Comparison of NAFTA and European Union

European Union

In the aftermath of World War II, the next four years of devastation and destruction witnessed the death of millions. Consequently, a relatively small group of different European countries join together for the purpose of planning for the future to avoid such destructive events. The result was the formation of a stable organization that would strive to ensure prosperity and peace. The initial step observed in this regard was a decision executed by six countries namely; Germany, France, Belgium, Italy, Netherlands, and Luxembourg. These countries agreed to pool their steel and coal reserves and as such the ‘European Coal and Steel Community was established in Paris in the year 1951. (Weiler, 2004).

The economic unification swiftly spread to different other areas. After seven years of its establishment, in the year 1957, founding nations gathered again to execute the treaties for the purpose of establishing the ‘European Atomic Energy Community and the ‘European Economic Community. The primary aim at that particular stage was to merge and unite the economies of Europe.

North American Free Trade Agreement

The implementation of the ‘North American Free Trade Agreement’ (NAFTA) was made on January 1, 1994. The aim was to remove existing tariff barriers among Canada, Mexico, and the United States. The Agreement consists two supplemental agreements on labor and environmental issues that focus on addressing cooperative endeavors to reconcile/settle policies and procedures for resolving any dispute among member countries. The North American Free Trade Agreement is, in fact, a comprehensive trade agreement connecting the United Sates, Canada and Mexico in a free trade sphere. NAFTA immediately called for the elimination of duties on almost half of entire goods shipped to Mexico and phasing out steadily different other tariffs over a period of almost fourteen years. (Weintraub, 2004).

Background of Establishing NAFTA and European Union

The European Union was one of the several international and transitional structures established after Second World War. Despite the aspirates of Schuman and Monnet, one of the most significant reasons for establishing ‘European Coal and Steel Community’ was to search for the means of associating Germany and France. Moreover, it also aimed to remove barriers and restrictions to economic reconstruction. European Economic Community (EEC) was established at a time when recovery was almost complete and most of the Europe was approaching level of full employment. The EEC swiftly succeeded in establishing a custom union as well as a free trade domain in the decade of 1960. Even though, ambitions to move beyond inter-governmentalism and also introducing majority voting in the Council of Ministers were upset by the French President, the European Union launched ‘Common Agricultural Policy’ and started developing its policy of competition in 1960s.

In the decade of 1970, the European Communities established ‘Common Fisheries Policy’ and also used European Coal and Steel Community to tackle the issue of over-capacity found in the steel industry. A fabric of competition law was built to supplement and support its agricultural policies. In 1980s, the European Union moved again and implemented qualified voting in their Council of Ministers. They proceeded with the idea of Single Market and agreed on considering closer political and monetary union. Well before contemplation or establishing NAFTA, the European Union was becoming more compound multilevel system in which the process of decision-making competence in different policy areas had been ultimately transferred from countries’ capitals to Brussels. (MacArthur, 2001).

NAFTA story is somehow different. North America, after sparing misfortune of extensive wars, had no desire to create an association with enemies for the purpose of securing peace. Instead, the origins of NAFTA reflect the distinctive needs of Mexico and Canada to deal with much wealthier, larger and more powerful neighbor, the U.S, and specifically to counter certain protectionist tendencies, ensuring continuous access to its markets. Canada, looking forward to execute a free trade agreement with U.S, reflected the culmination of a debate, historic in nature, among economic nationalists who focus on protection and enhancement of domestic industries and continentalists who firmly believed that economic deliverance required much closer associations with their neighbors to the south. Liberals in the past had been more inclined especially towards continentalism, while Progressive Conservatives were inclined towards an economic nationalism.

Governance System of NAFTA and European Union

European Union is a complex and multilevel governance system. Members of the European Union pool their overall sovereignties in a wide spectrum of policy areas. They participate in complex and to some extent transitional and intergovernmental structures of governance. There are smaller as well as larger member-states. Although some of the states have played prominent and exclusive roles, no single member-nation is in a condition to dominate others. Decision-making is done in a distinctive ways. The official or legislative process is from the Commission to Council of Ministers as well as European Parliament. The European Council, however, has assumed a more significant role in removing deadlocks. (Weiler, 2004).

The role of NAFTA is somehow different as it brings together Mexico, Canada and the United States. Although, not equal in influence or status, all three are federations. The population and size of United States is more than Mexico and Canada. Moreover, the economic and international status of United States is much higher than other two nations. NAFTA provides both Canada and Mexico with some vital aspects that some of their policy makers in each nation view critical, although not almost perfect, access to profitable and lucrative American markets.

The governance structures of NAFTA are just visible; three councils; a Council for Environmental Cooperation, Free Trade Commission and a Commission for Labor Cooperation, unite officials at cabinet level from time to time for the purpose of addressing and dealing disputes and implement provisions of NAFTA. These are staffed by different secretariats, small in size that is in a position to make decision by a majority of two-thirds vote. Moreover, it is also possible to convene specific trade tribunals during disputes.

