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Were the original Canada–US Free Trade Agreement (CUSFTA) and the North American Free Trade Agreement (NAFTA) significant policy turning points? Understanding the evolution of macroeconomic policy from the pre- to the post-NAFTA era in North America

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  • Mario Seccareccia

    (University of Ottawa, Canada)

Abstract

This article reviews the Keynesian/heterodox critique of free trade and the principle of comparative advantage, and offers some prima facie empirical evidence for North America that contradicts the basic predictions of the traditional free trade model. The evidence supports, instead, the view that trade liberalization actually promoted a perverse neo-mercantilist export-led growth (ELG) strategy that generates deflationary pressures not so much because NAFTA promoted greater international competition, but primarily because ELG relied on the macroeconomic role of the state in its implementing of restrictive fiscal and monetary policies to keep a lid on wage growth. The article argues that there is need for an alternative NAFTA that should promote the free circulation of goods, and that an institutional structure should be put in place that firmly ties each national government to an explicit full-employment commitment.

Suggested Citation

  • Mario Seccareccia, 2014. "Were the original Canada–US Free Trade Agreement (CUSFTA) and the North American Free Trade Agreement (NAFTA) significant policy turning points? Understanding the evolution of macroeconomic policy f," Review of Keynesian Economics, Edward Elgar Publishing, vol. 2(4), pages 414-428, October.
    • Handle: RePEc:elg:rokejn:v:2:y:2014:i:4:p414-428
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    References listed on IDEAS

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    1. Robert A. Blecker, 2003. "The North American Economies After NAFTA : A Critical Appraisal," International Journal of Political Economy, Taylor & Francis Journals, vol. 33(3), pages 5-27.
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    9. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
    10. Mario Seccareccia & Marc Lavoie, 2010. "Inflation Targeting in Canada: Myth versus Reality," Palgrave Macmillan Books, in: Giuseppe Fontana & John McCombie & Malcolm Sawyer (ed.), Macroeconomics, Finance and Money, chapter 3, pages 35-53, Palgrave Macmillan.
    11. Hassan Bougrine & Mario Seccareccia, 2004. "Alternative exchange rate arrangements and effective demand: an important missing analysis in the debate over greater North American monetary integration," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 26(4), pages 655-677.
    12. Keynes, J. M., 1974. "The international control of raw materials," Journal of International Economics, Elsevier, vol. 4(3), pages 299-315, August.
    13. Mario Seccareccia, 2013. "Budgetary Deficits and Overhanging Public Debt: Obstacles or Instruments to Full Employment? A Kaleckian/Institutionalist Perspective," Journal of Economic Issues, Taylor & Francis Journals, vol. 47(2), pages 437-444.
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    More about this item

    Keywords

    free trade; comparative advantage; export-led growth; CUSFTA; NAFTA; macroeconomic austerity policies;
    All these keywords.

    JEL classification:

    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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