Mexico

Carnegie Frames NAFTA For Slow Mexico Growth

|

Watch pointyheaded scholars concoct a new case against the North American Free Trade Agreement. According to Eduardo Zepeda, Timothy A. Wise, and Kevin P. Gallagher, the conventional wisdom "that Mexico was the undeniable winner from NAFTA" is wrong: In fact the trade agreement has been "a disappointment" for our friends south of the border.

Zepeda, Wise and Gallagher's Carnegie Endowment study Rethinking Trade Policy for Development: Lessons From Mexico Under NAFTA [pdf] is rarely in doubt. In this report, evidence doesn't just point, it points overwhelmingly. Every economic crisis is the most severe. All impacts are decisiveReforms must always go deeper. And so on.

Just a few more labor regulations and protections for politically connected industries, and this city will boom.

If you think you can guess what's causing all these Homeric epithets, don't keep it to yourself. Give up? Mexico has been done in by "prohibitions on policies for industrial competitiveness, such as selective promotion of industries, temporary preferences to national entrepreneurs in particular areas, and similar measures." It has also been hamstrung by "accelerated liberalization," by inadequate "standards for labor and the environment," and even by want of "a coherent national economic development strategy."

Since nobody's going to believe a report arguing for Mexico's halcyon days of 1993, when most citizens did not have telephones, the report defines "disappointment" the way bureacrats define "budget cuts." Nearly everything's up, just not up enough. So on page 5 you get this tonguetwister: "While poverty decreased due to multiple factors, inequality remained high." But then on page 15 you learn that remaining high actually means declining slightly: "Inequality, as measured by the Gini coefficient, showed minor improvement, from 0.550 in 1992 to 0.511 in 2004."

Other arguments fall apart on closer inspection. In a section dealing with Mexico's "jobs deficit," the authors point to the "rise in informal employment, which accounted for a remarkable 57 percent of the economically active population." What is informal employment? Down in the footnotes we find that it includes work done by employees who don't get health coverage, "which is mandatory for all wage workers." Leave aside whether a country where workers are willing to risk their lives to get north and pick lettuce should be imposing mandates that make it harder to hire workers. Just ask, how will a national economic strategy keep people from working under the table?

The report is full of whodathunkits like this one:

Mexico's gradual devaluation of the peso during most of 1994 and sharp depreciation during the 1994–1995 crisis contributed more to export growth than the liberalization measures included in the NAFTA text.

It also covers, without coming out and saying it, two areas where industry protection and economic strategy are responsible for lack of growth. Mexico's state-owned oil company manages to lose money during an oil boom, yet it remains under firm public control for reasons of "national pride." Sadder still is the damage being done by selective promotion of industries right in the United States:

With Mexico's unilateral liberalization of most agricultural sectors ahead of their NAFTA transition schedules, imports of subsidized grains and oilseeds have outpaced rising exports to the United States of fruits, vegetables, and meats. While the United States increased its farm subsidies in the post-NAFTA years, the Mexican government reduced its support, placing additional pressure on already-stressed farming conditions. Mexico's trade balance in agricultural goods with the United States has remained negative since NAFTA

It takes great force of imagination to look at a country with rampant government corruption and nearly a century of one-party rule in its past, then conclude that it needs more apparatchiks planning private sector activity. The report ends by decrying the usual laundry list of public policy sins, then says "None of these domestic policies was mandated by NAFTA, though they are largely consistent with the model in which NAFTA was a central component." You could go further and say Mexico is in much better fiscal shape than it used to be—with low inflation, low deficits and a smaller foreign debt—almost entirely thanks to NAFTA-mandated reforms. What you can't say with any honesty is that NAFTA's rough approximation of freer trade has hurt Mexico's economy. That's the kind of mierda del toro they only take seriously at Los Tiempos de Nueva York.

NEXT: Artificial Housing Respiration

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. All those siestas ain’t doing them any favors, either.

  2. Sadder still is the damage being done by selective promotion of industries right in the United States:

    With Mexico’s unilateral liberalization of most agricultural sectors ahead of their NAFTA transition schedules, imports of subsidized grains and oilseeds have outpaced rising exports to the United States of fruits, vegetables, and meats. While the United States increased its farm subsidies in the post-NAFTA years, the Mexican government reduced its support, placing additional pressure on already-stressed farming conditions. Mexico’s trade balance in agricultural goods with the United States has remained negative since NAFTA

    Ummm, no. What this is saying is that Mexico got rid of wrong-headed agricultural subsidies faster than in the U.S., resulting in a rational reallocation of resources and jobs.

    How exactly is it “sad” that progress is happening faster than statist politicians planned for it to happen, with people reacting rationally to the changed incentives?

    1. The above should read “got rid of wrong-headed agricultural TRADE BARRIERS …”

  3. Cavanaugh sounds like some hysteical Jesuit denouncing a heresy. You fucking market fundamentalists would be burning people at the stake if you could.

    1. I won’t deny that some people like Bernake and Geithner may deserve such a fate Morris. Maybe we can throw Reid and Pelosi in while we’re at it.

