November 20, 2003 -- CropChoice news -- NY Times, 11/19/03:
As the North American Free Trade Agreement nears its
10th anniversary, a study from the Carnegie Endowment
for International Peace concludes that the pact failed
to generate substantial job growth in Mexico, hurt hundreds
of thousands of subsistence farmers there and had "minuscule"
net effects on jobs in the United States.
The Carnegie Endowment, an independent, Washington-based
research institute, issued its report on Tuesday to
coincide with new trade negotiations aimed at the adoption
of a Nafta-like pact for the entire Western Hemisphere.
Trade ministers from 34 countries in the Americas are
gathering now in Miami.
The report seeks to debunk both the fears of American
labor that Nafta would lure large numbers of jobs to
low-wage Mexico, as well as the hopes of the trade deal's
proponents that it would lead to rising wages, as well
as declines in income inequality and illegal immigration.
Though sorting out the exact causes is complicated,
trends are clear. Real wages in Mexico are lower now
than they were when the agreement was adopted despite
higher productivity, income inequality is greater there
and immigration has continued to soar.
"On balance, Nafta's been rough for rural Mexicans,"
said John J. Audley, who edited the report. "For
the country, it's probably a wash. It takes more than
just trade liberalization to improve the quality of
life for poor people around the world."
The Carnegie findings strike a much more pessimistic
note than those of a World Bank team that concluded
in a draft report this year that the trade accord "has
brought significant economic and social benefits to
the Mexican economy."
The bank's economists argue that Mexico would have
been worse off without the agreement as the country
struggled to recover from a deep financial crisis in
the mid-1990's and that the income gap between Mexico
and the United States is smaller than it would have
Luis Servén, research manager for Latin America
at the bank, said in an interview that he disagreed
with the Carnegie report's contention that the trade
agreement had hurt small subsistence farmers. He also
said that the higher productivity Mexico had achieved
in the Nafta years was ultimately the only route to
higher wages there.
The intensity of the debate about the agreement's consequences
is likely to grow with the approach of the pact's 10th
anniversary in January as pro- and antiglobalization
forces marshal arguments to influence negotiations for
a Free Trade Area of the Americas and for a new bilateral
trade deal between the United States and Central America.
Carnegie's policy experts stop short of contending
that Mexico would have been better off without the agreement.
"Mexico would have been better off with a better
Nafta," said Sandra Polaski, a senior associate
at Carnegie who was director of economic research at
the Nafta labor secretariat from 1996 to 1999.
The authors of the report say developing countries
have much to learn from Mexico's mistakes in the Nafta
Trade negotiators for Central and South American countries,
they said, should bargain for more gradual tariff reductions
on corn, rice and beans — the staples of subsistence
farming — to give peasants time to adjust to tough
competition from large, highly efficient and heavily
subsidized American farmers.
Carnegie's researchers also say developing countries
should push international donors and rich countries
to finance transitional assistance for the retraining
of workers and farmers displaced by global competition.
Developing countries should also seek greater leeway
to promote the use of domestic suppliers in manufacturing
over imported components — a step that would increase
job creation, the authors say.
The Carnegie report argues that the growth in manufacturing
resulting from the trade agreement was largely offset
by lost employment among rural subsistence farmers,
who were adversely affected by falling prices for their
crops, especially corn — a problem intensified
by the Mexican government's decision to lower tariff
barriers to American-grown corn even more rapidly than
the agreement required.
"This is a trade pact which opened the U.S. economy
to Mexico very profoundly, including years when the
United States experienced its best growth in decades,"
Ms. Polaski said. "Yet we can't see a clear net
increase in jobs in Mexico. You'd expect strong growth.
You wouldn't have expected to need a magnifying glass
to find it."
The trade agreement also reinforced and magnified changes
in Mexico's rural economy — brought on by a broad
array of other policies — that are damaging the
environment, according to Scott Vaughan, an economist
who recently left Carnegie to head the environmental
unit at the Organization of American States. For example,
he contends that the agreement has accelerated the shift
to large-scale, export-oriented farms that rely more
heavily on water-polluting agro-chemicals and use more
irrigated water compared with producers of similar crops
for the Mexican market.