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through creation of free-trade blocs based upon the free flow instantly
to bear on statism but made clear to the world that the failures of
that state ownership was being carried out in the name of the masses.
The opening of the world trade has broken down old barriers
positive side to it. The break down of trade barriers and the rise of
They are both against statist power. It is the rise against the
In its expansive phase, the state rose against real nations who wanted
1
voluntary servitude, trying to create alternative cultures, independent
structures.
called against IMF and World Bank policy, are sending “political
Jan, 2000http://www.lumeam.ro/nr4_2000/noua_era.html
2
information” via Internet using the most important major globalization
inter -bloc trading, not intra -bloc as had dominated thinking from the
civil society.
As economic questions have come to dominate political ones,3
3
the rejection of the old command economy in all East Central
European countries has taken place. The major alternatives today are
of the interventionist role of the state, not only in the social, but also
In this thesis I will delve into the actual major free-trade blocs
Visegrad countries.
Emerging World Trade Blocs: The North American Free Trade Area and
1993, p. 218
4
The European Union is becoming the blueprint for free trade in the
member countries.
Germany and France for 1997 under the Maastrich criteria for entry of
3% of GDP.
Ireland and parts of Spain and Southern Italy. The beneficiaries of the
Union grant system (any region of the EU where the income per head
Poland.
As the world moves into large trade blocs, the two most
important to date are the North American Free Trade Area (NAFTA)
5
and the European Union (EU), formerly known as the European
Community. To begin, this study compares the key legal and policy
aspects of the two blocs and outlines the salient features of each. The
other world trade units. The analysis focuses first on population, GNP,
sixteenth member.
magnets and models for free trade are NAFTA and the EU.
6
Countries either seek to join NAFTA and the EU or follow these
be called the "Mercado del Sur, " omitting the concept of "Comun."
countries to live under the same laws and regulations. The EU has
B:l. (insert B1) The NAFTA model mainly involves freeing trade and
and export share in GDP for the EU, Eastern Europe, and NAFTA.
Table B4 shows population, GDP, and GDP/C for major world trade
5
Gellner, S., “Mexico-European Union Pact Signed,” Baja Traveler,
2000, p. 42
8
One of the members of the EU, reunited Germany has the largest
(Table Bl).
Luxembourg has the highest GNP/C in the EU (US$ 35,260) and the
larger population (39 million) but the EU's lowest export share of GNP
first glance might have us believe. In any case, countries with the
Six countries in Eastern Europe seek to join the EU: Bulgaria, the
Among these, Poland has the highest GNP (US$ 75 billion), much
9
previous leadership position among the former Communist countries
it has the lowest export share of GNP (19 percent). Bulgaria has the
second largest export share of GNP (45 percent), after the Czech
Republic, which leads both Poland and Bulgaria in export share of GNP
(58 percent) and also in GNP/C (US$2,440) compared with the rest of
the Eastern European countries.
(US$ 24.9 billion) is more than double that of the Slovak Republic (US$
10 billion), yet the two countries export the same percentage of GNP
Subsequent growth in trade with the West has been slow, and
four times larger than that of the Slovak Republic (5.3 million).
The legacy of high inflation and modest growth accounts for the
10
Romania will become a full member of the EU within the next ten
years.6
How can the Slovak Republic, with its small population and weak
population is only 5 million and its GNP is only US$ 10 billion, the
Slovak Republic has the same high level of exports relative to GNP as
the Romania.
Figure B: 2).
6
Lowry, Karen, Miller, “East Loves West,” Newsweek,
11
people while trying to prevent the rise in Europe of any
Rich and poor countries, the latter including Ireland and to some
extent Italy.
Europe freed themselves from Russian rule after 1989 and view
the next decade Norway has petroleum and fish for export to
7
Lowry, Karen, Miller, “East Loves West,” Newsweek,
fishing beds to the EU. The urban sector, some of which also
voted against joining the EU for fear of losing social benefits, has
their
the economy.5
the divergent interests: (1) the British model seeks to give more or
and a unified foreign policy focused on the center circle in Figure B:2,
the Core. The notion that Britain may resist France and Germany and
Economist:
13
If Britain stays out, only to change its mind later [as it did
about the EU], its leaders may seem as silly as Churchill now
and Steel Community 43 years ago: "I love France and Belgium
Population totals (Table B4) for NAFTA and the EU are now about
the same: NAFTA, 363.3 million; EU (15 countries), 368.8 million (1992
France and Italy. Among all countries in the two trade blocs, the
the highest GNP/C within NAFTA. Overall, Luxembourg has the highest
GNP/C.
