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STATISTICAL ANALYSIS
(a) the 15 countries comprised in the European Union (data for which here
include three countries that are to join in January 1995),
(b) the six Eastern European countries likely to join the European Union in
the long term under the Europe Agreement,(1)
(d) major world trading blocs, especially Mercosur which is being courted
by both NAFTA and EU, and
(f) the NAFTA schedule for managing the opening of duty-free trade by
item for each of the three countries.
Data on the major trade blocs are included in order to show the context in
which NAFTA and EU discuss expansion. The Europe Agreement to unite
the continent east and west was signed on October 5, 1992, at Luxembourg;
and the EU's negotiations to develop a special relationship with Mercosur
have acquired importance by mid-1994 as Mercosur debates how closely to
try to relate to NAFTA.
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the relative importance of the major trade blocs, using the USA as reference
point. Table 6 presents the current situation of economic blocs as through
statistics for six countries, Japan standing as its own economic bloc.
Given such disparities in size, is it "fair" that the EU member countries have
disproportionate voting rights which are weighted in favor of small
countries? (For shares of voting rights, see Appendix A.) One good
argument for such weighting is that Luxembourg has the highest GNP/C of
EU's (US$ 35,260) and the highest export share in GNP (94%). Spain has a
larger population (39 million) but has EU's lowest export share in GNP
(17%). Such complexities explain why weighted voting rights are not as
arbitrary as first glance might have us believe. In any case big countries have
enough votes that it takes the votes of many small countries to reach the
present blocking minority of 23 votes, a total which once the EU reaches 15
countries will be 26 votes. (2)
Table 2 shows ranges in size for the six countries of Eastern Europe seeking
to join the EU. Poland has the highest GNP (US$ 75 billion), much higher
than that of EU member Ireland (US$ 42 billion). Unfortunately Poland is
weak in exports, which amount to 19% of its GNP. Hungary's advantage is
due to its earlier leadership among the former communist countries in
carrying out economic reform, its GNP/C being 54% higher than that of
Poland.
With regard to the two poorest countries seeking to join the EU, the poor
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economic performance of Romania is noteworthy. The Romanian GNP is
hardly double that of the Slovak Republic (US$ 10 billion), yet the two
countries are equal in GNP export share (28%). Romania's trade with
Eastern Europe collapsed in 1991 along with the COMECON trading
organization. Subsequent growth in trade with the West has been slow, and
current-account deficits of more than US$ billion have been recorded in each
of the last four years. In terms of population, Romania is 4 times larger than
that of the Slovak Republic (5.3 million). The legacy of a high-inflation
environment and modest growth accounts for the Romanian currency's very
small purchasing power. Despite all theses shortcomings Romania became a
full member of EU in ten years, that is December 1st, 2007.
The Slovak Republic with its small population and economy calls our
attention. How can it hope to compete in an expended EU? Although its
population is only 5 million and its GNP is only US$ 10 billion, Slovakia
has a relatively high level of export in GNP, 60% higher than the larger
Romania.
Given the above disparities, interests within the EU have been divided into
five "constituencies." (3) (See Chart 1.) The "Core" constituency is France
and Germany (which founded in 1951 the European Coal and Steel
Community to rebuild war-torn Western Europe). To this core are appended
Belgium, Holland, and Luxembourg, too close geographically and too small
economically to avoid being drawn into the orbit of power.
The fourth constituency involves Eastern Europe, which freed itself from
Russian rule after 1989. It sees admission to the EU, proposed for the year
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2000 by Germany, as guarantee against the resurgence of Russian authority
in the region.
Given the divergent interests of these five constituencies, two models offer
future direction to solve the problem of disunity within unity. The British
model, which seeks to give more or less equal weight to, the concentric
circles depicted in Chart 1, thus encourage cooperative diversity; and the
German-French model, which seeks to move forward with monetary union
and unified foreign policy focused on the center circle in Chart 1. The idea
that Britain may resist France and Germany by refusing to join the EU
monetary union has prompted The Economist to write:
If Britain stays out, only to change its mind later {as it did about the EU], it
leaders may seem as silly as Churchill now seems, for this comment on the
founding of the European Coal and Steel Community 43 years ago: 'I love
France and Belgium but we must not allow ourselves to be pulled down to
that level." (4)
Noticeable is that the USA has the highest GNP among all countries (US$
5.9 trillion) and the highest GNP/C within NAFTA (US$ 23,120).
