Blame NAFTA
by David Morris
www. alternet.org, April 13, 2006
The debate about illegal immigration rarely
mentions NAFTA. That's regrettable, since the flood of undocumented
Mexicans in 2006 empirically challenges the economic philosophy
that guided NAFTA's design.
The slogan of those who championed a North
American Free Trade Agreement was, "Trade, not aid."
NAFTA would solve our problems, they insisted, with little or
no transfer of funds from richer Canadians and Americans to poorer
Mexicans. By raising Mexican living standards and wage levels,
Attorney General Janet Reno predicted NAFTA would reduce illegal
immigration by up to two-thirds in six years. "NAFTA is our
best hope for reducing illegal migration in the long haul,"
Reno declared in 1994. "If it fails, effective immigration
control will become impossible."
Well, NAFTA succeeded, at least on its
own terms. As Jaime Serra Puche, Mexico's former trade minister
and chief NAFTA negotiator maintained in 2004, "When you
look at NAFTA in terms of what NAFTA was made for, which were
trade flows, investment flows, and in general technological transfer
and so on, you can say that NAFTA has been a successful enterprise."
Trade volume has soared, from about 30
percent of Mexico's Gross Domestic Product in 1990, to about 55
percent in 2005. Foreign investment has increased by over 225
percent. Yes. When you look at NAFTA in terms of what NAFTA was
intended to do, based on what those who wrote it said it was intended
to do, it has been a smashing success.
At this point bringing up an old medical
adage might be appropriate: "The surgery was successful,
but the patient died." NAFTA achieved its intended goals.
But the flood of illegal immigration is up, and the standard of
living of the average Mexican is down.
Real wages for most Mexicans are lower
than when NAFTA took effect. And Mexican wages are diverging from,
rather than converging with U.S. wages, despite the fact that
Mexican worker productivity has increased dramatically. From 1993
to 2003, worker productivity rose by 60 percent. In the same period,
real wages declined by 5 percent.
As NAFTA intended, Mexico has become an
export-dependent economy. But this has not benefited most Mexicans.
Sandra Polaski of the Carnegie Endowment for International Peace
points out that Mexican manufacturing is increasingly based on
a production model in which component parts are imported, then
processed or assembled and then reexported. In the maquiladora
sector, which accounts for most exports, 97 percent of components
are imported; only 3 percent are produced in Mexico. The spillover
effect of such operations on the broader economy is very limited.
Ironically, one could argue that illegal
migration is the only thing saving Mexico from the ravages of
NAFTA and preventing it from collapsing into economic and social
chaos.
Illegal migration serves as an important
safety valve. In the past 10 years, Mexico's working age population
increased by a little over 1 million per year, but the number
of jobs expanded by only half as much. The annual exodus of 500,000
to 1 million Mexicans keeps unemployment to at least manageable
levels.
Migration serves another even more important
salutary function: national financial safety net. In 2005, Mexicans
in the United States remitted some $20 billion home, about 3 percent
of Mexico's national income. Remittances now exceed tourism, oil
and the maquiladoras as the country's top single source of foreign
exchange.
NAFTA boasted that trade, not aid, would
boost the lot of Mexico and Mexicans. But the only thing that
has kept the wolf from Mexico's door is aid from Mexicans living
in the United States, not trade.
It didn't have to be this way. The European
Union approached economic integration from a very different philosophical
orientation and has produced dramatically different results. "The
EU realized from the beginning that you can't have a community
unless you lift the poorest up," notes Robert Pastor, director
of the Center for North American Studies at American University
in Washington and President Jimmy Carter's former national security
advisor.
Europeans realized that the flow of migrants
increases when the income gap between countries widens. As it
moved toward a common market, the European Union invested hundred
of billions of dollars in its poorer countries to improve their
economies, reduce intra-European tensions between farmers and
workers, and decrease internal migration. This massive investment
enabled the EU's four poorest members -- Greece, Ireland, Portugal
and Spain -- to boost their per capita GDP from 65 percent of
the overall EU average in l986 to 78 percent in l999 and even
higher today.
Raul Hinojosa, director of the North American
Immigration and Development Center at the University of California,
Los Angeles, instructively notes that 40 years ago Mexico and
Spain were at the same economic level. He estimates the EU's special
funds added 2 percent to Spain's annual GDP growth.
Unlike Americans, Europeans knew that
both trade and aid are needed to make economic integration work.
I would add only one further ingredient to this recipe for success:
internally generated development. Sustainable economic development
comes from within, from expanding internal markets and internal
production that can satisfy those markets. Sustainable economic
development comes from strengthening, not weakening, local and
regional trade networks. And this in turn depends on strengthening
and not weakening, local and regional social networks. People
don't leave their communities, their friends, their families and
their cultures because they want to. They leave when they have
to.
NAFTA's designers promised it would keep
Mexicans at home. Yet its very objectives undermined that possibility.
Now leaders in all three countries are trying to pick up the pieces.
One hopes they will use this opportunity to revisit their original
premise and model as well.
David Morris is co-founder and vice president
of the Institute for Local Self Reliance in Minneapolis, Minn.,
and director of its New Rules project.
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