Friday, January 6, 2017

NAFTA from Mexico's Point of View

Since we have a new, allegedly protectionist, President-elect, NAFTA is likely to be in the news quite a bit.  It's well known what effect NAFTA had on the American working class: NAFTA lowered wages, as it was intended to do.

But what about our partners in NAFTA? There's been some rather spurious, very inaccurate talk over the years about how Mexico has gained from NAFTA at the United States' expense.  That claim is absurd, as this article and this article make clear.

The emphases added below are mine.  Quotes are from the two articles above, interspersed:

Nafta has cut a path of destruction through Mexico. Since the agreement went into force in 1994, the country’s annual per capita growth flat-lined to an average of just 1.2 percent -- one of the lowest in the hemisphere. Its real wage has declined and unemployment is up.
As heavily subsidized U.S. corn and other staples poured into Mexico, producer prices dropped and small farmers found themselves unable to make a living. Some two million have been forced to leave their farms since Nafta. At the same time, consumer food prices rose, notably the cost of the omnipresent tortilla.

It's funny.  You'd think a free trade agreement such as NAFTA, very much the product of a free market ideology, would not have to face market distortions such as subsidies to agriculture (essentially welfare for farmers), but, well, there you have it.  America has long had subsidized agriculture problems (for God's sake read "Cadillac Desert"), and in this case, they've led to the suffering of our ostensible partners in the free-trade pact NAFTA.

Not all of Mexico’s problems can be laid at Nafta’s doorstep. But many have a direct causal link. The agreement drastically restructured Mexico’s economy and closed off other development paths by prohibiting protective tariffs, support for strategic sectors and financial controls. 

Funny, isn't it?  America abandoned its tariffs and paid the price; Mexico abandoned its tariffs and paid the price.  If Mexico was really preying on the USA, would things have played out this way?

Meanwhile, for those who take issue with illegal immigration, it's worth noting:

Nafta’s failure in Mexico has a direct impact on the United States. Although it has declined recently, jobless Mexicans migrated to the United States at an unprecedented rate of half a million a year after Nafta.  

It is very important to note, however, as many people are living on another planet when it comes to this basic fact: more Mexicans have left the United States since 2009 than have immigrated here.  You could make the argument for many reasons, if you wish, that there are too many illegal immigrants here (I am not making that argument myself) but you cannot credibly argue that Mexican immigrants continue to pour into the United States in overwhelming numbers.

NAFTA has failed to make the average Mexican more prosperous:

Mexico’s economy has grown an average of just 2.5 percent a year under Nafta, a fraction of what was needed to provide the jobs and prosperity its supporters promised. More than half of Mexicans still live below the poverty line, a proportion that remains unchanged from 1993, before the deal went into effect.

Oddly, Americans think that Mexicans have gained from NAFTA at the expense of Americans; Mexicans think that Americans have gained from NAFTA at the expense of Mexicans!

All of this is not lost on Mexicans, despite their government’s defense of Nafta. A recent poll by Parametr√≠a, a respected Mexican pollster, found that more than two-thirds of respondents believed that Nafta had benefited American consumers and businesses, while just 20 percent believed it had been good for them. The poll, consisting of 800 interviews in people’s homes, had a margin of sampling error of plus or minus 3.5 percentage points.

Hmm.  Could it be that Americans and Mexicans would be better off in solidarity rather than attempting to fight an asinine pseudo-race/culture war?  What a concept!

Sounds like both sides would agree that NAFTA should go.  Oho!  But will it be easy to get rid of?

After two decades, the two economies are tightly braided together. Goods manufactured by companies operating in both countries — whether speakers, cars or airplanes — cross the border multiple times during production, a shared manufacturing process that, if destroyed, would mean shared job losses.

And hey... maybe the decay in Mexico is not entirely NAFTA's fault:

Investments in research and development, for instance, have failed to materialize in both the public and private sectors. Government spending on infrastructure has dropped to its lowest level in seven decades, experts say, leaving an unreliable network of ports, highways and even internet connections across the country. Burdensome regulation and corruption stifled investment, while the nation’s banks lent far less than their Latin American peers, leaving small companies to scramble for credit.

Hm. Some of that sounds a lot like "El Norte" to me!  

It sure sounds as though if NAFTA were to be retired, few working people in the USA or in Mexico would mourn its passing.  And Donald Trump has been an outspoken opponent of NAFTA.  So NAFTA will go, right?

Not if traditional Republican bankroller the U.S. Chamber of Commerce has anything to say about it!

Dramatically changing the pact could instead threaten 14 million American jobs that rely on trade with Canada and Mexico and send tremors throughout the North American business community, which has invested billions of dollars in developing ways to manufacture everything from cars and airplanes to pharmaceutical products using labor from multiple countries.


“You want to get rid of NAFTA?” U.S. Chamber of Commerce Tom Donohue asked in an interview with Fox News earlier this year. “NAFTA is 14 million jobs in the United States.”

The big question that many of us have been asking about Trump is: how much is he his own man, and how much is he just another Republican?  Because it would be a shocker for a run-of-the-mill Republican President to defy the U.S. Chamber of Commerce.

And if he does stare down the Chamber, he'll still have to work things out with Mexico and Canada, and take on big agribusiness!

Canada and Mexico are the second- and third-largest markets for U.S. farm goods, behind China. The three North American countries are also closely integrated in many manufacturing sectors, such as autos and steel, making any talk of U.S. tariff hikes to bring jobs back to the United States a double-edged sword because it could make the entire region less competitive.

We'll see whether Donald Trump takes down NAFTA after all.  There's an awful lot of money at stake, and when there's an awful lot of money at stake, there's an awful lot of reason to back down, as Donald Trump already has regarding what my colleague Kaye Allyn is calling his "Freedom Fence".

Trump defended that proposal Friday morning in a tweet, saying the move to use congressional appropriations was because of speed.
"The dishonest media does not report that any money spent on building the Great Wall (for sake of speed), will be paid back by Mexico later!" Trump tweeted Friday.

Almost certainly, a country which sends a net negative number of immigrants to the United States and has been on the losing end of the free-trade deal that led to the much-decried illegal immigration in the first place will want to pony up for a big pointless wall/fence.

Everyone have a great weekend!

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