NAFTA and Beyond: Regional Policy Making in an Interdependent World represents the culmination of this task force's attempt to develop an integrated policy proposal for the border regions of the United States. This policy proposal seeks to go beyond the currently acrimonious approach taken by discordant US government agencies. This lack of harmonious policy for the border regions is illustrated by the competing visions for development promulgated by diverse government including the Environmental Protection Agency, the Departments of Commerce and Labor, and the Justice Department, among others. Border regions within North America have become a stage for the most intense socio-economic and environmental interdependencies that are transforming the relationship between the US, Canada and Mexico. As a result of this cross-border interdependency, impassioned debates over the future of these regions abound and make absolutely clear the urgent need for harmonized US policy for its northern and southern borders. Such an integration of policy will in turn set a precedent and standard for broader harmonization of policy demanded by the broader patterns of integration that have already resulted from and taken us beyond a narrowly economic NAFTA.
In order to bring detailed analysis to our arguments about integration, this task force sets out to provide a thorough set of policy recommendations for four economically, socially and environmentally interdependent trans-border regions within North America. Thirty years ago (the zenith of bi-polar spatial organization of sovereign nation states in North America and around the world) it would have defied logic to approach development issues from a cross-national and regional perspective. Since the early 1970s, however, the world has undergone a major transformation in terms of economic orientation and spatial order. As ever-increasing flows of capital, goods, information, and people create web-like relationships around the globe, traditional political boundaries are threatened with seemingly imminent anachronism by a pattern termed globalization that trade agreements such as the European Union and NAFTA continue to extend and exemplify. While the world assumes a more globalized nature, traditional nation states have declined in importance while dynamic, productive and increasingly autonomous free market regions (which often extend across national boundaries) and cities are gaining in importance. This unlikely trend of simultaneous globalization and localization has been referred to as "glocalization" by leading scholars, including Agnew and Corbridge, and represents a major policy challenge for trading blocs such as NAFTA. In a globalized and interdependent world where political boundaries have declining significance and trade blocs such as NAFTA are the trend, development policies must be constructed for the increasingly significant trans-border regions where trade, growth, and social and environmental problems are focused.
The following pages will explore in greater detail the aforementioned transformation of the world economy - from an emphasis on domestic production to the established trend of "glocalization" - and will conclude by introducing and describing the trans-border regions within the North American Free Trade Area that have emerged as the most significant sites of "glocalization" in North America.
Since the early 1970s, the world has witnessed a profound, albeit gradual, shift in the economic orientation of the vast majority of nation-states. Prior to this, in the twentieth century, national economic strategy generally had been predicated upon the principles of Fordism. Catalyzed and since characterized terminologically by Henry Ford's 1914 introduction of the 5 dollar workday at his automated car assembly plant in Dearborn, Michigan, Fordism consisted essentially of an industrial system based on the mass production of standardized products and mass consumption of consumer goods for a predominantly domestic market. In terms of state policy, the balance of production and consumption was regulated according to principles of Keynesian macro-economic management and social-welfarist intervention in the economy.
Geographer David Harvey notes that the Fordist period passed through a 30 year (1915-1945) period of evolution before reaching "maturity as a fully-fledged and distinctive regime of accumulation" in the late 1960s. During this time, industry boomed and economic regulation and governance clearly lay within the realm of government economists and strategists.
The postwar period saw the rise of a series of industries based on technologies that had matured in the inner-war yearsÖbeen pushed to new extremes of rationalization in World War IIÖandÖbecame the propulsive engines of economic growth, focused on a series of grand production regions in the world economy [such as] the Midwest of the United States. The phenomenal growth that occurred in the postwar boom dependedÖon a series ofÖrepositionings on the part of the major actors in the capitalist development process. The state had to take on new (Keynesian) roles.