Comparing the countries with lowest export share of GNP in each unit,
NAFTA's Mexico with only 14% has much less than the EU's Greece, which
stands at 23%. Romania and the Slovak Republic have twice Mexico's
export share in GNP.
With regard to the power of population and GNP, the index in Table 5 is
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based on the fact that the most important country is the USA, which equals
100. while Mexico has one-third of the U.S. population, but only 5% of
GNP.
Table 5 shows why Japan is often seen as the economic "enemy" of both
NAFTA and the EU, its power being concentrated in one county which has
established a web of trade dependency worldwide. Its GNP/C is 21% higher
than that of the USA.
The USA dwarfs most of the Western hemisphere in terms of GNP, except
for Canada, which reaches 84.3% of the U.S. total. (See Table 5.) Although
the European Union is 48% larger in population than the USA, its GNP/C is
only 89% of the U.S. amount.
In establishing itself as FTA linchpin in the Americas, (5) Mexico has done
so in spite of the fact that it has only one-third of the U.S. population, 5% of
the U.S. GNP, and 15.3% of the U.S. GNP/C at the same time, however the
NAFTA framework enhances Mexico's tremendously as U.S. business
investment has arrived with new impetus beginning in 1994, especially after
the national "defeat" of the Chiapas rebels in August at ballot boxes almost
everywhere in Mexico.
To further this comparison, let us note the fact that since 1994 the New York
Times (NYT) is carrying a regular comparison of the NAFTA-EU-Japan
economic situation for competition (See Table 6.) To represent the EU, the
NYT gives Britain and Germany; to represent NAFTA, it gives all three
partners; to represent global competition, it gives Japan.
The bottom line for global competition is shown in the 1993 manufacturing
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wage gap given in Table 7. With five leading countries of Western Europe
trying to compete under a burden of hourly scale averaging nearly US$ 21,
Japan and the United States nearly tied in the US$ 16 hourly range, and the
Asian "tigers" (Taiwan, Singapore, South Korea, and Hong Kong) averaging
about US$ 5 hourly, two facts are clear. Mexico with its US$ 2.41 hourly
manufacturing average is the attractive partner wherein factories can be
established in the Western Hemisphere. Eastern Europe with its US$ .90 is
the equivalent area of the future for the European Union.
The NAFTA model for opening its three countries over 15 years provides a
much easier process than that faced by Eastern Europe of having to integrate
into the EU on a complete basis and mostly all at once. The effect of
NAFTA integration on Mexico, the USA and Canada is shown in Table 8,
which divides the process into the following time frames for elimination of
tariffs: immediately as of January 1, 1994, and within 5, 10 years, and 15
years.
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NAFTA
NAFTA and the EU differ greatly in three major ways. The EU goes beyond
NAFTA's trading plan to include free movement of citizens as workers and
students; and EU seeks eventual unification of such potentially controversial
areas as currency, foreign policy, and military coordination.
The second difference is that NAFTA has the trading edge to expand beyond
Mexico into Latin America. Not only do the USA and Mexico have large
trade experience with the region that dwarfs that of the EU, but Mexico has
made the many agreements that at once make expanded trade possible as
well as require it to make multilateral sense of its many bilateral agreements.
Canada has far to go in developing trade beyond the USA, and both
countries face stiff competition from Japan. Under Mexico's leadership in
bringing about the integration of the Americas, however, NAFTA seems
well positioned to compete with the EU as it takes its first serious steps to
develop relations with Mercosur.
The third major difference is that the "core" for NAFTA is the USA, for EU
it is two countries. With Mitterrand’s term coming to an end in France and
Jacque Delors not only retiring as the unifying head of the European
Commission but declining to be the front-runner to replace Mitterrand as
president of France, the question is whether or not Germany can count on
either a dynamic concept of the EU or France as traditional ally as it seeks
ever greater EU unity on all fronts.
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decisiones aplicable.s a todos
los miembros.
