By Richard N. Baldwin T. /HispanicVista.com
NAFTA Bashing

 

     There is a good deal of talking (yelling) on both sides of the border running from scrapping, revising or renegotiating the 15 year old trade agreement between the US, México and Canada. This should not be surprising considering that it is election campaign time in the US and the full elimination of tariffs on corn and beans has gone into effect at the beginning of this year in México.

     Let's look at the Mexican view of this. This is a subject that I have written about repeatedly. The Maiz of Wrath, 20 Jul 03; Storm Clouds, 28 Sep 03; The Beleaguered Mexican Farmer, 9 Jan 04. All of these appeared in HispanicVista. The main thrust in all of this was to point out that México asked and received a delay of 15 years to prepare for the elimination of the protective tariffs on agricultural goods. I said that the impact on México would be as great as what happened to the farm sector in the US in the 1930s. But in reality, México has done little or nothing to prepare for this. Looking at the larger picture in México, agricultural exports have increased under NAFTA. But the increase has mainly happened in the large farms toward the north in México. Some of the corn grown there is now exported to the US along with a growing sector for winter exports in lettuce, avocados and other products. We have finally into the sugar export market. What is and has been hurt is the sector consisting of small 2-hectare subsistence farms operating with a burro or two and technology dating back to the Aztecs. On top of this is the lack of infrastructure to even get the product to market. Is this the fault of NAFTA?

     These farmers needed help even without NAFTA from the Mexican government; help in equipment investment, infrastructure, and above all educational investment to train this sector to participate in the benefits of the 21st century. But all they are getting so far as rhetoric from the center left PRD whose leader (Andres Manuel López Obrador); the man who still doesn't realize that he lost the last election, to lead in demonstrations demanding a complete revising of NAFTA. It ain't going to happen. In the meantime, the government is promising some help, too little and too late and will let the farmers blow off steam until they get tired or migrate north.

     From the US side, they see much of the higher paid manufacturing jobs going off shore. Some to México but more is going to Asia. This is contributing to what Pat Buchanan calls the "hollowing out of America". México has received a lot of these lower cost jobs but far more are going to Asia. The one thing to be said is that at least México maintains a much better trade balance with the US than Asia, although still negative for the US. It is interesting to note that China's largest private automaker is investing in a half billion-dollar plant in México to make Chinese autos to sell to the US market. 

      Let's consider the auto sector in the US: The once invincible US automakers only sell a fraction of the autos now sold in the US. The state of Michigan is now considered to be a state in permanent recession. I can remember when the US auto makers in the 1960s and 1970s would come out yearly pushing smaller autos only to find out later in the year that the market still wanted larger cars. Then emergency tooling was ordered (at high cost) to increase production of large cars. This was yearly event with great benefits for the tooling industry. But when small cars finally came into demand, the auto industry wasn't ready. 

     Then there was the quality problem. While modern quality control systems were invented in the US, the auto industry wasn't interested. The inventor went to Japan, who were interested and they converted to a quality first approach that caught the US auto industry flatfooted. They still haven't fully recovered from that. The once powerful steel industry went through similar problems and is now almost nonexistent in the US. In short, a lot of US industry simply found themselves in a position unable to compete in the new global market. Is this the government's fault? Or is this a private sector failure? Probably some of both. But to place the blame solely on free trade agreements is not realistic. 

     In short, both the Mexican and the US governments have a lot to do in this new age. México has to completely reinvent their educational system to provide higher quality workers required to produce better paying jobs needed in México. And to pay them better. Breaking up the monopolies would be a big help here. This might well keep more Mexicans in México. The US should be concentrating on creating an environment to foster better paying higher technology jobs and to reinvigorate their manufacturing sector. Basing the internal market on the service sector is a loosing game. Both countries have macroeconomic problems that have to be addressed internally.

     But none of the solutions are going to be solved by simply bashing NAFTA. NAFTA was and is only a tool to present greater opportunities for both countries. But you have to take advantage to these opportunities.  The sum of these things is that NAFTA has been an overall benefit to both countries.

 

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Richard N. Baldwin T., a HispanicVista.com (http://www.hispanicvista.com/) contributing columnist, lives in Tlalnepantla, Edo de México. E-mail at: R1041643422@aol.com