02 January 2009

NAFTA fails Mexico

While Canadians continue to debate what the North American Free Trade Agreement has done for us -- or to us -- we pay rather little attention to how it's affecting our two partners. A recent article in the Guardian discusses how it has affected Mexico and the verdict is not good. I strongly recommend reading the article; however, a few points are worth emphasizing here:
  • While exports to the U.S. increased sevenfold, much of it in manufacturing, and foreign investment increased fourfold, the Mexican economy grew more slowly than before NAFTA. It also grew much more slowly than the economies of other developing countries such as China, India and Brazil. These countries follow policies that would be illegal under NAFTA.
  • Mexico gained about 600,000 manufacturing jobs after NAFTA took effect, but lost at least two million agricultural jobs, as cheap imports of heavily subsidized products such as corn flooded the now liberalized market from the U.S. This at a time when the country's baby boom has about one million young people entering the work force each year. Not surprisingly, twice as many Mexicans are crossing the border into the U.S. each year as before NAFTA.
  • The wage gap with the U.S. has increased, and about half the population can't find formal employment. Poverty rates and inequality are down slightly, but in part at least because of increased remittances from the additional Mexicans who migrated north.
In summary, those who benefit from increased trade and investment have prospered; the people at large have not. This isn't surprising. NAFTA was always about trickle down: make life better for investors and some of the benefits will trickle down to the toiling masses. Well, there's been damn little trickling in Mexico.

1 comment:

  1. Commenting as someone who works "on the ground" in Mexico, I can say that the quality and the nature of jobs that are being created in Mexico has changed drastically over the past 30 years. Recently higher paying, high skilled jobs are making their way to Mexico which is prompting the creation of an educational infrastructure that will only serve to create more good employment opportunities for Mexicans in the future. It is interesting to read comments from people who are looking from the outside in. Things do, however, look different on the inside. Mexico will continue to increase its skill levels and will, over time, have the capacity to create and attract larger number of decent paying jobs for its people. These things do not happen overnight, however.