Regional Integration

NAFTA limits the overall ability of provincial, local, federal and state governments in each nation to regulate the activities in economy. This takes place not through direct prescriptions or prohibitions, but due to plaintiffs- normally business firms- in each nation can inquire from courts in other nations to strike down certain regulations which could be thought to interface with trade or restrict commercial activity. Comparisons between NAFTA and the EU can be undertaken in a better way within a large universe of regional systems or blocs. As the current wave of regional integration processes is spreading internationally, the neo-functional and economic wisdom as well as neo-liberalism and realism, to narrate its nature, appear quite partial. Efforts had failed to address local politics as the major source of national interest. The political economy and the politics of contemporary regionalism evolve as a meaningful and proper theoretical track to examine characteristics of the international order during this millennium.

Regional Integration is one of the primary key expression related with contemporary regionalism, it provides a laboratory to conduct research specifically from a comparative perspective. Regional integration system reveals different formal and informal regional integration and as such, an assessment can be made regarding different levels of economic, cultural, political and social cohesion. In North America, even though NAFTA is several years old, most of the theoretical debates are continuously being made in a much crude scenario as compared with the overall dynamics of the North American region. The North American Market is the biggest contributor towards the GNP of the world followed by the European Union. This trading bloc represents for Mexico and Canada more than eighty percent of their total foreign trade.

The economic interdependence in this area has developed enormously during the final decade of the twentieth century. Regionalism has been swiftly growing in the last two decades as compared with globalism and the phenomenon that three regions; East Asia, EU and NAFTA contribute almost eighty percent of the total world trade which signifies the overall new form of the tripartite system in the world economy. Despite the phenomenon that the Western Europe is the birthplace, the cradle of the modern capitalist state and territorial sovereign, it is also the place in which it is currently questioned. It is Europe where the notion of sovereignty is currently being challenged.

Comparison of Trade Liberalization Agreements of EU and NAFTA

In the early part of 1990s, the European Union executed extensive and exclusive trade liberalization agreements designed to support economic and political reform and also to create a better association with, the countries of Eastern and Central Europe. They also entered into agreements with neighboring nations having low per capita income. Subsequently in the round of negotiations, the European Union admitted ten countries of Eastern and Central Europe to the membership of European Union.

At almost same time, Canada and the United States also made extensive agreement of trade liberalization, the North American Free Trade Agreement, designed to support economic and political reform and create improved associations with Mexico, a neighboring country having low per capita income. As such a comparison can be made between NAFTA and European Union in the context of liberalization through Europe Agreements by EU to the Central and Eastern European Countries, with trade liberalization by Canada and the United States to Mexico in the North American Free Trade Agreement. (Foster, 2007).

Variations between EU and NAFTA

However there is a considerable variation in the autonomous variable of interests between NAFTA and the EU. The member states of the European Union and the Untied States have different forms of political organizations at domestic levels. Political organizations in the U.S comprise veto-points external specifically to the executive has, in fact, contested agenda-setting in which proposals can be placed on the political agenda through a broader spectrum of actors and also for porous political parties that provide certain opportunities for the purpose of mobilization against executive suggestions.

Political organizations in the member states of European Union seem to possess no or few veto-points external to the executive and political parties which are controlled hierarchically by party leaderships. The Europe Agreement/NAFTA comparison also comprises variation and difference in the dependent variable; the overall capacity to make certain demanding commitments to a global regime. However, comparisons of almost-simultaneous enlargement of global organizations with the general involvement of different countries constantly hold most of the variables of interests across European Union and NAFTA.

Categorization of Variables Facilitating/Retarding Change in Trade Policy

The available literature suggests a broader spectrum of variables that retard or facilitate changes in trade policy which can be measured with trade liberalization efforts by the EU and NAFTA. These variables can roughly be categorized as; the distributional impacts of change in trade policy; overall economic conditions; global relations factors; decision procedures; agenda-setting and vetoes; and civil society. These variables can effectively control alternative elucidations for the comparative ease of European Union commitment to Europe Agreements and commitments of United States, Mexico and Canada to NAFTA.


Appendini, K. (2003) Economic Integration in NAFTA and the EU: Deficient Institutionality. St. Martin’s Press.

Foster, N (2007) EU Treaties and Legislation 2007-2008. Oxford University Press.

MacArthur, J (2001) The Selling of “Free Trade”: NAFTA, Washington, and the Subversion of American Democracy. University of California Press.

Weiler, J (2004) The EU and the WTO and the NAFTA; Towards a Common Law of International Trade? Oxford University Press. 2nd edition.

Weintraub, S (2004) NAFTa’s Impact on North America: The First Decade. Center for Strategic & International Studies.