The tumultuous conclusion of the Fordist period came in the early 1970s, as declining relative productivity and profit levels in developed countries, combined with increasing wages, resulted in precipitous price inflation and a consequent decline in purchasing power of core currencies. The postwar emergence of Western Europe, Japan, and various other countries into the realm of highly developed industrialization, coupled with burgeoning international trade and competition caused industrial profit levels to decline. Because the inflexible Fordist mass production systems required large amounts of fixed capital investment and were predicated on assumed stable growth of unchanging mass-consumer markets, increased competition resulted in declining profit levels. As profit levels descended in advanced capitalized countries from 17% in 1964 to 10% ten years later, the logical reaction of declining enterprises was the attempt to lower wages, a move that proved to be impossible, for the most part, due to the inflexibility of the strong, unionized working class of the US and Western Europe. While wages remained rigid, profit levels fell, and the ensuing tension resulted in a tremendous increase in inflation - from 1% and 4% in the US and Western Europe respectively (1960) to 9% and 13% in 1975 - that ultimately led to the demise of the US dollar based Bretton Woods monetary policy when the US devalued its currency. With the OPEC cartel's decision to raise oil prices, the Arab decision to embargo oil exports to the West during the 1973 Arab-Israeli War and the ensuing oil crisis of 1973, much of world was sent into a tumultuous scramble for new modes of production and new systems of economic management.
Technological change, automation, the search for new product lines and market niches, geographical dispersal to zones of easier labor control, mergers, and steps to accelerate the turnover time of their capital surged to the fore of corporate strategies for survival.These experiments represent the early stirrings of the passage to an entirely new regime of accumulation, coupled with a quite different system of political and social regulation.
The result for many national economies has been Post-Fordism, an increasingly free-market and flexible capitalist system based on reduced government intervention, increased flexibility of production, greater capital mobility, increased segmentation of the global labor force, new sectors of production, new ways of providing financial services, intensified rates of commercial, technological and organizational innovation and, of paramount importance for this project, a tremendous overall shift toward so-called globalization.
Globalization, for purposes of this paper, will refer primarily to the integration and interconnection of global production and consumption processes, as well as to the continued transition, of the world economy, away from domestic self-sufficiency and toward international trade based on comparative advantage as well as the observed as increased cross border flows of capital, goods and services. A telling example of increased globalization and the ubiquity of world-wide enterprises is cited by Stuart Corbridge and John Agnew: "40% of world trade in the early 1980s, as in the early 1990s, was in the form of trade between branches of the same multinational company (intra-firm trade)." Also entailed in globalization is a phenomenon of "time-space compression" in which the "time horizons of both private and public decision making have shrunk, while satellite communication and declining transport costs have made it increasingly possible to spread those decisions immediately over an even wider and variegated space."
Globalization has had two major ramifications for governance and the nation-state: First, as a result of the increased economic interconnectedness entailed in globalization, barriers to trans-border flows have, not surprisingly, become a liability for governments because they dissuade trade and investment. Highly mobile multi-national corporations can now just as easily establish production facilities in Mexico as in Bangladesh, and thus tend to follow the most lucrative set of circumstances, including, most importantly, the fewest barriers to entry. As a consequence, many national government policies that traditionally inhibited cross border transactions such as tariffs and non-tariffs barriers have been relaxed or dismantled in an effort at increased competitiveness in the world economy. According to Khaler, "as cross border economic integration increases, governments experience greater difficulties in trying to control events within their borders, [a phenomenon]Ösummarized by the term diminished autonomy." Second, as a result of globalization, the world's economies have become highly interdependent and thus must cooperate to solve common problems. "Economic interdependence among nations has increased sharply in the past half centuryÖyet the increasing sensitivity of national economies to events and policies originating abroad creates dilemmas and pitfalls if national policies and international cooperation are poorly managed." These dilemmas will be addressed in greater detail, focusing precisely on those introduced by NAFTA, in later chapters of this project.
Numerous authors have analyzed and discussed the transformation from Fordism to post-Fordism, and despite slight theoretical nuances, concur on the fundamental assertion that globalization is a dominant characteristic of today's world economy. Robert Keohane and Helen Milner, in their analysis of the contemporary global system, assert that, "[e]conomic transactions across national boundaries have expanded dramatically over the last two decadesÖ.Since the early 1970sÖworld trade has increased dramatically relative to previous levels and relative to domestic productÖ.Hence, internationalization, as we empirically identify it, has increased. " These authors support their claim with ratios of merchandise exports relative to GDP for 16 industrialized countries, which conclusively show an over 50 percent increase since 1913 and a 28.3 percent increase since 1973.
