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
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
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 deal.
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
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
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.