[CTC] 1st anniversary of Korea FTA: U.S. exports down, deficit balloons

[Arthur Stamoulis]

http://www.fpif.org/articles/nafta_at_20_the_new_spin

NAFTA at 20: The New Spin
By Manuel Perez-Rocha and Javier Rojo, March 14, 2013

Only a few years ago, analysts were warning that Mexico was at risk of  
becoming a “failed state.” These days, the Mexican government appears  
to be doing a much better PR job.

Despite the devastating and ongoing drug war, the story now goes that  
Mexico is poised to become a “middle-class” society. As establishment  
apostle Thomas Friedman put it in theNew York Times, Mexico is now one  
of “the more dominant economic powers in the 21st century.”

But this spin is based on superficial assumptions. The small signs of  
economic recovery in Mexico are grounded largely on the return of  
maquiladora factories from China, where wages have been increasing as  
Mexican wages have stagnated. Under-cutting China on labor costs is  
hardly something to celebrate. This trend is nothing but the return of  
the same “free-trade” model that has failed the Mexican people for 20  
years.

The North American Free Trade Agreement (NAFTA), which was ratified in  
1993 and went into effect in 1994, was touted as the cure for Mexico’s  
economic “backwardness.” Promoters argued that the trilateral trade  
agreement would dig Mexico out of its economic rut and modernize it  
along the lines of its mighty neighbor, the United States.

The story went like this:

NAFTA was going to bring new U.S. technology and capital to complement  
Mexico’s surplus labor. This in turn would lead Mexico to  
industrialize and increase productivity, thereby making the country  
more competitive abroad. The spike in productivity and competiveness  
would automatically cause wages in Mexico to increase. The higher  
wages would expand economic opportunities in Mexico, slowing migration  
to the United States.

In the words of the former President Bill Clinton, NAFTA was going to  
“promote more growth, more equality and better preservation of the  
environment and a greater possibility of world peace.” Mexico’s  
president at the time, Carlos Salinas de Gortari, echoed Clinton’s  
sentiments during a commencement address at MIT: “NAFTA is a job- 
creating agreement," he said. "It is an environment improvement  
agreement.” More importantly, Salinas boasted, “it is a wage- 
increasing agreement.”

As the 20th anniversary of NAFTA approaches, however, the verdict is  
indisputable: NAFTA failed to spur meaningful and inclusive economic  
growth in Mexico, pull Mexicans out of unemployment and  
underemployment, or reduce poverty. By all accounts, it has done just  
the opposite.

The Verdict Is In

Official statistics show that from 2006 to 2010, more than 12 million  
people joined the ranks of the impoverished in Mexico, causing the  
poverty level to jump to 51.3 percent of the population. According to  
the United Nations, in the past decade Mexico saw the slowest  
reduction in poverty in all of Latin America.

Rampant poverty in Mexico is a product of IMF and World Bank-led  
neoliberal policies—such as anti-inflationary policies that have kept  
wages stagnant—of which “free-trade” pacts like NAFTA are part and  
parcel. Another factor is the systematic failure to create good jobs  
in the formal sectors of the economy. During Felipe Calderon’s  
presidency, the share of the Mexican labor force relying on informal  
work—such as selling chewing gum and other low-cost products on the  
street—grew to nearly 50 percent.

Even the wages in the manufacturing sector, which NAFTA cheerleaders  
argued would benefit the most from trade liberalization, have remained  
extremely low. According to the Bureau of Labor Statistics, Mexican  
manufacturing workers made an average hourly wage of only $4.53 in  
2011, compared to $26.87 for their U.S. counterparts. Between 1997 and  
2011, the U.S.-Mexico manufacturing wage gap narrowed only slightly,  
with Mexican wages rising from 13 to 17 percent of the level earned by  
American workers. In Brazil, by contrast, manufacturing wages are  
almost double Mexico’s, and in Argentina almost triple.