In line with Keohane and Milner is Timothy McKeown, who has shown that, "[i]mport volumes as a percentage of real GNP in industrial capitalist countries, which remained between 10 and 16 percent throughout the ninety years between 1880 and 1972, increased to almost 22 percent during the 1973-1987 period."
Stuart Corbridge and John Agnew, in support of their reference to "the dramatic post-war growth in international trade," state that in the forty years spanning 1950-1990, trade between high income economies grew by a factor of fifteen, and "by 1991 even hitherto ëclosed' economies like the US and Japan had import/GDP ratios of about 7-9 percent while more open economies like the UK and the Netherlands had ratios closer to 25-45 percent."
Toward the more zealously free-market end of the spectrum is Kenichi Ohmae, who has based his assertion of increased globalization on what he refers to as the growing importance of the four I's (Investment, Industry, Information, and Individual): Investment, according to Ohmae, is no longer geographically constrained but follows the world's most ëpromising' opportunities; Industry has become more global as its strategies are shaped by marked opportunities rather than state interests; Information technology's dramatic evolution has allowed companies to operate all over the world without establishing expensive and time consuming complex business structures; Finally, the Individual has become less likely to base consumption decisions on product origin and more likely to respond to market forces (price) when making purchases.
In a 1996 OECD working paper on globalization, experts from business, political, academic and policy making backgrounds jointly announced that "[g]lobalization has become the dominant trend in the world economy, notably through the rapid development of a growing number of non-OECD economies. These dynamic and emerging market economies are ëlinking' themselves [interdependently] to the global economy through trade, investment, capital flows and technology exchanges."
Other authors, such as Hirst and Thompson, despite demurring on the decline of the nation-state, thoroughly concede that increasing levels of trade and investment since the 1970s have created an international global economy. In sum, despite diverging theoretical nuances among prominent authors, it is clear that a general consensus exists that the world's economic organization pattern has become increasingly global.
The assertion of growing globalization, in addition to the related interdependence and reduced autonomy of national economies is especially pertinent to North America. In Canada, the US and Mexico, the recognition of increased reliance on international trade in North America, and a desire for its institutionalization and further deepening, resulted in the 1992 North American Free Trade Agreement. While being a product of, and a major player within the globalized world economy, NAFTA has contributed to the emergence of various semi-autonomous trans-border regions within North America, via a process referred to earlier as "glocalization."
NAFTA has led to regionalization by bequeathing upon the border regions both increased economic and political importance. As a result of globalization and the free trade agreement, North American border regions that were once relegated to peripheral status due to their distance from national centers of production have seen themselves transformed into loci of growing international trade. Whereas in the age of Fordism the areas along the northern and Southern borders of the US had little economic significance v's a v's Midwestern and Eastern industrial centers, in the post-1970s era of globalization and interdependence, border regions have become important international trade centers and viable contenders in the international competition for capital and investment. In recent years, millions of dollars in international investment capital have begun to pour into North American transnational border regions because they offer benefits unrivaled by non-border production centers, including easy access to multiple markets and, particularly in the case of Mexican borders, relatively inexpensive labor and production costs within close proximity to large markets.
Concurrent with the increasing economic significance of North America's border regions is a growing political importance. With the emergence of globalization, the federal governments of Canada, Mexico and the US have simultaneously become more decentralized, moving power and decision making to more local levels. As a result, increasing responsibility for international affairs and cross-border problems has fallen to state and city governments. These smaller, flexible and oftentimes more efficient governmental actors in all three countries have responded cooperatively to solve problems and plan for the trans-border regions' futures. In addition, state and city governments increasingly have more in common (socially, economically and environmentally) with states, provinces and cities across national divides than with their respective federal governments, an additional factor that has contributed to regionalism within the NAFTA context. For example, as the North American border regions have become the focus of highly contested international debates over development, environmental degradation, job security, immigration, and a host of other issues, the actors charged with solving international problems are local governments acting with greater independence from distant federal governments in Ottawa, Washington D.C., and Mexico City. Furthermore, it is perceived that the outcome of debates regarding the "front lines" will influence future policies, as the effects of globalization become more pervasive throughout North America.
