NAFTA and the Legalization of World Politics: A Case Study

Abstract

I examine the trend toward using hard legal instruments in international trade governance and explain this trend in the context of the North American Free Trade Agreement (NAFTA). I suggest that hard law (1) reduces intergovernmental transaction costs, (2) reduces private risk premiums associated with trade and investment, (3) promotes transparency and provides corollary participation benefits, (4) tends to restrain strategic political behaviors, and (5) may increase the range of integration effects by encouraging private actors to enforce intergovernmental obligations. I compare the legalization model of NAFTA with those of the European Union (EU) and the Asia-Pacific Economic Cooperation (APEC) forum.