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NAFTA anxiety: Trade agreement has not produced expected gains in Mexico’s economy

NAFTA Anxiety: Trade agreement has not produced expected gains in Mexico’s economy


Wednesday, January 10, 2007

PEGUEROS, Mexico — Even as his village emptied, Pedro Martin stayed behind. His schoolmates abandoned the scrub-covered hills of central Mexico for the land they called El Norte - the North. They mopped floors in Fresno, poured concrete in Tempe and tended other people’s children in Galveston, measuring their lives in dollars.

Martin worked at a poultry farm. His wages rose to 2,000 pesos a week, about $185. Meager by the standards of the north, it was enough to build a brick house with white tile floors. Enough to buy a car, and to stay in the village and watch his three boys grow, resisting the gravitational pull the United States exerts on much of rural Mexico.

"Up north, even though they pay more, you’re not necessarily living as well," Martin said, as church bells echoed down lanes of pastel-painted houses. "You feel out of place. Here, you can walk around the whole town and it’s comfortable. Life is easier."

But now, Martin worries that life in the central Mexican state of Jalisco is about to be shaken by globalization. Already much of Mexico’s farm country has been overwhelmed by an influx of crops from the United States in the years after the North American Free Trade Agreement. Over the next two years, the final provisions of the trade pact kick in, opening Mexico to unlimited imports of poultry from the United States. Mexican farms will compete directly with an American agribusiness nurtured by subsidies on the corn that feeds the birds.

"If a lot of chicken comes in from the United States, we’re not going to be able to maintain our farms," said Martin, 39. "What’s going to happen? People are going to get fired. People are going to go north."

NAFTA, as the landmark trade agreement is known, was supposed to work the other way around. In the early 1990s, as politicians in the three countries of North America sold the pact, they promised that it would spur enough development in Mexico to create millions of jobs, raise wages and diminish the lure of the north.

But since 1994, the year NAFTA took effect, Mexico’s economy has grown sluggishly. Not enough jobs have materialized, while Mexico’s working-age population has swelled. Meanwhile, the United States has been a magnet for Mexican laborers willing to take on low-paying, unpleasant work.

More than 6.2 million Mexicans now live in the United States illegally, according to Mexico’s National Council of Population. Two-thirds arrived after NAFTA.

For Mexico, as for most developing countries, free trade was a gamble. It opened the world’s most lucrative market, the United States, to wares produced in Mexico’s factories and to produce grown on Mexican soil. But it also lifted protections on Mexico’s manufacturers and farmers, bringing an influx of products from the north.

As NAFTA’s final provisions take effect next year, tying Mexico’s fortunes more tightly to world markets, how will its economy adjust? And how will the latest wave of trade liberalization alter the calculations for millions of Mexicans wanting to stay home, but constantly feeling the tug of the north?

The demographic wave that has carried unprecedented numbers of Mexicans to the United States is the consequence of a baby boom that began in Mexico 40 years ago, when improvements in rural health care allowed more infants to survive.

From 1993 to 2006, as those born during the boom reached adulthood, Mexicans of working age swelled from 34 million to 44 million, according to Agustin Escobar, a sociologist at the Center for Higher Research in Social Anthropology in Guadalajara. Over the same period, Mexico’s businesses added only 8 million jobs that pay decent wages and benefits, exacerbating a backlog of about 15 million Mexicans needing work, Escobar said.

Population pressure, combined with the lifting of subsidies on the farm, sent rural Mexicans in search of higher wages. They moved within Mexico in vast numbers. Many crossed the border. By 2002, 14 percent of all people born in Mexican villages were living in the United States, according to Edward Taylor, an agricultural economist at the University of California at Davis.

Mexicans in the United States sent home nearly $17 billion in 2004, according to the Bank of Mexico.

"If you want to buy a house, you have to go to the States," Escobar said. "People go to America to make their Mexican dream come true."

NAFTA, as the politicians sold it, was supposed to make Mexican dreams attainable at home.

Mexico’s government promised that the agreement would add 1 million jobs a year. But jobs have been created at about half of that rate. Mexico’s economy has grown less than 3 percent a year since NAFTA. Not even a sustained expansion of 5 percent a year would have been enough to stem the surge of immigrants headed north, given the numbers of Mexicans entering the work force, declared the 1997 Mexico-U.S. Binational Migration Study.

NAFTA did bring Mexico foreign investment. Jobs at its maquiladoras - export factories set up in the 1960s, mostly near the border - more than doubled from 540,000 to 1.13 million between 1993 and 2004. But in other factories, employment has slipped and average wages have dropped by 5 percent.

Economists emphasize that any assessment of NAFTA must include the financial crisis that savaged Mexico in 1994 and 1995, sowing unemployment. Some assert that without NAFTA and the exports it fueled, Mexico’s recovery would have been slower.

Many also say that Mexico’s government squandered opportunities for growth by failing to improve highways and ports, and by leaving unchecked the monopoly power of the national telephone company, which has kept rates for Internet access and other telecommunication services high, discouraging new ventures. While Mexico has stagnated, China has exploded, capturing factory jobs.

Oddly, border enforcement may have stifled some of Mexico’s gains. In a paper presented to the Federal Reserve Bank of Dallas, Raymond Robertson, an economist at Macalester College, found that Mexico’s increased foreign trade has been a factor in pushing wages up at home, but that has been countered by the intensification of U.S. border security, which has kept people in Mexico, leaving more workers competing for jobs and pushing wages down.

The clearest reason why Mexico has not prospered under NAFTA is found on the farm, the workplace for about one-fourth of the population.

From 1993 to 2003, exports of American agriculture to Mexico more than doubled, climbing from $3.6 billion to $7.9 billion, according to Gary Hufbauer and Jeffrey Schott in their book, NAFTA Revisited. Over a similar period, Mexico lost nearly 2 million agricultural jobs, according to Mexico’s National Employment Survey."

 source: Winston-Salem Journal