Pas de Calais and EUREGIO regions, already battling structural unemployment from sharp declines in their industrial competitiveness in the world market, were knocked down to all time post-war highs in unemployment. Since 1988, employment rates have soared within the regions, far exceeding the European average, but the total unemployment rate still exceeds that of the rest of Europe. Entering into the second phase of the INTERREG Initiative, job creation and retraining programs will play a critical role toward ensuring the region's survival and global competitiveness in the future.
Within the Nord-Pas de Calais region, the INTERREG II program has initiated programs for the improvement of cooperation between SME's and the tourism industry throughout the region. In promoting regional growth, the plan looks at training a cross-border labor force of approximately 3,000 people, as well as pursuing a better cross-border business networking system to improve investment within the region. The programs are estimated to cost 78.080 mecu from 1995-1999. The EU's contribution to the total cost amounts to 36.736 mecu. The goal is to create jobs within the region, while at the same time upgrading human resources for future growth.
INTERREG II looks to achieve a similar result within the EUREGIO. The EU's strategy for the region is summarized as:
Economic stability must be brought to the traditional mainstays of growth, and a change of direction with a view to creating new employment opportunities. At the same time, the process of structural trade must be generally speeded up through the promotion of alternative economic activities and innovation and technology transfer. The immediate priority must be SME's.
With 52.792 mecu of funding built into the INTERREG II Initiative of the EUREGIO toward programs totaling 105.448 mecu, the socio-economic impact of structural unemployment common to the EUREGIO region, due mainly to its industrial past, is a serious problem worthy of investment. Included within this funding are programs aimed at helping SME's become more competitive in the global economy through retraining efforts and technical assistance. As stated earlier, both in Europe and along the US-Canadian border SME's are seen as one of the largest sources of contributors toward regional growth. The development of a profitable business climate, an efficient infrastructure, an educated regional work force, and attractive business sites are keys toward strengthening both new and existing SME's as well as increasing regional per capita income.
Similar to Northeastern Canada, the EUREGIO is also faced with lagging levels of investment. Under the Structural Fund's Objective 1 (regions of lagging development) and Objective 2 (areas of industrial decline), the EU has made an additional 560.260 mecu available for funding 2,076.480 mecu worth of projects focused at combating regional under-investment and lower than average technological levels. The programs focus on promoting the modernization of the region's economic fabric and endogenous development, boosting research and development capabilities, creating a suitable environment to attract business and turning the resultant economic growth into jobs for the long run. The creation of jobs over the long run continues to be a problem along the US-Canadian border. As was pointed by Wolters in Chapter 1 of this volume, Canadian initiatives of establishing retraining programs along the border have led to the creation of just a few part-time, low wage positions.
Troop withdrawals from the region have had a heavy impact on the EUREGIO, and more specifically, on the SME's therein. In 1995, the EU implemented the KONVER II program, focusing on site conversion of old military bases and assisting in SME conversion from military to civilian production through advising and retraining. Through making old military buildings available as business centers for the region, it is hoped that more SME's will move into the region, adding to the number of jobs.
In contrast to the situation along the US-Canadian border, regional actions have taken precedence over individual state action in the pursuit of investing in human capital. In training the regional labor force, programs have built valuable links between the regional educational establishments and local industry. Vocational training programs in textiles, metalworking and plastics industries have all worked toward supplementing the regions' comparative advantage. Additional measures of assistance, in the form of technology consultants, have also been provided to the regions in order to accelerate the region's technological growth. It is the ultimate goal of the regions that skills acquired through regional training programs build a better business sector for the future.
The US and Canada's unwillingness to bilaterally combat job displacement has led, and will continue to lead, to increasing job loss within important sectors of their economies. With large percentages of the population being employed in the low and medium-tech sector, lack of regional action leads directly to the implementation of an individual nation's initiative toward decreasing national unemployment. Many people in Canada see NAFTA as being the major cause for job loss in Canada. As a result of Canadian protectionist measures to aid its citizens, cross border conflicts between the US and Canada are becoming common place. The level of regional cooperation in decreasing regional unemployment within Europe provides a valuable lesson of how NAFTA may go about promoting regional job expansion in the future.
Sustainable development is a subjective concept, comparable to justice, safety and beauty: everyone agrees that it is desirable, but opinion differs considerably as to what the concept should imply in practice. Any definition of sustainable development must be based in part on ethical considerations, such as the degree to which mankind has the right to interfere with the ecosystem, and the extent of our responsibility towards future generations.
