NAFTA 20 years on: success or failure?

 Mexico's geography in the Press
Jan 092014
 

The North American Free Trade Association (NAFTA) came into effect on 1 January 1994. Twenty years on, opinions remain sharply divided over the extent to which NAFTA has benefited Mexico and Mexicans.

NAFTA has led to progress

The Economist magazine is among those arguing that NAFTA has transformed the Mexican economy for the better, but that much remains to be done if Mexico is to make the most of its partnership with the USA and Canada. Two recent articles from The Economist summarize the arguments for NAFTA having been a success story for Mexico:

NAFTA has hindered progress

Other analysts are equally convinced that NAFTA has hindered Mexico’s economic progress and has brought problems for many Mexicans. For example, Timothy A. Wise, the policy research director at Tufts University’s Global Development and Environment Institute, argues that NAFTA has had adverse impacts on agriculture and on Mexico’s food security.

In Wise’s view, NAFTA had a sequence of impacts. First, it led to a flood of US imports of corn, wheat, meat and other staples which drove Mexican producer prices down below the costs of production. (Some US corn exports to Mexico were “dumped” at prices 19% below even US farmers’ costs of production). While Mexico’s own agricultural exports to the USA increased due to NAFTA, the overall agricultural trade deficit between the two countries widened considerably, with Mexico needing to import almost half of its total food requirements by the mid-2000s.

The international prices for many of these imported crops have doubled or tripled over the past decade, and Mexico’s agricultural trade deficit with the USA jumped to more than $4 billion. Why does Wise choose to highlight the beer industry? He argues that even the success of Mexico’s beer industry has brought more benefits to US farmers than Mexican farmers because the two major raw materials for beer (barley and malt) are not produced in Mexico, but imported from the USA.

Similarly, in a Guardian article entitled NAFTA: 20 years of regret for Mexico, Mark Weisbrot, the co-director of the Centre for Economic and Policy Research in Washington DC, concludes that, “It’s tough to imagine Mexico doing worse without NAFTA.”

Conclusion

Both sides of this argument hold some merit. While some sectors of Mexico’s economy, and some people, have undoubtedly gained from NAFTA, others have lost.

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