“Oh, down in Mexico
I never really been so I don’t really know”

- James Taylor

When most Americans think about NAFTA, their thoughts are channeled by the “great sucking sound” that never really materialized and by the shibboleth that Americans can’t negotiate trade agreements.   We almost never look at an agreement from the viewpoint of the other guy, and we assume that our own people are getting hurt by it.  I suppose most countries are like that.

I long ago learned that it is more important to read or hear views that are contrary to yours.  But most of us look only at arguments that reinforce our views.  That’s why two studies published this month are important.  They don’t just say NAFTA is good, or that NAFTA is bad, nor do they join the legions of studies that examine NAFTA’s impact in individual U.S. industries or communities.  These studies look at NAFTA’s impact on Mexico.

The first was issued by the Carnegie Endowment for World Peace and carries the imposing academic title of “Rethinking Trade Policy for Development: Lessons From Mexico Under NAFTA.”  The study concludes that Mexico mistook trade policy for development policy and that NAFTA did not go far enough to encourage economic development in Mexico.  The authors (Eduardo Zepeda of the Carnegie Endowment, and Timothy A. Wise and Kevin P. Gallagher of Tufts’ Global Development and Environment Institute) like the post-NAFTA emphasis on addressing labor and environment issues in trade agreements, but admit that tighter provisions would not have helped Mexico take advantage of NAFTA.  More important, they say, would have been a development strategy that, in concert with NAFTA, would have nudged Mexico’s economy on a steeper upward path.  For the United States, illegal immigration and the drug trade are the two big issues with Mexico, and economic development would have addressed both of these.  If a country is advancing economically, its people are less likely to want to leave.  Similarly, an advancing economy provides more opportunities for bettering oneself in a legal and safer fashion than does the drug trade, thus lessening the lure of the drug cartels.  (In fact, it makes sense for drug cartels to fight economic development.  Except their own, of course.)

The authors point to five ideas they say should be central to future trade agreements.  First, they argue that future agreements should avoid any prohibitions on industrial policies, such as favoring particularly promising industries.  (I have never noticed that the United States is especially good at picking winners, but perhaps other countries fare better at this.)  Second, Mexico’s liberalization of agriculture, partially encouraged by NAFTA, led to domestic unrest and left Mexican markets vulnerable to competition from U.S. and Canadian produce.  Third, future trade agreements need better and more stringent benchmarks for environmental and labor standards (I disagree because it is too easy and too tempting to use these in a protective fashion).  Fourth, the lack of U.S. and Canadian funding for Mexican economic development was a fatal flaw in NAFTA.  And last, the presence of NAFTA is no argument for Mexico to ignore creation of its own comprehensive development strategy.

Barrier To Exports?

Clearly, I agree with some of this, but not all – and that’s why it is important to read contrary views.  It makes you think about things anew.  The point about the lack of funding to support economic development is the most telling for me.  I would much rather see the money of U.S. taxpayers poured into Mexico for development projects, than to see billions wasted on a wall between neighbors that will only prompt Mexican ingenuity in getting over, under, around and through.  Let’s put the same money into making Mexico a nicer place to live, which makes the border problem moot – and creates a better market for U.S. goods and services.

The second study, by one of the same authors, Timothy Wise, carries an equally imposing title: “Agricultural Dumping Under NAFTA: Estimating the Costs of U.S. Agricultural Policies to Mexican Producers.”  Wise examines the impact of U.S. farm subsidies on trade with Mexico and concludes that U.S. policies cost Mexican farmers $12.8 billion between 1997 and 2005.  The impact was concentrated on Mexican corn farmers, who lost $6.6 billion in the same period.  No wonder farmers were marching on Mexico City, complaining that American crops are being dumped on Mexico.  Mexico has its own farm subsidies, too, and – emulating their northern neighbors – the bulk of these go to large wealthy farms and agribusiness companies.  Neither country does especially well by its small farmers.

The next time you hear someone blithely say that Mexico gets all the benefit from NAFTA, ask them to go share a corn tortilla with a Mexican farmer.