NAFTA (14 percent) and Greece places last in the EU, with 23 percent.
Even Romania and the Slovak Republic rank above Mexico, with 28
percent each.
strength of major trading units. For example, Mexico has one third of
the population of the United States, but Mexico's export share of GNP
is only 5 percent of the U.S. export share of GNP. The table also
shows why Japan, a single country that has established a web of trade
the United States. Many countries have formed implicit trade blocs to
NAFTA gives the United States, Canada, and Mexico the opportunity to
of Canada, whose GNP is 84.3 percent of the U.S. total (Table B5).
Although the population of the EU is 48 percent larger than the U.S.
Mexico has established itself as the linchpin for free trade in the
America S7 despite the fact that its population is only one-third that of
the United States, its GNP 5 is percent of the U.S. amount, and its
GNP/C 15.3 percent of the U.S. figure. The NAFTA framework, along
with the "defeat" of the Chiapas rebels in the August 1994 national
investment.
15
Most recently trading options with Italy and the European Union were
shows that in relation to the GNP/C of the United States, Mexico ranks
higher than Mercosur by 3.5 percent, while Germany, with a
population about equal to the U.S. population, has 95.7 percent of the
U.S. GNP/C, raising the average for the EU to 80 percent of the U.S.
Japan).
1997, p. 7
21, 1997, p. 32
16
with the highest average hourly wage in manufacturing (1993 data)
In Japan and the United States the figure is $16. The Asian
average about US$ 5 per hour. These data illustrate Mexico's status
manufacturing funds into Romania, for example, but the EU has yet to
gap between countries than is the EU. For NAFTA, the U.S.
manufacturing wage rate is 6.8 times higher than the Mexican rate.
For the EU, the present gap between the highest wage (Western
Germany) and the lowest one (Portugal) is 5.4 percent, but the
Bulgarian wages. Equity is not the only issue, however; in this case,
inequity may help Eastern Europe attract capital in the competition for
17
Under the NAFTA model, the process of opening markets to free
trade will occur over 15 years (Table B8). Eastern Europe, in contrast,
into the EU. In keeping with the gradual removal of trade barriers,
Mexico has eliminated duties on all U.S. and Canadian products not
from Canada (1.0 percent), the reality is that much of the Canada-
greater.)
Conclusion
18
When NAFTA and the EU are compared with respect to their
beyond those with the United States. And both the United
with the EU, as it takes its first serious steps to develop relations
with MERCOSUR.
19
Meanwhile, expansion of the EU into Eastern Europe is
with modern laws and credit systems but also by Russia's argument
scheduled by 1998.
has been the first to be accepted. There are signs that budget deficits
will be a problem for Germany and France for 1997 under the
Ireland and parts of Spain and Southern Italy. The beneficiaries of the
Union grant system (any region of the EU where the income per head
20
available) will than be the Czech, Slovak Republic, Poland and
Hungary.
21
The Visegrad Countries (CEFTA.) New accessions
forty years of socialist rule, Poland and Slovakia are the most likely to
are better prepared for the accession than the rest and avoids using
the Visegrad label and considers the CEFTA label more appropriate,
But two World Bank economists say that while these nations have
come a long way, the four -- known as the Visegrad countries -- are
contract enforcement.
analyst Michael Borish say that to ensure the continued growth of the
22
State ownership is still significant in both the banking and industrial
sectors in all four countries, they say, and "Poland and the Slovak
Without question, the two economists point out, these four countries
The Czech Republic has seen its private sector increase from 11
thirds of the Hungarian labor force now working in the private sector.
And in Poland, the private sector share of GDP rose from 28 percent in
23
one region --Bratislava. Economists say that private sector growth
since 1994 has been "slowed by policies that, despite the growth of
privatization."
Hungary’s GDP.
The economists say that private sector growth in Hungary has
been "stunted" by high tax rates, high inflation and heavy government
borrowing.
They write that in all four, "tenancy laws distort rental markets and
Similarly, say the economists, all four countries have improved their
24
commercial codes, but that "institutional weaknesses" such as a
enforcement.
