Saturday, January 18, 2014

Mexico And NAFTA: The Truth

CEPR (Center For Economic and Policy Research) Co-Director Mark Weisbrot examines how the Mexican economy has fared under 20 years of the North American Free Trade Agreement (NAFTA), in a new column in The Guardian. The answer is summed up well in Mark’s original title, “Twenty Years Since NAFTA: Mexico Could Have Done Worse, But It’s Not Clear How.”

Mark writes:
Well if we look at the past 20 years, it’s not a pretty picture. The most basic measure of economic progress, especially for a developing country like Mexico, is the growth of income (or GDP) per person. Out of 20 Latin American countries (South and Central America plus Mexico), Mexico ranks 18, with growth of less than 1 percent annually since 1994. It is of course possible to argue that Mexico would have done even worse without NAFTA, but then the question would be, why?
From 1960-1980 Mexico’s GDP per capita nearly doubled. This amounted to huge increases in living standards for the vast majority of Mexicans. If the country had continued to grow at this rate, it would have European living standards today. And there was no natural barrier to this kind of growth: this is what happened in South Korea, for example. But Mexico, like the rest of the region, began a long period of neoliberal policy changes that …put an end to the prior period of growth and development. The region as a whole grew just 6 percent per capita from 1980-2000; and Mexico grew by 16 percent – a far cry from the 99 percent of the previous 20 years.

He also notes that – unsurprisingly considering how little growth there has been, that “Mexico’s national poverty rate was 52.3 percent in 2012, basically the same as it was in 1994 (52.4 percent).”

Such basic facts about Mexico’s economic progress – or lack thereof – in the NAFTA era are not likely to appear in many major media stories, however. As we have noted previously, many media reports and commentary pieces have exaggerated Mexico’s economic growth. But NAFTA champions such as Thomas Friedman have not been alone in getting the story wrong; 10 years ago, the World Bank released conclusions based on erroneous research that purported to show that NAFTA had a positive effect on Mexico’s growth. CEPR made repeated requests to the World Bank asking for a correction, to no avail. Similarly, the even more pro-NAFTA Washington Post editorial board has never corrected an embarrassingly fallacious 2007 claim that Mexican GDP had quadrupled since 1988. (As CEPR Co-Director Dean Baker notes, “the actual growth was 83 percent according to the IMF.”)

For some information on NAFTA's negative effects in the US see last week's blog here


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