During the more than eleven years since it took effect, the North American Free Trade Agreement (NAFTA) has profoundly affected the Mexican economy. Goods flow duty-free over the border, and (so goes the theory) everyone involved benefits. However, things are not always quite so simple. The question of whether NAFTA has been beneficial or harmful requires clarification: beneficial to whom? In what way?
Whatever may be the case in other areas, NAFTA's effects have been mostly to the detriment of Mexican farmers. The primary sector has been on the decline in the Mexican economy since the early 1980's, but "free trade has played an active role in the demise of agriculture" (Gereffi and Martinez 2005, 133). Primary sector goods represented only 4% of GDP in 1999 and have remained more or less stable at that level in the years since, despite the fact that nearly a quarter of the Mexican population depends for their livelihood on them (Gereffi and Martinez 2005, 132).
In many cases, as tariffs on agricultural products have been phased out, such products from the United States have become less expensive under NAFTA than locally-produced equivalents. American ranchers have economies of scale available to them which are not available to their Mexican counterparts. American agribusiness has the highest productivity in the world. Mexican farmers and ranchers have simply had difficulty competing.
The farmers' discontent came to a head in 2003--as tariffs on all but three agricultural imports (white corn, beans, and powdered milk) were eliminated--when a group of farmers begain to blockade meat and produce coming over a bridge into Ciudad Juarez. Although resistant at first, President Fox eventually agreed to "seek major changes . . . to help Mexican agricultural producers" by attempting to negotiate a side agreement which would remove certain products from the list of those exempt from tariffs (NACLA 2003, 5). Such a step was necessary because although NAFTA contains language to "legally restrict import surges under certain conditions," those clauses are only applicable to a (small) subset of the agricultural commodities which Mexico (and the United States!) produces (Wainio, Young, and Meilke 2003, 1041). Mexican domestic laws do, like those of most countries, contain anti-dumping provisions (as does NAFTA), although they appear not to be consistently applied. Indeed, Mexico dropped from accounting for 10% of all actions taken worldwide against dumping in 1995 to 7% in 2000 (Wainio, Young, and Meilke 2003, 1042).
On the other hand, there is certainly an argument to be made that what has happened to Mexican producers in the primary sector is exactly what should happen, given NAFTA's goals. Whatever the political and social gains its designers and implementors (that is to say, both the individual framers and the nations they represented) hoped to garner for themselves, the neoliberalist philosophy underlying NAFTA is an economic one, not social or political. NAFTA's goals, encapsulated in Article 102, talk about goods, services, competition, investment, and property rights. Nothing is mentioned of a social or economic equality, or even a right to work. By its own goals, though, NAFTA has been quite a success for Mexico. Mexican GDP is usually up--what downswings have occurred have been easily attributable to a specific, non-NAFTA-related, cause (the 1995 peso crisis, for example). Foreign direct investment is up also. Capital and labor seek one another out, and both together seek markets throughout the free trade area.
A free trade area, however, is not a country; there are other considerations. At the risk of stating the obvious, if, as already mentioned, due to higher productivity and economies of scale, American agricultural commodities are cheaper than Mexican, this puts at least some Mexican farmers out of work. Some of them find other work, but, since 80% of Mexico's primary sector producers are below the poverty line (Gereffi and Martinez 2005, 132), and "Mexico's traditional anti-poverty policies for rural labor . . . were partially supported by trade restrictions" (Burfisher, Robinson, and Thierfelder 2001, 125), others take advantage of the relaxed border restrictions and try to find work across it. That they must do so (as opposed to simply seeking better job opportunities in the normal course of things) leads to discontent not only in Mexico, but in the United States as well.
NAFTA, then, is no cure-all, no panacea. Its effects on Mexican agricultural consumers--that is to say, everyone--are potentially beneficial in that prices can go down. Average citizens can get cheaper goods (and thus, presumably, more of them). Farmers and others in the primary sector, however, are faced with the consequences of a cliché: they must lead, follow, or get out of the way, but in this present situation, they can neither lead nor follow. Fortunately or unfortunately, depending on one's perspective, the resolution of their situation depends on politics, not on economics.
- Burfisher, Mary E., Sherman Robinson, and Karen Thierfelder. 2001. "The Impact of NAFTA on the United States." Journal of Economic Perspectives. 15: 125-144.
- Gereffi, Gary and Martha A. Martinez. 2005. "Mexico's Economic Transformation Under NAFTA." In Mexico's Democracy at Work: Political and Economic Dynamics, ed. Russell Crandall, Guadalupe Paz, and Riordan Roett. Boulder: Lynn Riener.
- No author. 2003. "Mexico: Government Agreement with Farmers on NAFTA." NACLA Report on the Americas 36: 5.
- No author. 2003. "Mexican unrest can shut off traffic." Transportation and Distribution 44: 12.
- Wainio, John, Linda M. Young, and Karl Meilke. 2003. "Trade Remedy Actions in NAFTA: Agriculture and Agri-Food Industries." World Economy 26: 1041-1065.