Tuesday, January 19, 2010

Interpreting NAFTA: The Science and Art of Political Analysis

Frederick W. Mayer

Interpreting NAFTA: The Science and Art of Political Analysis by Frederick Mayer has a quite similar format to the last political analysis book I read: “Essence of Decision.” In the first chapter, Mayer lays out an analytic framework, and then he alternates narration about the development of NAFTA and political analysis aimed at understanding that history. He divides NAFTA’s development into three sections: deciding to negotiate, the actual international negotiations, and ratifying the agreement in the U.S.

The framework that Mayer lays out is a matrix, with three items on each side. On one axis, he notes that policy interactions can take place on an international, domestic (group), or individual level. The three possible modes of politics he includes are rational choice, institutional process, and symbolic choice. Rational choice is based on each party weighing their options and choosing action that maximizes their utility (objectives). Institutional process focuses on the patterns and rules already in place that affect policy. Symbolic choice focuses on the use of symbols to understand policies. Rather than assuming that each player – individual, domestic, or international can fully gather and analyze all available information, symbolic choice notes that this is not possible, or even logical, much of the time, and that instead, positions are often based on symbolic understandings. Using this matrix, he points out that legitimate political analysis can focus on any of the three levels and use any of the three analytic modes. He argues that the ‘art’ of policy analysis is deciding which of these methods to apply and when.

Deciding to Negotiate
The first issue Mayer addresses is why the U.S., Mexico, and Canada, decided to create a North American Free Trade Agreement at this particular time. He notes that international rational actor theory is often used for International Security issues, which are set up like prisoner’s dilemma games – i.e. the challenge is to figure out how to ensure cooperation in which each individual player has an incentive to defect (and not cooperate). International trade policy is different. If the goal is macro-level economic efficiency gains, then free trade is good for each country, whether or not any other country opens their market or not. So that begs the question – why do you need to draft a treaty to get countries to do what is already in their interest to do? The answer involves looking at domestic politics as well – it may be very politically different to take down trade barriers, but if those barriers are removed in coordination with international efforts, there is more political protection for leaders.

Mayer also talks about the particular time and the leaders involved in making the decision to draft a NAFTA – President Bush was particularly interested in free trade and in improving relations with Mexico. Mexican President, Salinas, was a Harvard-trained economist, a supporter of free trade, and was in the midst of trying to modernize Mexico’s economy. The Canadian Prime Minister, Brian Mulroney, actually wasn’t interested in participating at first, but then changed his mind as he determined that it would hurt Canada to be left out of the agreement.

Though the three leaders were interested in drafting a NAFTA, for this to be possible, the U. S. Congress had to give President Bush “Fast Track” Authority (actually just extend fast track, since he already had authority from another negotiation process, but it was set to expire soon). This is a process that gives the president the ability to negotiate the treaty and then provide it to Congress for a simple yes or no vote. Under the fast track rules, Congress is not allowed to add amendments – this prevents them from pulling apart a negotiated agreement. The take-it-or-leave-it vote means that even if there are some sections that aren’t good for their own constituents, if the overall bill is beneficial, they’ll likely still vote for it. Usually a procedural vote, like the one to extend fast track authority,’ would not be a big fight in Congress – trade politics aren’t usually big news items. However, the fight for NAFTA was a bigger deal – Labor groups lobbied members, as did some environmental groups. Bush agreed to include environmental considerations in the bill, and it ‘fast track authority’ was narrowly passed by Congress. Mayer uses this to show the importance of domestic considerations in something that seems like a strictly international policy issue – the decision to negotiate an international treaty.

