Ten Years into NAFTA and Its Lessons to Korea

Ten Years into NAFTA and Its Lessons to Korea

&nbsp;&nbsp;It has been now more than ten years, since the North American Free Trade Area (NAFTA hereafter) had formally launched in 1994. Although it is not yet clear that NAFTA had provided economic prosperity that was promised, the launch of NAFTA ten year ago had a huge impact enough to change the shape of world trade regime. In fact, there were ever more increases in the number of regional trade agreement around the world after 1994. Especially in Asia, where the regional trade agreements were not traditionally welcomed, a sudden blossom of talks on free trade agreement are noticeable. Japan and Singapore were the first in the region to make such an arrangement. Korea followed the suit by negotiating and concluding FTA with Chile, Singapore, and recently with ASEAN. Although it is suspended over the agricultural market opening for now, Korea and Japan are officially negotiating the FTA between themselves. China also introduced similar agreement with Hong Kong and Macao and now concluded FTA negotiation with ASEAN, Chile, and Pakistan. It certainly looks like a battle to take a regional economic initiative. Worrying competitions among Asian countries and that against western economic blocks such as NAFTA and EU, some suggests Asia-wide trade arrangement so that it can function as a harmony scheme among them and a strategic cooperation toward outside.<BR>&nbsp;&nbsp;The main focus of this paper is to draw lessons from ten years experience of NAFTA to the Northeast Asian Economic Integration.<BR>&nbsp;&nbsp;In this paper, it is argued that the leadership of the U.S., motivated both by economic and political concerns, played a greater role in pushing for NAFTA. Facing the growing competition with other continents, especially with Asia, the U.S. need to secure both economic and political ties with its two neighbors. In return, the U.S. had to give carrots to Canada and Mexico in the form of what they wanted. For Canada, it was the restructuring of their industries into more high tech sectors. For Mexico, it was the promise of helping them to modernize their industry and to fight against its chronic poverty. To give these economic benefits to its neighbors, the political leadership of the U.S. also had to have a support from its own industries. This paper identifies the automobile and electro industries as the critical players in supporting the idea of NAFTA in the U.S. They were the industries that had faced the fiercest competition from East Asian countries, such as China, Japan, and Korea. Although the overall economic performance of NAFTA for its member countries seems not that brilliance, we need to look at the performance of the core industries that supported NAFTA in the process. The automobile and electro industries certainly had benefited from NAFTA, while Canada and Mexico restructure their&nbsp;&nbsp;industries into the direction that they wanted.<BR>&nbsp;&nbsp;In light of the findings in this paper, the current situation in Northeast Asia is very different from what North America was ten years ago. First of all, there is no outstanding leader like the U.S. in North America. While China and Japan compete each other for the position of the leader, Korea also wants to take a significant role of their own. Furthermore, it is not clear what they can give each other. Considering the fact that Japan, Korea, and even China have been pursuing a similar economic development strategy and they are now competing each other in almost every industrial product category in the world export market, it seems not possible to devise a scheme to satisfy major players in the national as well as in the industrial level. Therefore, it seems not possible to see the Regional Economic Integration Scheme in Northeast Asia at least in the near future.<BR>&nbsp;&nbsp;Therefore, it is rather much more practical to discuss the possible steps to lessen the tensions within this region first. Fortunately, we see some areas of possible colla