368 Explaining Business Support for Regional Trade Agreements
The second group can be labeled “regionalists” due to their preference for
discriminatory regional trade agreements and their recent opposition to
multilateralism. Led by U.S. auto and electronics firms, this group has tended to
support nontariff barriers against Japan and Western Europe, while supporting
regional trade agreements perceived to give them greater leverage against foreign
competition. This group is dominated by foreign direct investors who have struggled
to maintain a competitive advantage against European and Japanese companies in
the triad markets of Western Europe, Japan, and the United States. These firms
see NAFTA as a way to continue the reorganization and rationalization of production
necessary to compete with Japanese and European firms who have penetrated the
U.S. market.
An example of this regionalist strategy involves U.S. auto firms that successfully
won a provision in the U.S.-Canada free trade agreement that has allowed them
to continue to bring parts and vehicles into Canada duty-free from any country
(including Brazil, Korea, Mexico, Taiwan, and Thailand). Conversely, Japanese
firms, including Honda, Hyundai, and Toyota, still have to pay duties on any
imports from outside the United States. U.S. auto and electronics firms have
insisted on maintaining preferential treatment for North American firms in the
trade agreement with Mexico, which places them at a further advantage relative
to their Japanese and Western European counterparts. In this sense, these
regionalist firms see NAFTA as leverage against foreign competition and advocate
restrictive measures that some analysts believe are incompatible with the
multilateralism of GATT.
In addition, regionalist firms, especially consumer and industrial electronics,
were among the leading advocates of the Caribbean Basin Initiative, which brought
together direct foreign investors and export-import interests with a stake in improving
the terms of trade with the Caribbean Basin. Like the case of NAFTA, CBI
represented a significant departure from GATT in its discriminatory treatment of
foreign companies. Regionalists applauded the initiative for giving greater leverage
to U.S. firms engaged in global economic competition with their Japanese and
European rivals.
The following analysis will focus on regionalist U.S. firms, especially automobiles
and electronics, in attempting to explain the appeal of NAFTA. In addition, a
focus on regionalist firms will be useful in highlighting the implications of the
global restructuring of the world economy for political trade coalitions in the
United States. I argue that regionalist firms that supported NAFTA are likely to
maintain their opposition to multilateralism, given the current realities of the world
economy.
I will attempt to expand upon these general observations by performing three
tasks: (1) locating the process of industrial restructuring within the larger context
of global competition for production advantage in the U.S. market; (2) connecting
the economic process of industrial restructuring to the development of a U.S.-
based political coalition supporting CBI and NAFTA; and (3) drawing lessons
from these agreements regarding the future prospects for multilateralism,
regionalism, and protectionism on a global scale.