The flow of credit to the private sector has also been "mixed" within
the four nations, say the economists. New lending to the private
in all except the Czech Republic, where the private sector got 65
percent of total outstanding credit in 1995. In Hungary, Poland and the
Slovak Republic, on the other hand, private sector credit was at the
archaic agricultural structure in the region that would cost the Union a
11
Mediafax, April, 1997
25
The cheap labor force is a mine gold for Westerners who are flooding
relations with the EU and problems concerning sea and river transport
major value. The growing integration of the world economy has been
overseas markets and has hoisted wages. Yet some Western and East-
26
the adverse consequences of change showing a particular propensity
France, Sweden and almost all East Central Europeans. One symptom
between state protection and freedom of action is the model for future
development in a globalized economy.
272
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72727272727272727272727272727272727272727272727272727272
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If the strongest example of Globalization to date is found in NAFTA and
inhibits world competition. Although those same Brazilian leaders claim that
they favor joining the U.S.-Mexico proposed Free Trade Association of the
America (FTAA), the realization that Mexico would be the bridge between
agreements with Latin American countries to lay the basis for the FTAA, a
basis that the USA can not help to build because it is trapped in petty
partisan political struggles between the Republic Party and Democratic Party.
In the meantime, Mexico has signed FTAs with Venezuela and Colombia,
Chile, Bolivia, Costa Rica, and is developing such a union with the Caribbean
funds has vanished almost everywhere at once and there is not enough
private capital to meet all the demands for it. The change of world
tech jobs.
28
As How the World Bank and the IMF had been building the
Argentina that began in the mid 1980s has become the most
Mercosur's initial stages had been successful and the already high
associate members in 1996. Peru and the Andean Group, the other
29
south American trade group, have began talks on a formal agreement
the transition to Mercosur from the Buenos Aires Act of 1990 until the
Cooperation (PICE). The second part focuses in the debate over which
30
Technocrats and policy makers alike have advocated economic
1985 at 8% of world trade, and it was not until 1989 that the region
regained the levels achieved nine years earlier. The burden of the
to pay for imports, and although the recession allowed for a favorable
31
During the second half of the 1980s, Latin American countries
the pressures brought about by the foreign debt begin to ease and
flown away during the debt crisis, which allowed for the financing of a
large deficit in the current account and an increase in international
32
protocols, demanded a low level of coordination required to define the
which was very low before 1986, the PIEC also addressed Argentina's
the stimulus that could have for the rest of the economy, and the high
33
political and economic arenas. Both countries were new democracies
conditions under which the PIEC had to operate became very difficult.
The problems of the Cruzado Plan and the troubles with the level of
383% for Brazil, almost twice as bad as the 230% for the rest of Latin
34
their approach to the foreign debt. While Brazil was declaring a
began to restructure its tariffs in 1988-89, and in 1990, the list of ban
1990.
during this period. Most of this growth was from Argentine exports
that gained access to the Brazilian market for the first time. The
35
policies, the capital goods sector captured a greater share of trade at
13%. In the food sector, 500 products were added to a list of zero
tariff between 1986 and 1990, and in 1988 Brazil became Argentina's
most important export market for wheat, capturing over 26% of wheat
exports.
complementation.
The new coalitions that arrived to power after the Argentine and
policies for regional integration. After the end of the cold war, it
seemed that power competition between nations had shifted its center
36
Two sets of events in particular affected Argentina and Brazil. On the
markets of the industrialized nations, and the rise of China and East
the proliferation of trade blocs, the United States Initiative for the
37
The simultaneous implementation of preferential agreements
and benefits that exceeds the technical and political capacity of closed
economies.
has been the traditional view from the United States regarding
38
growth, suggests that regional groupings can stabilize the region
economies.
income.
preference with low barriers to third countries, but should also avoid
39
administrative and production costs and leads to better resource
trade, both intraregional and total trade, and not to trade diversions.
Therefore the Buenos Aires Act, signed in July of 1990,
trade by December 31st 1994. Although the Act allowed for the
goods that the PIEC had allowed to be liberalized, the new strategy
40
adopted negative listing that included temporary exemptions to the
rule.
96).
These elements became all the more important after the 1992
less than three years for the four nations to agree on a CET.
