Mar 11, 2014
After 20 Years, NAFTA Leaves Mexico’s Economy in Ruins
Posted on Jan 9, 2014
Twenty years ago, on Jan. 1, 1994, a trade deal championed by Democratic President Bill Clinton went into effect. The North American Free Trade Agreement was meant to integrate the economies of the United States, Canada and Mexico by breaking down trade barriers among them, creating jobs and closing the wage gap between the U.S. and Mexico.
What in fact happened under NAFTA was that heavily subsidized U.S. corn flooded the Mexican market, putting millions of farmers out of work. Multinational corporations opened up factories creating low-wage jobs at the expense of organized labor and the environment. This, in turn, drove waves of migration north.
Meanwhile, corporate profits soared, and Mexico boasted the richest man in the world, Carlos Slim. Walmart and Krispy Kreme conquered Mexico, and ordinary Mexicans had access to the same consumer goods as their neighbors to the north. The economies of all three nations, measured only by GDP rather than jobs or wages, were pronounced grand successes, even though the U.S. and Canada disproportionately reaped more financial benefits.
Meanwhile, in the U.S., manufacturing jobs fell dramatically and organized labor lost even more clout. The Great Recession of 2008 worsened the downward trend, especially for Mexicans. Mexico’s economy, tied intimately to the U.S.’ because of NAFTA, suffered more than any other country in Latin America.
News reports on NAFTA’s anniversary point out that as a result of the free trade agreement, Mexicans today can buy designer sneakers or iPhones. Manuel Perez-Rocha, an associate fellow at the Institute for Policy Studies in Washington, D.C., and a Mexican national, told me in an interview, “This is a new spin—praising the riches of consumerism. All these new analyses about how Mexico is becoming a more middle-class society and able to buy more products from the United States—it’s just baloney. According to official statistics from Mexico, most Mexicans are poor and belong to the lower class, and this is the reason why there has been so much migration to the United States.”
Even analysts who tout the economic benefits of NAFTA to all three member countries acknowledge that Mexico has benefited less than its neighbors to the north. Perez-Rocha confirmed that, saying, “During NAFTA, Mexico has had the slowest rate of economic growth than [with] any other previous economic strategy since the 1930s. From 1994 to 2013, Mexico’s gross domestic product per capita has grown at a paltry rate of 0.89 percent per year.” Additionally, “During NAFTA, Mexico’s economy grew much slower than almost every Latin American country. So to say that NAFTA has benefited the Mexican economy is also a myth. It has boosted trade and investment, but this has not translated into meaningful growth that generates jobs. One of the problems that NAFTA has generated is basically an exporting economy for transnational corporations, not for the Mexican industry per se.”
It turns out that not only did NAFTA, “flood Mexico with imported corn and cheap grains from the United States,” but “it also destroyed Mexico’s own industries,” according to Perez-Rocha.
Having grown up in Mexico, the analyst reminisced, “Before NAFTA, I still remember how my father would take me to different industries in which Mexico would manufacture its own tractors and buses. We had an industry that was completely dismantled to give way to bigger corporations from the United States to use Mexico as an assembly plant for exporting cars back to the United States. And this hasn’t produced the boom of jobs that was promised.” Perez-Rocha concluded, “So in the end what NAFTA did was destroy the Mexican national industry and destroy a lot of jobs.”
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