United States EPA Chief Director William Reilly was quoted as saying, "NAFTA is the 'greenest' trade agreement ever negotiated." According to the preamble of NAFTA, the primary purpose of the agreement is to: "Contribute to the harmonious development and expansion of world trade . . . in a manner consistent with environmental protection and conservation; . . . promote sustainable development;...strengthen the development and enforcement of environmental laws and regulations." As seen from the earlier chapters of this volume, US-Canadian environmental policy (or lack thereof) along the border has been shown to be contradictory to this statement. Uncoordinated efforts, combined with a lack of both funding and interest from policy makers, has led to large scale environmental problems along the border. The NAFTA environmental side agreements were supposedly negotiated in the United States' interest in coercing Canada and Mexico to abide by and harmonize with the environmental policies of the US. Lack of coordination and harmonization of environmental policy has become a zero-sum game. As both nations compete to pursue individual interests, one nation's gains will only be off-set by the other's losses.
A number of additional factors exist within the context of the EU that do not yet exist along the US-Canada border. Europe is very densely populated. Its population consists of 80 million more people than the United States' 260 million, but yet is just two-thirds the size. The major concentration of population within the EU is consolidated around the immediate Euroregions addressed in this chapter. Even with the side agreements in place, substantial bi-national action remains scarce. Trade between the member states of the EU has steadily been increasing overtime, becoming less restricted and allowing for environmental externalities to increase.
Both regions share a distinctive industrial past, combined with a declining agricultural industry. Since the end of the coal and steel era immediately following World War II these areas found themselves to be in a period of degradation. The closure of local industries left an ugly landscape behind, filled with empty, dark buildings with dirty smoke stacks extending into the polluted air. Since 1989, and especially 1994, both the EUREGIO and Nord-Pas de Calais Euroregions have focused on turning the "dirty" image of an industrial wasteland into that of prosperous, environmentally sensitive regions.
INTERREG II has made available 14.422 mecu toward projects costing an estimated 29.344 mecu, focusing on cross-border cooperation and improving the environment and countryside within the EUREGIO. These funds go towards combating several environmental problems such as water pollution along the Rhine River, air pollution, and recycling programs as well as research on alternative energy sources.
As was illustrated by Sarah Mitchell in Chapter 2 of this volume, water pollution has been a major problem within the Great Lakes region of North America. Water pollution has also been an area of concern along the Rhine River, not only in the EUREGIO, but in all countries sharing a border with the mighty river. A European-wide agreement was signed on September 9, 1996 in Strasbourg, France by the Six European countries of the greater Rhine basin on cutting down water pollution of the river. Belgium, France, Germany, the Netherlands, Luxembourg and Switzerland adopted the agreement to "regulate the collection and elimination of waste generated by boats plying the river." The program will not take effect until ratified by the individual country's parliaments, expected by 1998. Using the principle that "the polluter must pay", the agreement bans boats from dumping any waste into the Rhine. To pay for the initiative, a tax of 1.5 pfenning (approximately 1 US cent) for each liter of boat fuel will be implemented. Pollution of the Rhine extends far beyond the context of the EUREGIO alone, deeming European-wide action in controlling spill-over pollution caused across borders and down-river.
In addition to solving water pollution, INTERREG II has arranged for 19.998 mecu towards innovative programs costing an estimated 56.551 mecu. The financing is being directed toward the promotion of environmentally sensitive infrastructure. Automobile emissions within the region have had a detrimental effect on air quality. The EU's programs include increasing the number of bicycle lanes and walking paths on both sides of the border in the EUREGIO.
The projects of the INTERREG II Initiative within the EUREGIO are also being complemented on the regional level. In accordance with Objective 5b (low levels of economic development in the rural sector), an additional 31.356 mecu has been set aside for both sides of the border toward programs, with an estimated total cost of 90.700 mecu promoting environmental awareness and action within the EUREGIO. Examples of regional environmental action under the Objective in the EUREGIO include: the promotion of "environmental tourism"; reorganization of the agricultural sector combined with recycling and reducing agricultural waste; and, improvement of water quality.