Los miembros han establecido
una unidad monetaria común (el
ECU) pero coda paísmantiene
Cada miembro tienesu aún su propia moneda. Bajo el
Moneda
propia moneda. Tratado de MaastricL,
seprogramó que el ECU se
volvlera la única unidad
moneuriapara 1999
Los miembros se unieron en un
sólo mercado a partir del 1 de
enero de 1993. Capital,bienes y
Cada paLçconserve sus servicios circulan entre los
Aranceles propias regulaciones paises de la UE. Existe el
arancelaria. compromiso para abolir los
controles de migración interna,
pero algunospaises han
pospuesto su cumplimiento.
Autoriza a camionesy
Se establecióuna política común
cargueros comunes para
para un bloque sin fronteras y la
circular entre paises. (El
apertureto total de las rutas de
Transporte tráfico camioneroen
transporte, excepto el tráfico
cruzará la frontera
camionero,que está prohibido
mexicana libremente para
Los Alpes suizos y austríacos.
1999.)
Los trabajadorespueden
Los trabajadoresno están
Empleo moverse libremente entre los
incluidos.
paises miembros.
MigraciónyCiU Sólo Los ciudadanos delos paises de
adanía profesionistas,persona de la UE tienen garantizada la
negocios e inversionistas libertad de movimiento y
aenen el derecho de residencia.Los ciudadanos votan
trabajar en losestados par el Parlamento Europeo en su
miembros. lugar de residenciasin importer
su ciudadanía. Están siendo
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introducidos pasaportesde color
tinto en to da la UE.
Acuerdos de
Los acuerdos de comercio son
comerciocon otros
No cubiertos. firmados par la Unión, no por
países no
países individuales.
mlembros
Los miembros
estáncomprometidos con una
Políticaexterna No cubierta. política externa común, pero
pocuspaises buscan en realidad
su cabal cumplimiento.
Inflacióny
Los pulses miembrosdeben
administrac ión No incluidas.
adherirse a los límites máximos.
macroeconómica
Los miembros
acordaronestablecer estrategias
Competencia y comunes para hacer a todos Los
No cubiertas.
calldad países igualmentecompetitivos.
Las normac de calidad.son
mínimac.
Los miembros seadhieren a
Protecciónal
No cubierta. regulaciones estándar que están
consumidor
siendo establecidas.
Se aplican criteriosestándar a
Politica social No cobierta. todos los paises (por ejemplo, la
seguridad social).
Establece una pauta estándar
para todos los miembros. Se
otorgan privilegios
especialespara ayudar en las
Legislacion de Cubre sóloel Tratado de
area económicamente
impuestos Doble Impuesto.
necesitadas tale. como Españay
Portugal. Finlandia y Austria se
beneficiarán al volverse
miembros.
Medio ambiente Los participantesestán Los miembros hanestablecido
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estableciendo estándares
una política externa de
comunes en Los tratados
estándares y medidas.
Iaterales
Los miembroshan establecido
Salud No cubierta.
un programa común
Establece programasde
Aunque el TLC esuna intercambio para estudiante de
unión economica, ha educación superior y
surgido un acuerdo profesoresunlversitarios. El
Educación
lateral, pero no al programa ERASMUS apoya a
mismonivel que para el los estudiantes que
programa ERASMUS. estudienhaste un afio en otro
pais de la UE.
Los miembros buscandesarrollar
una política común de
seguridad. Se ha establecidoun
Defensa No cobierta.
sistema militar común, pero
coda pais conserve su propia
milicia.
