Volume 6, Number 2, Page 4

NAFTA turns five

By Andres Oppenheimer

Although there won’t be fireworks to celebrate the fifth anniversary of the U.S.-Canada-Mexico free trade agreement, the deal has not produced the calamities its critics had predicted. On the contrary, the Jan. 1, 1994, North American Free Trade Agreement (NAFTA) seems to have worked pretty well for Mexico — although mostly for those living in the richer states of northern Mexico — and has not produced the “giant sucking sound” of U.S. jobs heading south as predicted by former presidential candidate Ross Perot.

For Mexico, the benefits are evident. Mexican exports have soared by 140 percent over the past five years, to a projected $115 billion this year. Thanks to NAFTA, Mexico has become the second largest U.S. trading partner after Canada.

Foreign investment in Mexican factories has almost tripled, to about $11 billion a year, as U.S. and European and Asian companies set up manufacturing plants in Mexico to sell their goods duty-free across the U.S. border.

“NAFTA has put us on the map,” Mexico’s Commerce Secretary Herminio Blanco told me in a telephone interview this week. While in the past many European companies would not even consider investing in Mexico, “today, they tell you . . . they are studying whether to do it in the United States, Canada or Mexico.”

If it hadn’t been for the trade agreement, Mexico would have needed many more years to recover from its 1995 financial crisis, Blanco and U.S. officials say. This would have crippled U.S. exports, and increased the flow of undocumented Mexicans to the United States, they say.

Trouble is, many of the benefits of the free trade deal have gone to Mexico’s relatively wealthy northern states. Since 1994, investors have set up 1,498 assembly plants in northern Mexico, including 604 in Baja California, 246 in Chihuahua and 210 in Tamaulipas, according to Mexican government figures.

By comparison, there has been only one assembly plant set up over the same period in the remote southern state of Chiapas, where the Zapatista guerrillas launched an Indian-backed rebellion on the very day NAFTA was enacted.

Asked about the lopsided benefits of free trade, Blanco said growing numbers of investors are opening plants in central and eastern states, such as Aguascalientes and Yucatan, as northern states become less competitive in some industries.

As for the United States, NAFTA has not caused the loss of “millions of jobs” that Perot and Pat Choate had predicted in their 1993 book Save Your Job, Save Our Country: Why NAFTA Must Be Stopped Now.

According to U.S. Labor Department figures, about 204,000 U.S. workers have applied for retraining over the past five years because NAFTA-related factory closings. Public Citizen-Global Trade Watch, a Washington anti-NAFTA consumer group, puts the number of lost U.S. jobs at closer to half a million.

But the fact is, U.S. unemployment rates are at their lowest level in recent times. U.S. Commerce Department figures show that growing U.S. exports to Mexico are supporting one million U.S. jobs, up from about 650,000 five years ago, and that these jobs pay higher wages than domestic-related ones.

It’s hard to tell which side is playing fewer tricks with statistics. But NAFTA has not created large-scale havoc — which is pretty good behavior for a 5-year-old.

Andres Oppenheimer is a foreign affairs columnist with The Miami Herald and author of “Bordering On Chaos: Mexico’s roller-coaster journey to Prosperity” (Little, Brown and Co., 1998.) Printed with the express permission of the author.