Similar to the idea of promoting "economic tourism" in Cascadia (See Kaestner, Chapter 4, this volume), both the EUREGIO and Nord-Pas de Calais regions are also looking in this direction toward promoting tourism to their regions. Tourism is expected to become the largest single economic activity within the Community by the year 2000. In promoting environmental tourism, the European Structural Funds have provided investment into the idea both as a way of generating economic revenue as well as a means through which environmental problems can successfully be combated.
Comparable programs exist in the second stage of the INTERREG program within the Nord-Pas de Calais Euroregion concerning the promotion of sustainable environmental development. The Commission has set aside 34.782 mecu for programs designed to keep an underlying environmental direction in regional development projects, estimated to cost a total of 70.319 mecu. These funds go toward the redevelopment of land and increasing the attractiveness of the region through environmental improvement and pollution clean-up projects.
The idea of promoting environmentalism through tourism is a new concept of development for the Nord-Pas de Calais region as well. Under Objective 1 (regions of lagging development) and Objective 2 (areas of industrial decline) of the EU's Structural Funds, an additional 210.000 mecu has been arranged for the promotion of the common cultural heritage that exists within the Euroregion. This is especially predominant in rural, formerly agricultural areas. This tourism, combined with improvements in infrastructure, push toward an increasingly important environmental role to be played by tourism within the region.
Cooperation within Europe in creating sustainable growth has proven itself worthy of attention. Europe is much more densely populated, especially within the EUREGIO and Nord-Pas de Calais regions, than what is seen along the US-Canadian border. Spill-over pollution from one country to its neighbors is taking its toll on Europe. Both Euroregions provide valuable lessons for the US-Canadian border in that they illustrate problems caused by high levels of commerce and population growth. Particular caution should be placed upon Cascadia. As brought forth by Kaestner in Chapter 4 of this volume, congestion and land transformation has already begun to have negative effects on the environment. With the projected growth rates of the region, problems are only going to increase. Every summer throughout all of Europe, the blow-over effects of vehicle emissions and smog create unhealthy levels of toxic ozone gas. This gas has been shown to cause an increase in premature death rates throughout Europe as well as considerable damage to plant life. It is estimated that Great Britain alone, separated by ocean from continental Europe, exports 50% of its pollution to the rest of Europe.
Pollution sees no political boundaries. Due to the ease of pollutants crossing borders, the only effective way to combat the problem is through international action. Along border regions, where large-scale pollution tends to occur, no single country can be effective in controlling environmental policy. Regional institutions play the critical role in working to combat trans-border pollution on the regional level. The implementation of environmental solutions in Cascadia and the Great Lakes suffer from a lack of both bilateral cooperation and funding. In confronting the problem now the US-Canadian border regions have the possibility to deter future environmental problems before they are compounded into much larger problems of the future. Ways into which the two countries may go about solving these problems will be looked at in more detail by Colin Johnson in Chapter 6 of this volume.
Though the role of local regions in the EU with regards to regional development is strictly advisory, the institutional role of the EU is key to implementing policies that are in the best interest of both the region and the EU as a whole. In achieving this level of institutionalization, the member countries had to be willing to forfeit, to a certain extent, a level of individual sovereignty. It is that "pooled sovereignty" that allows for regional development programs to take place.
Although NAFTA and the EU differ, both in foundation and level of integration, similar problems due to further integration arise. The question then becomes: What lessons from the EU can be learned by the northern border regions of NAFTA?
Institutionalization has proven itself within the realm of the EU to be effective. Institutionalization can also be quite costly. Having not experienced the extent of negative effects from the 1982 recession as did the EU, the drive toward deeper institutionalization has not arisen along the northern border region of the US and Canada. A certain amount of individual state sovereignty would have to be given up by both sides. This is a move that neither Canada or the United States seems ready to make at this juncture.
On the other hand, the further institutionalization of NAFTA could amount to incredibly large economic gains within these regions. The case for effective institutions promoting sustainable development in the EU has shown that, even in light of serious economic hardship, they remain effective and produce results.
The welfare losses accrued along the US-Canada border are self-defeating. The implementation of further institutional integration towards regional development would be in the best interest of the northern border regions of NAFTA. The welfare gains from the further institutionalization of NAFTA now would far outweigh the social costs of enforcement and future economic damage. The key lesson to be learned from the EU is that only through improved institutionalization and cross-border cooperation can the regions along the US-Canadian border achieve an elevated position of competitiveness in the global economy