41
During the transition phase, the different development of the
and threatened the consolidation of the custom union by the last day
of 1994. The Argentine economy grew almost four times faster than
that of Brazil. The cumulative real GDP growth between 1991 and
1994 was 10.5 % for Brazil and 40 % for Argentina. Inflation was
doubled the next year to end at 2,244.5 for 1994, the year the Plan
paths.
After convertibility, Argentina fixed the peso with the dollar and
42
Since the end of 1992, the automatic process of linear
Argentina.
43
During the transition period, the economic establishment of
custom union.
44
exports to Brazil increased at an annual rate of 32%, while Brazilian
Argentina became Brazil's third market for exports and imports, after
the European Union and the United States. This rise in intraregional
trade has gone hand in hand with the growth of total trade. Mercosur's
exports to the rest of the world continued to grow. Also, total imports
1986. By 1995, the first year of the custom union, almost half of
preferential liberalization.
45
automotive industry. The agreement stipulated quotas for the free
After the Real Plan was lunched in the second half of 1994,
Brazilian currency began to increase in value and Argentina again
after the Real Plan of stabilization, exerted great influence and offered
During the first year of the Plan Real (7/94 to 7/95), the peso
commitments.
46
trade jumped from 5% to 20% of world trade. Presidential summits
and numerous contacts between high and medium level officials was
well under way by the time the CET was reached. The difficult
1995. The common external tariff (CET) applied covered 85% of goods
and had an average of 14% and a maximum of 20%. The other 15% of
trade has different national tariffs that range from 0% to 35%. The
year 2006. There were also national lists that included some products
47
foreign direct investment in Argentina and Brazil has been growing
since the beginning of the PIEC and total almost 40 billion dollars
1996, the Brazilian state of Sao Paulo had displaced the United States
peacekeeping training.
48
One of the first problems found by the Mercosur after the
capital pulled away from Latin America, hit the region hard. Argentina,
with the peso fixed by law at par with the dollar, was hit hardest,
have been in low gear, with a 3.5% GDP growth for Argentina and a
Mercosur’s objectives..
States over NAFTA. This structural situation has made Brazil the main
49
force behind the shaping of Mercosur. Brazil, reluctant to cede
little choice but to follow the steps of their main trading partners,
although they clearly prefer a deeper union with no rapid expansion
balance between the sovereignty of the nation state and the need for
50
So far, Mercosur’s decision making power rests with the inter-
required textile imports to be paid for within 30 days rather than 180;
deficit, limited credit to pay for imports. All Mercosur members were
eventually exempt from these measures, but only after difficult and
had a trade deficit with the rest of Mercosur. The opening of the
51
Brazilian market to Argentine lubricants on May of 1997 was a
Mercosur. While Brazil’s weight in world trade has been declining for
tentative target for free trade by the year 2005. The EU is Mercosur’s
NAFTA and Mercosur. This means that a precondition for FTAA will be
shows: 27% went to the EU; 21% went to NAFTA; and 18% to Asia.
52
The discrepancies between the United States and Mercosur over
reduction of tariffs.
reached.
IV - Conclusion
effective implementation of the CET is still being worked out and free
53
access to intraregional markets continues to be affected by a number
of local regulations.
improvements.
54
intraregional trade has persisted for the last twelve years and it will
national governments.
the short-term.
55
The harmonization procedures should try to eliminate the
Within the next twenty years, a free trade area in the western
regional model for integration and as a global trader will give South
56
There is an unprecedented fever on the part of Brazil for
leadership and enlargement of the Sounthern cone free trade area till
January 2002.14 The implementation of the free trade accord between
The vision is to connect all South America not only fluvially but also
Conclusion
lives.
2000, p. 3A
15 Postrel, Virginia, “The rich may get richer, but numbers suggest the
poor are doing better, too,” The new York Times, August 10, 2000
57
The flow of cross-border funds is private now - no government is
information technology.
trade) work just fine on their own, nation states more often just get in
the way (given their own troubles) and state intervention is absent.
Region states are Hong Kong, or the Kansai region around Osaka, or
map are irrelevant as the currents of global economy (namely the new
contends that it is not globalization that some people are against, but
impuse sus falcias: Viviane Forrester,” Proceso, March 12, 2000, p.45
59
The globalization and ultraliberalism are not synonimous nin