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This paper illustrates that the magnitude of disparities among proposed partners of NAFTA is greater than any disparities that have been associated with prior successful free trade experiences.
Paper points to seeming comparison of the European Community experience, which in fact was facilitated by massive region-wide compensate and adjustment programs designed to ameliorate adjustment costs and compensate for the disparities.
Paper argues that NAFTA does not offer similar adjustment programs. In addition, based on experiences of Canada during the first three years of its free trade agreement with the U.S., authors argue the severe dislocation, loss of jobs, and resulting political turmoil.
Report offers three general policy recommendations. First, all three countries involved in NAFTA can recognize that it will be seemingly impossible to create a European Community replica (economic integration). Secondly, a call for alternative approaches to multilateral programs for job retraining, regional impact alleviation, subsidies to labor mobility and other transitional programs. Thirdly, allow the process of liberalization and integration to stabilize before moving forward with NAFTA or similar multinational agreement.
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