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NAFTA Showtime: Stephen Harper, Enrique Peña Nieto, and Barrack Obama |
The Canadian Broadcasting Corporation noted: "Jean
Chretien famously pronounced his last G8 summit as prime minister a
success. When asked why, he replied, "Because it could have been a
disaster.'
'
That same logic could be applied to this past weeks meeting of the three North American leaders in Toluca, Mexico.
Even though the" three Caballeros" called NAFTA a great success - looking at the results - tells another story. .
The Financial Times wrote about NAFTA: "Treally wenty
years into Nafta, Mexico has too many criminals and not enough
policemen; too many workers earning low wages and not enough skilled
jobs; too many false dawns and not enough economic growth.
NAFTA really is a big economic failure. From 1994 through 2003, the
Mexican economy has grown by only 11 percent per person. This is less
than one-fourth the rate of growth that Mexico experienced in the 1960s
and 1970s. This is the relevant economic comparison for anyone who wants
to evaluate Mexico's experience with NAFTA.
Of course, the
reforms embodied in NAFTA did not begin in 1994 - they started in the
early 1980s. But if we take the longer view, it looks even worse: From
1980 to the present, income per person in Mexico has grown by about 19
percent. This compares to 93 percent for the 1960-1979 (somewhat
shorter) period. In other words, there is no economic evidence that the
NAFTA model is a success at least not for the tax paying public.
U.S. economic winners and losers under NAFTA vary with company size, type of
industry or
sector,
and geographical location. Sectors affected positively include planes,
trains and automobiles, large agri-businesses, appliance makers and
energy corporations. Clearly, large multi-national companies with
investment capacities, world-market savvy and
capital resources have benefited from protected investment and cheap labor. These companies enhanced management
performance-based compensation
while putting downward pressure on production-worker wages and
benefits, collective bargaining clout and available jobs, especially in
manufacturing. Many view their actions as a major contributor to
compensation inequality.
According to one estimate,
workers in Canada and Mexico have displaced 829,280 U.S. jobs, mostly
high-wage positions in manufacturing. The heaviest U.S.
manufacturing-job losses were in states such as Ohio, Michigan,
Pennsylvania, New York, North Carolina, Texas, Connecticut, New Jersey,
California, Indiana and Florida.
Canada has so far experienced significant benefit from:
- U.S. investment in automotive production,
- Increases in oil exports to the U.S. and the rest of the world,
- Increases in shipment of beef, agricultural, wood and paper products to the U.S.
- Export of mineral and mining products, which have fared well in U.S. markets.
Canada has, however, also experienced some losses in narrow
sectors such as specialty steel production and processed foods due to
U.S. imports.
Overall the conclusion is that NAFTA has not lived up to the high
expectations of its proponents. It has made many U.S. companies and
investors rich - and their managements even richer. But it has also cost many
U.S.
manufacturing workers their livelihoods while failing to raise living
standards for most Mexicans. Any major market changes not dictated by
market forces usually lead to both opportunity and loss, and this has
happened with NAFTA.
EU-Digest