 Were the original Canada–US Free Trade Agreement (CUSFTA) and the North American Free Trade Agreement (NAFTA) significant policy turning points? Understanding the evolution of macroeconomic policy from the pre- to the post-NAFTA era in North AmericaReview of Keynesian Economics, 2014, vol. 2, issue 4, 414-428 Abstract: This article reviews the Keynesian/heterodox critique of free trade and the principle of comparative advantage, and offers some prima facie empirical evidence for North America that contradicts the basic predictions of the traditional free trade model. The evidence supports, instead, the view that trade liberalization actually promoted a perverse neo-mercantilist export-led growth (ELG) strategy that generates deflationary pressures not so much because NAFTA promoted greater international competition, but primarily because ELG relied on the macroeconomic role of the state in its implementing of restrictive fiscal and monetary policies to keep a lid on wage growth. The article argues that there is need for an alternative NAFTA that should promote the free circulation of goods, and that an institutional structure should be put in place that firmly ties each national government to an explicit full-employment commitment. Keywords: free trade; comparative advantage; export-led growth; CUSFTA; NAFTA; macroeconomic austerity policies (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:2:y:2014:i:4:p414-428 Access Statistics for this article Review of Keynesian Economics is currently edited by Thomas Palley, MatÃas Vernengo and Esteban Pérez Caldentey More articles in Review of Keynesian Economics from Edward Elgar Publishing |
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