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NAFTA: Not just trade - El Paso Inc.: Border Business

NAFTA: Not just trade

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Posted: Monday, March 5, 2012 10:26 am

In my last column, I wrote about a speech I attended by Herminio Blanco, the former lead Mexican trade negotiator for the North American Free Trade Agreement, or NAFTA.

He was Mexico’s minister of Trade and Industry in the late 1990s.

The lecture, “NAFTA at Almost 20 Years: Growth Perspectives,” was part of the Centennial Lecture Series at the University of Texas at El Paso.

NAFTA has succeeded in increasing U.S.-Mexico trade five-fold to $460 billion per year, and Blanco talked about the positive effects the agreement is having on the U.S., Canada and Mexico.

But audience members also asked Blanco questions about the NAFTA effect on non-trade issues.

Blanco was adamant that the only way for Mexico to pull itself out of poverty on a sustainable basis is to create jobs. In this respect, NAFTA has helped, because there are a multitude of Mexican families that now have jobs that were created by the agreement.

He said that wages in Mexico may not be as high as was hoped for at this time in Mexico’s development, but NAFTA has been successful in generating jobs for Mexican workers. The agreement also has opened up markets previously closed to imports, which gives Mexican buyers more varieties of products at more economical prices.

In spite of the progress, Blanco believes that there is still much to be done, but believes that in the future, wages will continue to rise. He is adamant in arguing that NAFTA has created more jobs than have been lost in Mexico.

And in spite of more U.S. exports entering the Mexican market, he has not heard of any widespread outcry by smaller Mexican companies that U.S. imports are taking away their business, because the products are generally different than those being produced in Mexico.

In terms of NAFTA’s effect on Mexico’s agricultural sector, Blanco stated that this sector has not had a net loss of jobs due to the agreement. Because of NAFTA, Mexico has now become a major exporter of fruits and vegetables to markets that were previously closed or had high tariffs.

Many people claim that due to NAFTA, the country has become a net importer of corn. However, Mexico traditionally has not been able to produce enough grain and corn to feed its population. Blanco stated that some opponents of NAFTA claim that because foreign producers, especially those from the U.S., are supplying the Mexican market with these commodities, it has been at the expense of Mexican jobs in these sectors.

According to Blanco, the data does not support this assertion, and that Mexico is thriving in other areas such as cattle and pork production.

He was asked whether NAFTA has had any effect in equalizing salaries between Mexico and the U.S. He stated that in such a broad area like salaries, NAFTA is but one of a multitude of factors affecting rates.

He said that in order to increase salaries in Mexico, it’s more important to fix the country’s educational system, which is rated very poorly. Furthermore, he said, the powerful Mexican unions need to look past their traditional goal of consolidating their power among the working class.

They also need to understand that the skills of the workers need to be improved in the future and that education is key to this objective.

And then there is the fertility rate, a statistic that will play a major role in shaping Mexico’s future. According to Blanco, it is now only two children per family. For the first time, he argues, this is allowing Mexico to grow a middle class.

If the rate holds steady, Mexico will reach a population of 140 million in the not-too-distant future. This means that the flow of Mexicans north to the border in search of work will decrease, and that will put additional pressure on Mexico’s educational institutions to increase the job skills and sophistication of the existing workforce.

When asked about NAFTA’s effects on immigration, Blanco inferred that it is simply a matter of labor flowing to where the jobs exist, which is simple economics. Mexico’s maquiladora or twin plant program has industrialized the country’s border region since 1965. During this time, Mexicans from the interior of the country have migrated to northern Mexico to work, and many have traveled farther north to find work in the U.S.

While immigration remains a major source of friction between the U.S. and Mexico, Blanco doesn’t see the issue being addressed in the near future, due to the political environment in both countries.

Finally, NAFTA was proposed as the first step in the eventual creation of a Free Trade Area of the Americas – the FTAA – that would encompass North and South America.

Blanco does not see this effort going forward because of trade disagreements between Brazil and the U.S. Further putting a damper on these efforts is the political environment in the U.S., which he sees as lacking the will to further pursue an FTAA.


 

Jerry Pacheco is executive director of the International Business Accelerator, a trade counseling and training program of the New Mexico Small Business Development Centers Network. He can be reached at (575) 589-2200 or by e-mail to jerry@nmiba.com.

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