Mexico’s stagnant wages are celebrated by free traders as an  
opportunity for U.S. businesses interested in outsourcing. According  
to one report by the McKinsey management consulting firm, “for a  
company motivated primarily by cost, Mexico holds the most attractive  
position among the Latin American countries we studied. … Mexico’s  
advantages start with low labor costs.”

But even as the damning evidence against NAFTA continues to roll in,  
entrenched advocates of the trade agreement have been busy crafting  
new arguments. In his recent book, Mexico: A Middle Class Society,  
NAFTA negotiator Luis De la Calle and his co-author argue that the  
trade agreement has given rise to a growing Mexican middle class by  
providing consumers with higher quality, U.S- made goods. The authors  
proclaim that “NAFTA has dramatically reduced the costs of goods for  
Mexican families at the same time that the quality and variety of  
goods and services in the country grew.”

Most of the economic indicators included in the book conveniently fail  
to account for the 2008-2009 financial crisis, which hit Mexico worse  
than almost any other Latin American country. The result has been  
skyrocketing inequality. As theGuardian reported last December, “ever  
more Mexican families have acquired the trappings of middle-class life  
such as cars, fridges, and washing machines, but about half of the  
population still lives in poverty.”

The indicators of consumption that suggest the rise of Mexico’s middle  
class also exclude the dramatic increase in food prices in recent  
years, which has condemned millions of Mexicans to hunger. Twenty- 
eight million Mexicans are facing “food poverty,” meaning they lack  
access to sufficient nutritious food. According to official  
statistics, more than 50,000 people died of malnutrition between 2006  
and 2011. That’s almost as many as have died in Calderon’s war on drugs.

The food crisis has coincided with the “Walmartization” of the  
country. In 1994there were only 14 Walmart retail stores in all of  
Mexico. Now there are more than 1,724 retail and wholesale stores.  
This is almost half the number of U.S. Walmarts, and far more than any  
other country outside the United States. The proliferation of Walmart  
and other U.S. big-box stores in Mexico since NAFTA came into effect  
has ushered in a new era of consumerism—in part through an aggressive  
expansionbuilt on political bribes and the destruction of ancient  
Aztec ruins.

The arguments developed prior to the signing of NAFTA focused  
primarily on the claim that the trade agreement would make Mexico a  
nation of producers and exporters. These initial promises failed to  
deliver. Throughout the NAFTA years, the bulk of Mexico’s  
manufacturing “exports” have come from transnational car and  
technology companies. Not surprisingly, Mexico’s intra-industry trade  
with the United Sates is the highest of any Latin American country.  
Yet the percentage of Mexican companies that are actually exporters is  
vanishingly small, and imports of food into Mexico have surged.

Same Snake Oil, Different Pitch

Because their initial promises utterly failed to deliver, the NAFTA  
pushers are now hyping “consumer benefits” to justify new trade  
agreements, including the Trans-Pacific Partnership. One of the most  
extreme examples of this spin is an article inThe Washington Post that  
celebrates a “growing middle class” in Mexico that is “buying more  
U.S. goods than ever, while turning Mexico into a more democratic,  
dynamic and prosperous American ally.” Devoid of all logic, it goes on  
to say that “Mexico's growth as a manufacturing hub is boosted by low  
wages.” How can low wages make people more prosperous?

The Post also boasts that in “Mexico’s Costco stores, staples such as  
tortilla chips and chipotle salsa are trucked in from factories in  
California and Texas that produce for both sides of the border.” Is  
this something to celebrate? The influx of traditional Mexican food  
staples, starting with maize, and goods from the United States has  
displaced and dislocated millions of Mexican small-scale farmers,  
producers, and small businesses. And not only that, Mexicans’  
increasing consumption of processed foods and beverages from the  
United States has made the country the second-most obese in the world.

In essence, NAFTA advocates have been reduced to saying: “so maybe  
NAFTA didn’t help Mexico reduce poverty or increase wages. But hey! At  
least it gave it Walmart, Costcos, and sweat shops.”

The bankruptcy of NAFTA’s promises is only compounded by the poverty  
of this consolation.

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