The next section of the book is about the actual negotiations. There were quite a few sub-groups within the negotiations – energy, automotive, agriculture, etc. Each country would develop a bargaining position by discussing with domestic groups. For example, the U.S. consulted with the big three automakers about their position in the automotive group. The automakers’ preferences directly influenced the ‘rule of origin’ – the percentage of parts in the car that must come from the North America in order for the car to qualify as a North American product. Mayer describes this process as two-level bargaining. First, there is bargaining on the domestic level among interest groups and the national negotiator, and then there is bargaining on the international level among the representatives from each nation. The result of the international negotiation cannot be fully analyzed or understood without also analyzing the domestic negotiation process. This two-level process is particularly interesting in an area like agriculture, which tends to be sensitive. Nationally, a government would like to be as economically efficient as possible. Since the U.S. climate is better for growing corn and the Mexican climate is better for fruits and veggies, like oranges or tomatoes, you might expect an international agreement to open trade and allow this situation to occur. However, the U.S. continues to protect, fairly highly, its Florida orange-growers, for example, despite the inefficiency. It’s interesting to see the competing interests of domestic interest groups and international efforts to lower barriers, and how international negotiations are often used to make a nation do something that is arguably good for itself anyway.

NAFTA took a long time to negotiate, and by the time it was finished, there was a presidential election. As a candidate, Bill Clinton supported NAFTA, but to neutralize criticism, he said that labor and environmental side agreements would also need to be added. When he won the election, these side issues became a new area of international negotiation on the trade agreement. Mayer argues that understanding this domestic situation is essential for understanding why these side agreements exist. The negotiations were lengthy and difficult, in part because trade negotiators weren’t used to dealing with these issues. An interesting occurrence in these negotiations is that the environmental groups split between those who were willing to work with the administration on making side agreements to address environmental concerns and those who felt that no free trade agreement could benefit the environment and just lobbied against it as a whole. It was felt that labor groups would be against the free trade agreement regardless of any concessions given, so labor had much less of a say in the negotiations, and the labor side agreement was weaker than the environmental side agreement. Mayer argues that the results of international negotiation on the side agreements can only be to be examined and understood in the domestic political context.

The final section of the book is on ratification of the treaty. As mentioned above, once NAFTA was finished, it would go to the Congress for a simple yes or no vote, with no amendments allowed. Trade agreements usually didn’t get much press and passage wasn’t too controversial. This was not the case with NAFTA. There was a huge grassroots anti-NAFTA campaign. The author explains that this is particularly difficult to understand in a rational actor framework; analysis of NAFTA generally pointed to net benefits for the nation, though there were some credible arguments that there could be net loss. However, a consensus in the analysis was that whether positive or negative, the magnitude of the effect of NAFTA would be very small. The predicted job gain (or loss) due to NAFTA over ten years was about 200,000 jobs – this is the same number that economists estimate are created naturally in the U.S. in the course of a month. Mayer argues that the opposition to NAFTA was based on symbolic politics. People were provided with imagery through statements like Ross Perot’s famous quote about the ‘sucking sound’ of jobs flowing down to Mexico because of NAFTA. Labor and environmental groups encouraged people to oppose NAFTA. Some conservatives argued that NAFTA would result in the loss of U.S. sovereignty as it gives over control to international markets. These activities generated lots of negative mail about NAFTA being sent to Congressman and led to angry encounters at town-hall meetings.

Though businesses and others usually involved in trade agreements were used to lobbying ‘inside the beltway’ – i.e. to Congress and other D.C. oriented groups – they had never before had to launch a campaign for general support. However, as Congressmen saw the negative opinion of their constituents, Congressional votes for NAFTA were disappearing. Proponents of NAFTA launched a national campaign including commercials, grassroots efforts, and intense D.C. lobbying. They got out the message that all of the living presidents and all of the living Nobel Prize winners in economics were in favor of NAFTA – giving credibility to the idea that NAFTA is good for the U.S. They also re-framed the issue as a choice about America’s future – whether to open up trade, face competition, and move forward, or to retreat and become isolated and protectionist. They argued that working with Mexico and encouraging them to modernize their economy was going to have a positive effect on the U.S. In the end, the diagnosis of the opposition as symbolic politics and fighting it by changing the framework and image with which NAFTA was presented (as well as continued lobbying efforts) proved successful, and NAFTA was passed.

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