Home > Uncategorized > NAFTA has harmed Mexico a lot more than any wall could do

NAFTA has harmed Mexico a lot more than any wall could do

from Mark Weisbrot

President Trump is unlikely to fulfill his dream of forcing Mexico to pay for his proposed wall along the United States’ southern border. If it is built, it would almost certainly be US taxpayers footing the bill, with some estimates as high as $50 billion. But it’s worth taking a step back to look at the economics of US-Mexican relations, to see how immigration from Mexico even became an issue in US politics that someone like Trump could try to use to his advantage.

NAFTA (the North American Free Trade Agreement) is a good starting point. While it has finally become more widely recognized that such misleadingly labelled “free trade” agreements have hurt millions of US workers, it is still common among both liberal and right-wing commentators to assume that NAFTA has been good for Mexico. This assumption is forcefully contradicted by the facts.

If we look at the most basic measure of economic progress, the growth of GDP, or income, per person, Mexico ranks fifteenth out of 20 Latin American countries since it joined NAFTA in 1994. Other measures show an even sadder picture. According to Mexico’s latest national statistics, the poverty rate in 2014 was 55.1 percent ― actually higher than the 52.4 rate in 1994. 
Wages tell a similar story: almost no growth in real (inflation-adjusted) wages since 1994 ― just about 4.1 percent over 21 years.

Why did Mexico fare so poorly under NAFTA? We must understand that NAFTA was a continuation of policies that began in the 1980s, under pressure from Washington and the International Monetary Fund, when Mexico was particularly vulnerable during a debt crisis and world recession. These policies included the deregulation and liberalization of manufacturing, foreign investment and ownership (70 percent of Mexico’s banking system is now foreign owned). Mexico also moved away from the pro-development policies of the previous decades toward a new, neoliberal prescription that tied Mexico ever more closely to its northern neighbor and its questionable ideas about economic development.

The purpose of NAFTA was to lock in these changes and policies in an international treaty, so that they would be more difficult to reverse. It was also designed to add special privileges for transnational corporations, like the right to sue governments for regulations that reduced their potential profits ― even those dealing with public health or environmental safety. These lawsuits are decided by a tribunal of mostly corporate lawyers who are not bound by precedent or any national legal system.

About two million net jobs were lost in Mexican agriculture, with millions more displaced, as imported subsidized corn wiped out small farmers. From 1994–2000, immigration to the US from Mexico increased by 79 percent, before dropping off in the 2000s.

Now about that wall: if the Mexican economy had just continued to grow post-1980, as it did for the two decades prior, Mexicans would have an average income at European levels today. Extremely few Mexicans would take big risks to live or work in the US. But growth collapsed after 1980, under Washington’s failed experiment. Even if we look just at the 23 years post-NAFTA ― the much better years ― GDP per person has grown by just 29 percent, a fraction of the 99 percent growth from 1960–1980.

The wall would cause significant environmental as well as economic damage, if it is ever built. But it is the long-term damage that Washington has helped visit upon the Mexican economy that has brought us to the point where a US president could even propose such a monstrosity.

See article on original site.

  1. patrick newman
    February 11, 2017 at 4:10 pm

    Trump may well sabotage NAFTA but would want a bilateral FT agreement with Mexico that will leave them even worse off (USA First, guys!). as for the wall – apparently his mate Bibi knows a thing or two!

  2. February 11, 2017 at 4:11 pm

    A wall and a multilateral agreement, here the NAFTA (North American Free Trade Agreement) is already a contradiction. One is separating and hindering, the other should result in cooperation and liberalization. NAFTA is not really a partnership, its targeted to profit from the others. This agreements date from the 20th century and are partnerships based on eternal growth. Multilateral agreements, e.g. those under the umbrella of UN organizations, are the kind of future partnership strategies we need. But such agreements or conventions however should be driven by expertise and not by political power games and definitively adopt balanced partnerships and modern leadership systems.

  3. February 11, 2017 at 7:52 pm

    Destroying Mexico goes back a long time in US history. It’s something US citizens are proud of. And it’s something US politicians have used to win elections since the mid 19th century. But neoliberalism enforced by the US broke Mexico’s back, even more than it broke the US’ back. The only criminal here is neoliberalism. The greatest threat to the world since
    World War 2.

  4. February 12, 2017 at 2:36 am

    Thanks Mark; this certainly contradicts a lot that we here defending NAFTA in economic circles in the US, but admittedly the defenders focus on minimizing job losses among US blue collar workers.

    I find it interesting that you did not try to fit the drug trafficking and cartel system into the economic picture. How much did it contribute to Mexican troubles, or merely fill the holes in a deteriorating economy? Was it the employment solution to rural Mexico’s declining ag sector and workforce?

    Do you Mexico as a failed state?

  5. February 12, 2017 at 6:25 am

    “Even if we look just at the 23 years post-NAFTA ― the much better years ― GDP per person has grown by just 29 percent, a fraction of the 99 percent growth from 1960–1980.”

    The fact that so few people know of basic facts like this is an indictment of our news system, which is designed to replace careful analysis with trivia that suits an ideological purpose.

    It is also an indictment of our economics education. If people are graduating from Harvard (Mankiw’s home) without learning this then Harvard should lose its accreditation as a school of economics.

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