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es)
Alemania2 80,553 1,846,064 23,030 24
Austria 7,906 174,767 22,110 41
Belgica 10,039 209,594 20,880 73
Dinamarca 5,166 133,941 25,930 37
Espana 39,077 547,947 14,020 17
Finlandia 5,062 116,309 22,980 22
Francia 57,338 1,278,652 22,300 23
Grecia 10,454 75,106 7,180 23
Irlanda 3,536 42,798 12,100 62
Italia 57,844 1,186,568 20,510 20
Luxembourgo 389 13,716 35,260 94
Paises Bajos 15,167 312,340 20,590 54
Portugal 9,843 73,336 7,450 35
Reino Unido 57,701 1,024,769 17,760 24
Suecia 8,707 233,209 26,780 28
15 paises 368,782 7,269,116 19,6583 27c
12 paises 347,107 6,978,040 20,1034 25c
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)
Bulgaria 8,952 11,906 1,330 45
Hungria 10,202 30,671 3,010 33
Polonia 38,365 75,268 1,960 19
Republica
10,383 25,313 2,440 58
Checa
Republica
5,346 10,249 1,920 28
Slovaca
Rumania 22,865 24,865 1,090 28
Total 96,113 178,272 1,854a 305
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o
m
bruto
ill
ones de per
rcial o
dolares) capita
ne
(dolar
s)
es)
TLC
Mexico 83.3 282.5 3,391
Estados Unidos 252.7 5,610.8 22,203
Canada a 27.3 510.8 18,711
SICA
Costa Rica 3.1 5.6 1,796
ACS
Cuba 10.7 26.9 2,500
G3
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Colombia 33.6 41.7 1,241
Pacto Andino
Venezuela 20.2 53.4 2,644
MERCOSUR9
Brazil 151.4 414.1 2,735
Chile6 13.4 31.3 2,336
Union Europea
Alemania 79.6 1,692.0 21,256
APEC
Japon 124.0 3,337.0 26,911
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MERCOSUR 75.8 9.7 12.8
Alemania 31.5 30.2 95.7
EU 147.6 131.5 89.1
Japon 49.0 59.5 121.2
Equity is not the only issue, however, and indeed inequity in this case may
help Eastern Europe attract capital in the competition for ever cheaper
manufacturing sites in an era of globalization.
Crossing back over the Atlantic, Mexico has taken up a leading role in
requiring better Labor laws and environmental standards which are to be
perfected within NAFTA, otherwise the second bigger free trade alliance
will remain only a mere customs union.
2. Mexico is now benefiting from the electrical and hybrid car boom in the
USA, U.S. auto companies have made Mexico their
assembly/manufacturing base also because of Maquiladora legal
advantages.
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3. Auto and other manufacturing companies in EU countries (or other
countries which do not have an FTA (Free Trade Area) with NAFTA or the
USA are taking advantage of the fact that Mexico is the only country that
has an FTA with NAFTA, thus EU countries, e.g., use Mexico as their
manufacturing/assembly base to send their exports from Mexico to the
USA as Mexican exports.
4. Mexico is still the only country to have an FTA with both NAFTA and
the EU.
Canada is far from an accord with EU because each of the 27 EU countries
will have to approve of that FTA.
5. European and Asian countries are using Mexico as the base to export to
Central and South Americas as well as the Caribbean.
6. Many companies who left for China have returned to Mexico which has
more secure legal system, does not demand co-ownership, and has much,
much lower transport costs. Further, U.S. Executive can fly from many
U.S.
cities and still be in the same time zone and not suffer from long-flight
jetlag to Asia.
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B. Continuing Problem: NAFTA Red Flags
1. Labor rights and double taxation and social security issues for
workers are not included and far from inclusion.
2. Public safety issues for executives and employees are of great concern to
foreign companies.
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Footnotes
(1)
Desmond Dinan, Ever Closer Union? An Introduction to the European
Community (Boulder, Colorado: Lynne Rienner Publishers, 1994), p.
479.
(2)
Currently 54 votes out of 76 total are needed to obtain a "qualified"
(decisive) majority; once the number of countries reaches 15, the
decisive majority will be 62 votes out of 87 total. the U.K.'s concern is
that even if it were to be joined by Germany and Holland to form a
"liberal group," they could not form a blocking minority even though
they have 40% of the vote between them. See Appendix A and "The
European Union Survey," The Economist, October 22, 1994, p. 20.
(3)
"The European Union: Back to the Drawing Board," The Economist,
September 10, 1994, pp. 21-23.
(4)
Ibid, p. 23.
(5)
See James W. Wilkie and Olga Lazin, "Mexico as Linchpin for Free
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Trade in the Americas," Background Study prepared for PROFMEX-
ANUIES Conference on "Mexico and the Americas," Puerto Vallarta,
Mexico, November 13-16, 1994,
(6) http://www.allvoices.com/contributed-news/8467402-what-is-new-
with-nafta, March 16, 2011
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