NAFTA’s Been Bad for US; What About Mexico?

Mark WeisbrotThe thing about free trade is that it makes markets more efficient. One country doesn’t have to depend upon itself for all of the things that it needs. This lowers costs all around and makes the world richer. In theory, I’m all for free trade. In practice, I’m against it. This is because as trade barriers have been taken down over the last four decades, the economic gains have not been shared; they have gone overwhelmingly to the already rich. This is what happened with NAFTA in the US: it did increase profits, but it didn’t help the American worker. But we hear a lot that it was at least good for Mexico.

There is a certain strain of liberalism that likes this idea very much. From their vantage point, the poor here in the US may have it bad, but they should shut up because the poor in Zimbabwe have it even worse. I discussed this in an article last year, Data Journalists Don’t Know Anything About the Poor Anywhere. The problem is that these journalists are usually in the top quintile of income in this country and so the poor everywhere are abstractions to them. So they are the kind of people who would argue that damage done to US workers would be acceptable for the sake of the even more poor people in Mexico.

Part of the problem here is that this whole globalization game isn’t much different in other countries than it is here. The greater trade might lead to more GDP, but its all captured by those at the top. But sadly, we don’t even have to make that argument. The truth is that since NAFTA, Mexico’s economy has done really poorly. Mark Weisbrot of the Center for Economic and Policy Research (CEPR) wrote two years ago, NAFTA: 20 Years of Regret for Mexico. And he summed up what the first two decades brought Mexico:

Didn’t Mexico at least benefit from the agreement? Well if we look at the past 20 years, it’s not a pretty picture. The most basic measure of economic progress, especially for a developing country like Mexico, is the growth of income (or GDP) per person. Out of 20 Latin American countries (South and Central America plus Mexico), Mexico ranks 18, with growth of less than 1% annually since 1994.

If you want to take a deep dive into the subject, check out the CEPR document, Did NAFTA Help Mexico? An Assessment After 20 Years (PDF).

Weisbrot’s colleague at CEPR, Dean Baker, has been documenting the way that The Washington Post consistently exaggerates how well the Mexican economy has done. This is entirely typical of mainstream US news coverage. And it is in direct contrast to its coverage of official US government enemies like Venezuela, where nothing that they do will ever be seen as good.

The truth of the matter is that trade deals like NAFTA are created by the rich for the benefit of the rich. And even economists who once thought they were wonderful (for theoretical reasons), are now backing away. As Weisbrot noted, “When economists who have promoted NAFTA from the beginning are called upon to defend the agreement, the best that they can offer is that it increased trade.” But no one cares about trade as a goal; it is a means to a goal: shared prosperity. And Mexico has not shared in that prosperity.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

12 thoughts on “NAFTA’s Been Bad for US; What About Mexico?

  1. What’s the classic example? Cold country A is abundant in sheep and low in grapes; warm country B teems with grapes and has few sheep. By removing trade barriers, we lower the cost of buying wine in A and wool in B. Before, shepherds in A and vintners in B faced a saturated market; now there’s more demand for their products, and that creates opportunities for those whose livelihoods were disrupted by the new trade agreement.

    But that’s assuming the people who trade in wine and wool are self-employed. In practice (as you observe) shepherds and vintners are in hock to landowners, who reap humongous profits from the new deal. And since each country has a flood of newly-unemployed tradespersons, the landowners can undercut wages for existing shepherds in A and vintners in B by replacing them with desperate vintners and shepherds, respectively.

    As Dr. Noam puts it: free trade is good, but these deals are neither “free” nor “trade.”

    • That’s a good summation. There is also the Dean Baker side of it. Country A has lots of doctors and country B has lots of lawyers. But when the “free trade” deals are made, they don’t apply to the doctors and lawyers. So people in country A get cheep wine, lower wages, and continued high cost legal services.

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