      1. Doctrinaire hacks like Tim Cavanaugh are brittle and make good kindling.

        1. Much like your sanity! We’re waiting for you to really snap, Edward. It’ll be the crack heard round the world.

          1. More like a really wet fart.

    2. Poor Morriss,

      Your man Edwards turned out to be a collosal lying fuckwad. All our predictions about Obama are coming to pass, your faith that when the right people get the guns the world will become magically a better place is being proved wrong.

      Despite your rudeness, boorishness, and ill temper, I actually feel sorry for you.

      It must really suck to have your identity wedded to ideas on their way to the ash-heap of history.

      I pity you, you poor, poor, empty shell of a man, who has nothing left but the hatred he feels for those who didn’t make his mistakes.

      1. How about your man Ron Paul, asswipe? All your predictions come true in your overworked imagination, you market fundamentalist fuck.

        1. Well, having predicted that Ron Paul wouldn’t win the Republican nomination, let alone the presidency, I think they turned out rather well…

          Certainly *I* have nothing to be embarrassed about.

  4. Andrew Carnegie is rolling in his grave over what this organisation is doing…

    1. yup yup yup

    2. It’s enough to make me think that certain people should be allowed to come back to life. Or at least given free reign to haunt the shit out people.

  5. Let us know when you get out on the road, Morris, road rage is a killer.

  6. Well I’m afraid they’ve gotten it all wrong. There are certain Mexican import-export enterprises that are doing better than ever before. If they’d just legalize drug traffic and tax it, Mexico would become enviably wealthy in short order.

    Of course that means the Mexican government would have to thumb their nose at Uncle Sam. I’m not sure how much of that problem is due to a lack of balls, and how much is due to the fact that Uncle Sam can probably put some serious pressure on Mexico if he wants to.

  7. But then, nothing rational has happened in Mexico since Spain screwed them over about two centuries ago. And the one lesson we can learn from Spain, is that a government can get fucked up and just stay that way, for century after century after century.

    A genuine monument to the survivability of sheer human stupidity if ever there was one.

  8. It takes great force of imagination to look at a country with rampant government corruption and nearly a century of one-party rule in its past, then conclude that it needs more apparatchiks planning private sector activity.

    Kinda like they think a neo-merchantilist policy implemented by Mexico would resemble the rule of Elizabeth I, instead of Cortes or Santa Anna.

    Why is it that so many Spanish speaking countries seem to be suseptible to corruption and despotism?

    1. Look at the history of their mother Spain and it’ll make a lot more sense.

  9. Watch pointyheaded scholars concoct a new case

    I think I’ll just let you do the watching. I’m sure I couldn’t stand it.

  10. It may be that a stronger central government and a cohesive national economic policy that is uniformly enforced would be better for development in Mexico just due to the fact that it would limit the severity of local corruption and the irregularity of law enforcement (commercial or otherwise). Political decentralization is no automatic recipe for economic growth.

    1. But this is blasphemous! They say anarchy is always best.

      You must be a loon or a lune or a lewn or something.

    2. Political decentralization is no automatic recipe for economic growth.

      That’s not the issue – Mexico has been centralized for 200 YEARS. There is little in the way of decentralization.

      The problems of Mexico are as follows:

      a) No property rights. According to the Constitution, land belongs to the State. This HAS to change.
      b) Shaky or unreliable protection of contracts. Judge Judy we don’t have.
      c) High taxes: The personal tax burden is one of the highest in America. The Corporate tax burden is LOWER than in the US, but that is not saying much. The tax level for a secretary that obtains $1000.00 per month is almost 40%, before filing for a tax return.
      d) Insecurity is rampant. Mexicans are strictly FORBIDEN to defend themselves from attackers with guns or whatever. People (especially the poor) have been jailed for using makeshift weapons to defend their property. A guy in the Yucatan was sentenced to 15 years in prison for carring an old Winchestre rifle (an antique).

      Hijacking of big rigs is rampant; kidnapping is big business in Mexico. Not until the government recognizes that people need to protect their property and life will this ever improve.

      None of this has to do with NAFTA – those guys are a bunch of liars.

  11. Gini coefficient, showed minor improvement, from 0.550 in 1992 to 0.511 in 2004

    Isn’t an ~8% improvement actually pretty good? (0.04/0.5 = 8%)

  12. What you can’t say with any honesty is that NAFTA’s rough approximation of freer trade has hurt Mexico’s economy.

    You’re right, it hasn’t – saying it DID is a lie.

    That’s the kind of mierda del toro they only take seriously at Los Tiempos de Nueva York.

    I know you’re kidding, but in Mexico we don’t say Mierda de Toro to say a bunch of hooey.

    We say “son puras mamadas” or we say “pinches mentiras”, which are roughly translated (respectively) to “purely sucking things” (reference to cocksucking, or saying anything to appease someone); and the other would be “damned lies.”

  13. Tim Cavanaugh, this post was pure 24k oro.

Please to post comments

Comments are closed.