In addition to assuming increased economic and political importance in the post-Fordist age of "glocalization", border regions in the US have quickly come to recognize the interdependent relationship they share with their Canadian and Mexican counterparts, despite separation by political boundaries. Two general forms of border region interdependence, socio-economic and environmental, will be addressed in detail by this task force. Socio-economic interdependence, characterized by the inextricable regional integration of production and consumption processes, labor migration, physical infrastructure and even linguistic and cultural traditions, constitutes the first focus of this project. The second form of interdependence within North American border regions results from the areas' shared environments. Because air pollution, water contamination, acid rain and other problems have no regard for political boundaries, they have the potential to affect entire cross-border regions, including vast areas not belonging to the negligent country, and thus assume regional importance. Due to strong environmental and socio-economic connections, the maintenance of long term quality of life along the US borders is now inextricably tied to the well being of our neighbors in Mexico and Canada. This interdependence has produced both complimentarity, situations that are mutually beneficial for both sides of the border, as well as mutually destructive, internecine predicaments. For example:
In sum, the emerging global nature of the world has led to increased economic and political importance, as well as greater trans-border interdependence within North America's trans-border regions. Thus far, this interdependence has demonstrated the ability to significantly benefit and harm the US side of the border. It is increasingly recognized that for US border regions to thrive in the future, effective and harmonized US border region policy must be implemented in which regional Canadian and Mexican counterparts share in the economic, social, and environmental development, as both sides' futures are now inextricably tied.
Although for the US, joining NAFTA represents the first policy step toward acknowledging and reorienting itself for success in a burgeoning globalized and interdependent world, this country still lacks a coherent, sustainable, long-term development strategy for the above trans-border regions. This lack of sound regional development policy for these interdependent areas constitutes a serious threat to the long-term viability of NAFTA (and thus to the President Clinton's long-term political aspiration of being seen as the pro-free trade president), and is illustrated by general dissonance and numerous inter-government agency contradictions among different agencies regarding border region development objectives.
If the trans-border regions' development policy problems, illustrated by the above policy disagreements and contradictions, are not redressed with sustainable economic, social and environmental policies, NAFTA's long term success will be jeopardized, with two major consequences; first, the US will stand to suffer further relative decline within the world economy and second, US President William Clinton will risk failure in his bid to be posterity's "president of free trade."
This task force thus seeks to provide development policy solutions, on a regional level, that will allow for the long-term sustainable success of NAFTA by proposing policy solutions not just for business and economic development questions, but also to complex environmental and socio-cultural challenges as well. The following trans-border regions have been selected as points of focus, not only for their economic significance, but also as a result of their notoriety and salience in national news:
In conclusion, as the world evolves economically from its former Fordist orientation toward a situation of globalized economic interdependence, numerous trans-border regions have grown mutually dependent and emerged as important economic and political entities, a process appropriately called "glocalization." Within the North American context, globalization has had a profound economic and political impact, as illustrated by the 1992 North American Free Trade Agreement. Concurrent "glocalization" has resulted in the emergence of four major socio-economically and environmentally interdependent trans-border regions; Cascadia, Great Lakes/New York, San Diego/Tijuana, and Texas/Northeast Mexico. While for the United States, joining NAFTA represents an important step toward embracing and thriving in the emerging globalized world, this country has failed to develop a coherent and sustainable long-term development strategy for the above-described interdependent trans-border regions. This conspicuous absence of long-term policy threatens the long-term viability of NAFTA and could jeopardise President Clinton's aspiration to become posterity's consummate free trader if no solutions are found.
With this in mind, the following sections of this task force outline the numerous challenges of socio-economic and environmental interdependence encountered within the four trans-border regions. In addition, policy chapters for both the northern and southern borders provide coherent and harmonised long term regional development policy proposals, intended to produce a high quality of life for US trans-border region residents as well as their Canadian and Mexican neighbors.