Conclusions

Globalization’s origins are not just a historical concern. Democracy and expertise confer legitimacy. Insofar as the foundations of today’s global economy were neither very democratic nor based on serious expertise, it is unsurprising that globalization remains contentious. In this light, Chapter 8 considers the implications of the book’s analysis for the future of globalization. It also compares the case of North America to cases elsewhere, and reflects on the implications for the social science literatures on international political economy and ideas in politics. This chapter closes with a discussion of the costs of thinking about trade in the informal, anti-expert way of the businesspeople and politicians who defended CUFTA and NAFTA back in the 1980s and 1990s. Such thinking biases domestic decision-making against the interests of workers and the environment.

Does Business Exist?

Previous chapters argued that the private sector in all three countries was united in support of CUFTA and NAFTA. From some perspectives, this fact is puzzling: different industries have different interests, and some stand to lose out from free trade. How then was such broad-based business support for North American free trade possible? This chapter shows the business support followed from the national negotiators’ providing potential opponents with opportunities to shape the contents of the free trade agreements. The real possibility of winning meaningful concessions gave opponents a reason not to oppose free trade as a whole. But while these concessions served a purpose domestically, they also aggravated conflicts internationally. These conflicts reinforced nationalist understandings of trade that contradicted economists’ views, as discussed in Chapter 6.

Explaining the Rise of Globalization

This chapter summarizes the main themes of this book, and the theory it proposes of why the governments of so many nations around the world decided to globalize their economies in the late 20th century. The book asks whether the foundations of globalization were democratic, in the sense that politicians’ decisions derived from public opinion and electoral incentives, and also whether globalization as based on mainstream economic ideas. As shown by the cases of Canada, Mexico, and the United States, and the ways they established free trade in North America, the book shows that globalization has been more of an elite than a democratic project, and one based on folk economics rather than expert ideas. Business has been the motor force in developed countries; in developing countries, states have acted more autonomously from domestic business, but they have been more subject to pressure from international financial institutions.

Afterword

This afterword examines the track record of free trade in North America, and what impacts it had in a number of areas. These range from trade and investment flows, and economic growth, to inequality, labor and environmental conditions, migration, regional cooperation, and democracy and human rights in Mexico. Advocates and critics made many predictions about the near- and long-term impacts of CUFTA and NAFTA, and in hindsight some of those predictions were correct and some were not. These agreements succeeded in knitting together the three previously more segmented national economics, but their benefits in terms of welfare have been limited.

Mexico

Mexico came to North American free trade in a very different way than Canada. Unlike in Canada, not even economists favored greater integration with the United States before the 1980s. Over the course of the 1980s, however, the worldviews of Mexican economists, and then the country’s political and administrative elites, changed substantially. Economic crises and ongoing negotiations between the Mexican government and its foreign creditors reshaped the domestic political field, and a new generation of “technocrats” with PhDs in economics from prestigious American universities came to occupy most top posts in government. Under the technocrats, Mexico joined the multilateral trading system, and then in 1990 began negotiating North American free trade—even in the absence of broad-based support from businesspeople. The undemocratic Mexican state limited the opportunities for either dissident businesspeople or civil society to criticize its free trade initiative.

Canada

This chapter is the first of three that show how each country of North America embraced continental free trade. All three chapters describe key decisions and investigate whether there is evidence consistent with the liberal literature’s expectation that those decisions were strongly influenced by public preferences for free trade, as opposed to the agendas of economic elites. These three chapters also describe the motives, thinking, and actions of the people who made globalization happen in each country. This chapter begins with Canada and shows that while prominent economists and some public officials long favored free trade with the United States, key business groups—particularly manufacturers—were hostile. The views of Canadian business rapidly reversed themselves in the early 1980s, however, and after that the state’s position soon changed too. Business subsequently promoted free trade and ensured its political feasibility in a contentious national election in 1988.

Why Globalization Didn’t Happen, 1948–1982

This chapter sets the stage for the rest of the book, describing key political economic events, conditions, and changes in Canada, Mexico, and the United States from the 1940s to the early 1980s. The US government was broadly keen on regional economic integration throughout this period, but Canada and Mexico were opposed. As a consequence, this was in some ways a period of deglobalization. Canadian economists advocated freer trade (like their counterparts in the United States), but Canadian businesspeople prevented the state from pursuing it. In Mexico, political elites maintained a closed economy because they subscribed to the developmentalist economic ideas of the day. Public opinion everywhere was little informed about international economic issues, and had no significant role to play in shaping public policies.

The United States

Once Canada and Mexico each agreed to negotiate free trade, the United States began pressing its demands for content in the agreements that was consistent with what US business leaders wanted. In the end, private sector representatives were very pleased with the results of the negotiations. When NAFTA turned into a highly contentious issue, in 1992 and 1993, major American business associations and even individual firms campaigned hard for the agreement's ratification by Congress. That ratification was still not a sure thing, however, and Democratic president Bill Clinton needed to make NAFTA possible by advocating its ratification and supplementing it with side-agreements on labor and the environment. Clinton’s compromise position and the advocacy of business helped win over just enough critics to get NAFTA through, including in the face of substantial public skepticism.

Did Economists Cause Globalization?

Academic economists are broadly supportive of initiatives for globalization, and their endorsements make a difference politically: they carry the authority of expertise. But this chapter shows, contrary to what many people believe, that agreements like NAFTA are not really based on mainstream economic ideas. Compared to formal neoclassical trade theory, the priorities and worldviews of businesspeople—which are in some respects quite different—are much more politically influential. Economists’ ideas are so marginal in part because they are not politically useful for constructing broad business support for free trade. For that reason, even officials and negotiators who subscribe to neoclassical ideas do not talk about trade in neoclassical ways. Few people understand economists’ neoclassical trade theory, including its core concept of comparative advantage, which does not resonate with the lived experience of businesspeople.