November 21, 2003

NAFTA At 10: Trade Agreement Good For U.S., Mexico

By Louis Nevaer

The North American Free Trade Agreement, or Nafta, commemorates its 10th anniversary this December, but it seems like only yesterday that its critics were forecasting virtual Armageddon should it become law.

Ross Perot warned the nation of the “giant sucking sound” of American jobs disappearing into Mexico; Ralph Nader feared that corporate America would exploit weaker environmental laws south of the border, transforming Mexico into “a toxic wasteland”; AFL-CIO President Lane Kirkland decried the “inevitable” assault on the wages and benefits of American workers; and right-wingers such as G. Vance Smith of the John Birch Society were up in arms that Nafta was the first step in the “imminent” establishment of a world government under United Nations control.

Working at Plásticos Bajacal, Tijuana. A young worker pulls plastic parts from a plastic molding machine which will be assembled into coathangers for the garment industry, in the Tijuana maquiladora of Plasticos Bajacal. Photo by David Bacon.(File Photo)

None of these things have come to pass, and much good has resulted in our increased trade with Mexico, with hundreds of billions of dollars in trade flowing throughout the continent, and millions of jobs created. According to the Congressional Budget Office, before Nafta, U.S.-Mexico trade stood $34 billion a year, and has more than tripled to $111 billion by 2000. For the United States alone, more than 17 million jobs were created as a result of Nafta’s first decade, according to the CBO. Reagan’s vision, first articulate in 1980, of creating a common trading zone “from the Yukon to the Yucatan” is fast unfolding.

It’s a moment to reflect on what has been accomplished, and the tasks that lie before us as Nafta begins its second decade.

In 1994 Nafta was a polite way of integrating Mexico into the then-existing U.S.-Canada free trade agreement. To be sure there have been conflicts over trade, but in perspective, they have been minor considering the formidable task of integrating Mexico’s developing economy into those of the United States and Canada. The benefits of freer trade have been good for all three nations, in unexpected and compelling ways.

Consider immigration and the environment. When we think “immigration,” we think of Mexicans entering the United States illegally. But during Nafta’s first decade, more than 750,000 Americans have moved permanently to Mex-ico. Most are retirees. Indeed, Medicaid, Medicare, Social Security and Veterans Administration benefits are now payable in Mexico, and several U.S. HMOs are establishing programs to provide health care for members residing in Mexico.

When we think of Nafta and the environment, we think of corporate America exploiting Mexico’s weaker environmental laws. The opposite has happened: Under Nafta, Mexico has strengthened its environmental laws, and it is Canada — the “greenest” Nafta partner — that has seen an increase in environmental despoliation as it weakens its own laws to remain competitive.

Nafta has proven resilient. The first test came in 1994, when the Mexican peso collapsed, requiring a huge emergency bailout. What could have been a defeat became an opportunity, and through a process of accelerating the opening of Mexico’s financial sector, Mexico repaid its loans ahead of schedule and its financial system emerged the stronger. Mexicans are ambivalent about their banks being owned by Americans, Spaniards and Canadians, but Mexico now enjoys a world class banking system.

Nafta suffered a second blow on Sept. 11, 2001. Just one week before the terrorist attack on America, Mexican President Vicente Fox addressed a joint session of the U.S. Congress to applause and accolades. Officials in both nations predicted that a comprehensive immigration reform bill would be ready by the end of 2001.

These high hopes vanished on 9/11, along with America’s sense of security and invincibility. The United States, obsessed with the “war on terror,” turned its back on its hemispheric partners. Immigration reform dropped away. Overtures to adopt uniform approaches for things like political asylum and visa requirements languished.

In the wake of 9/11, however, Paul Cellucci, U.S. ambassador to Canada, spoke of the need for a “smart border” that would establish a “secure perimeter” for North America. His concern then was that the United States would remain vulnerable to terrorism if it did not work with Canada and Mexico.

Nafta now must look forward another way. The American Society of Civil Engineers estimates that the United States alone requires $1.3 trillion to repair existing infrastructure. The three Nafta nations require a Marshall Plan size effort to move to the next step: continental security and infrastructure enhancement. The Blackout of 2003, like the California energy crisis in 2000, underscored the vulnerability of the Nafta nations’ infrastructure. What North America needs is a master plan modeled on the Eisenhower Interstate Highway system and expanded: a $2 trillion investment program to upgrade, integrate and repair highway, seaport, airport and railroad networks across all three countries. It sounds daunting, but cooperation and integration born with Nafta 10 years ago should head this direction.

Nevaer is the author of the forthcoming book, “Nafta’s Second Decade: Assessing Opportunities in the Mexican and Canadian Markets.”

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