The year 1992 marked not only a significant shift in U.S. presidential leadership with the election of Bill Clinton but also a pivotal moment in American economic and foreign policy, particularly concerning the North American Free Trade Agreement (NAFTA). While the immediate post-Cold War era brought unprecedented U.S. power, it also presented a challenge in defining the nation’s new global role, leading to a strong emphasis on economic policy and international trade agreements.
NAFTA’s Origins and the Bush Administration’s Vision
It’s crucial to understand that the North American Free Trade Agreement was not conceived by the Clinton administration. Rather, it was initially pursued by President George H.W. Bush, with negotiations finalized in December 1992, just as he was leaving office. Bush viewed NAFTA as a dual economic and foreign policy initiative. His administration aimed to strengthen the United States and its neighbors economically, thereby deepening the political partnership across the North American continent. The agreement expanded upon the U.S.-Canada Free Trade Agreement, which had been approved in late 1988.
A key motivation behind the Bush administration’s push for NAFTA was the recognition that Mexico was undergoing a historic political and economic transformation. Mexico, traditionally governed by the corporatist PRI party, faced significant challenges in the 1980s, including debt crises and falling oil production and prices, while investors turned their attention to emerging markets in Central and Eastern Europe. Bush envisioned NAFTA as a foundational framework to support Mexico’s democratization, foster civil society, and stimulate economic growth. The agreement was designed to draw a transitioning Mexico closer to U.S. democracy, institutions, and civil society, reflecting a belief that a more competitive U.S. within a larger North America would wield greater global influence. This model of economic integration was unique, respecting national sensitivities unlike the European Union’s “shared sovereignty” approach, given the strong protective instincts regarding independence and sovereignty in the U.S., Canada, and Mexico.
Clinton’s Adoption and the Shift to Economic Imperatives
Upon taking office in 1993, Bill Clinton “picked up the baton” from the Bush administration. Despite campaigning on a message of “It’s the economy, stupid!” during the 1992 election, which focused on domestic economic issues and the slow recovery from the 1990-91 recession, Clinton ultimately embraced and expanded upon the neoliberal globalizing policies initiated by his predecessor. His administration completed the Uruguay Round of global trade negotiations with over a hundred economies in 1994, transforming the General Agreement on Tariffs and Trade (GATT) into the new World Trade Organization (WTO). Clinton strategically used the passage of NAFTA and the convening of the first Asia-Pacific Economic Cooperation (APEC) summit to signal that the U.S. would pursue regional trade liberalization if global agreements faced resistance.
For Clinton and his advisors, the primary concerns of American foreign policy in the post-Cold War era became economic rather than military, as the U.S. faced no “credible near-term threat to [its] existence”. Clinton declared that the great imperative was to organize a global economy where cross-border trade could flourish, requiring the U.S. to “get its own economic house in order” through deficit reduction, lower interest rates, high-tech industry support, and promotion of free trade agreements. This vision aimed at the “enlargement of the world’s free community of market democracies”. While Clinton initially prioritized economic matters “like a laser beam”, his administration, with a Democratic majority in Congress and the presidency, integrated Reagan’s antitrust principles into the Department of Justice and broadly expanded the “Reagan revolution” by taking neoliberalism global.
Arguments For and Against NAFTA
Proponents, including influential figures like former Secretary of State Henry Kissinger and David Rockefeller, presented NAFTA not merely as a trade agreement but as “the architecture of a new international system” and a “vital first step for a new kind of community of nations”. They celebrated it as a move toward a “new world” in the Western Hemisphere. The belief was that eliminating most tariffs between the U.S., Canada, and Mexico would make American exporters more efficient and competitive, thereby increasing their market share and ultimately benefiting American workers.
However, NAFTA faced significant opposition, particularly from organized labor and some conservative isolationists. Labor unions vehemently opposed it, fearing that the agreement would encourage businesses to relocate to Mexico to exploit lower wages and less stringent environmental and labor regulations. They saw it as a “make-or-break struggle” that would lead to job losses in the U.S.. Conservative isolationists, such as Pat Buchanan, and populist H. Ross Perot, who famously warned of a “giant sucking sound” of jobs moving south, also fiercely campaigned against the agreement.
The debate over NAFTA became a highly public and contested one. A notable moment was the televised debate between Vice President Al Gore and Ross Perot in November 1993, which Gore won through a mix of statistics and satirical humor, damaging Perot’s public image. Despite the strong opposition, Clinton kept the core of Bush’s agreement but added provisions for environmental protection and labor standards. The treaty passed through Congress and was signed into law by Clinton in November 1993.
Post-Passage Economic Trends and Criticisms
The Clinton years, following NAFTA’s passage, indeed coincided with a period of sustained economic expansion in the U.S., often lauded as the “best economy ever”. Unemployment dropped to a thirty-year low, and industrial productivity jumped. The budget moved from deficit to surplus, and median family incomes rose across all brackets. This economic boom, coupled with Clinton’s deficit reduction plan, was seen as a major success, ending what appeared to be an unending string of federal deficits.
Yet, beneath the surface of this celebrated prosperity, not all was well for every American. Critics noted that the benefits of economic growth were not evenly distributed, with the trend of the rich getting richer and the poor getting poorer continuing from the 1980s into the late 1990s. Many of the millions of new jobs created were in the low-paying service sector, offering little advancement for those trying to support families. As one Harvard Law professor specializing in bankruptcy observed, despite record-high stock markets and low unemployment, many Americans were still struggling, falling victim to the “trick and traps” of Wall Street.
The passage of NAFTA and the establishment of the WTO underscored a broader shift toward a “borderless world” of free-flowing capital. While intended to foster prosperity, this era also saw a rise in what some termed “market triumphalism,” where policies based on “laissez-faire” often translated into strategies for elites to exert greater control over resources and labor, sometimes at the expense of general well-being. The underlying tension between open markets and domestic stability, and the impact of globalization on American workers, would remain a central theme in subsequent political and economic debates, even as the U.S. continued to push for global trade liberalization. The focus on domestic economic health and global market integration became a defining characteristic of post-Cold War U.S. foreign policy, often prioritizing commerce over human rights in relations with other nations.