| This study applies the lessons of the new institutional economics to the understanding of the development and operation of the North American Free Trade Agreement (NAFTA). Institutions, as defined by new institutional economists are the "humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints (sanctions, taboos, customs traditions, and codes of conduct) and formal rules (constitutions, laws, property rights)." The central claim of the new institutional economists is that "institutions matter" for economic performance and the central claim of this study is that the institutions of the NAFTA, in terms of formal rules like constitutions, laws, and property rights, have been just as important in shaping economic performance in the micro- and macroeconomies of all three NAFTA partners. Whereas there is a vast literature in public policy, international relations, diplomatic history, and economics and economics on the NAFTA, all of which describe the NAFTA as a set of rules, little work has been done on the economics of the NAFTA as a set of formal rules---institutions.; This study attempts to fill that gap and advance the understanding of the NAFTA as a formal set of institutions by explicitly applying the theoretical approaches used by institutional economists to the NAFTA. In doing so, this study sheds light on the power of institutional constraints to alter NAFTA area property rights, initiate firm-level changes to organizational structures, and provide a framework for viewing institutional change that argues for further study and development of the formal rules of international trade as mechanisms for governance of global trade and investment relations rather than focusing so heavily on the construction of new organizations and adjudicatory bodies as mechanisms for deepening North American integration. In making this argument, this study borrows much from institutional economists in that their work has repeatedly demonstrated that the formal rules of our economic system are highly determinative of economic performance. The NAFTA is just one set, albeit an important set, of rules that structure and constrain the choice sets of economic decision makers in ways that broaden the insights and analysis of the NAFTA already provided by the standard neoclassical model. |
