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Thursday 18
December
2003
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World Bank Lauds North American Deal's
Impact on Mexico
Emad Mekay
WASHINGTON, (IPS) - Contradicting
a number of recent studies and findings
by independent think tanks and
activists, the World Bank says the
controversial North American Free Trade
Agreement (NAFTA) has spurred economic
development in Mexico.
In a report released Wednesday in
advance of the 10-year anniversary Jan.
1 of the implementation of the agreement
between Mexico, the United States and
Canada, the bank, the world's largest
development agency, said that Mexico
experienced productivity growth, better
jobs and more efficient agriculture.
The findings sharply contradict studies
from several trade unions, farmers'
organisations and manufacturing lobbies
that have all said the deal helps big
businesses in the United States at the
expense of workers, the poor and
ordinary people in all three countries
but especially in Mexico, the only
developing nation involved.
Similar research work by the bank has
previously come under fire from
independent economists and many civil
society groups, which accuse the
Washington-based institution of skewing
its studies to fit the economic agenda
of its political masters from the group
of seven (G7) most industrialised
nations, including the United States,
Britain and Japan.
According to the 346-page report,
'Lessons from NAFTA', the deal had no
adverse impacts on workers or the
agricultural sector.
It says the Mexican labour market
recovered relatively quickly after the
tragic adjustments of the 1994-95
so-called Tequila crisis, which caused a
wave of bankruptcies and forced many
banks to shut down.
Unemployment and real wages have now
returned to pre-1994 levels, said the
World Bank.
Pushing its customary economic argument
that foreign investment naturally
results in improved local economies, the
bank found that in Mexico, ”wages and
employment tend to be higher in states
with higher foreign direct investment
and trade, and out-migration from those
states is lower”.
”Wages are also higher in sectors with
more exposure to imports or exports,”
said the report.
”More generally, free trade has
increased the demand for a more skilled
Mexican workforce, a challenge the
educational system must be prepared to
meet,” said William F. Maloney, a lead
economist at the bank and one of the
report co-authors, in a statement..
The bank also said that NAFTA spurred
productivity growth in Mexico, as the
country needed only about one-half of
the time to adopt foreign technology
during the span of the deal than it did
previously.
”In addition, the national innovation
effort also rose modestly after NAFTA,
possibly due to the strengthening of
intellectual property rights,” it added.
On the controversial issue of
agriculture, the report says that
Mexican farmers, including those at the
subsistence level, were not harmed by
the deal, as is widely claimed.
”NAFTA has been quite positive for
export agriculture, but it has probably
had little impact on small farmers in
the southern states, who have suffered a
long history of social, political and
economic neglect,” said Daniel Lederman,
co-author and World Bank senior
economist.
The report went on to blame ”Mexico's
deficiencies” in education and research
and development for restricting what the
bank said was ”the power of NAFTA” to
enable the country to reach the level of
technological progress of the United
States or countries such as South Korea.
The report findings contradict sharply
those by other research groups, which
found the decade-old deal did not help
Mexico boost its economy, create jobs or
rejuvenate its agricultural sector, as
promised.
”NAFTA has not helped the Mexican
economy keep pace with the growing
demand for jobs,” said a recent report
by the Carnegie Endowment for
International Peace, a Washington-based
think-tank.
While foreign direct investment in
Mexico led to the creation of 500,000
manufacturing jobs from 1994 to 2002,
the country lost at least 1.3 million
jobs in the agricultural sector alone,
where one-fifth of Mexicans still work,
added Carnegie.
Further contradicting the World Bank
report, the Carnegie study says the real
wages of most Mexicans today are lower
than they were when NAFTA took effect.
On Tuesday, the U.S. consumer interest
group Public Citizen released another
report arguing the deal ”has had
devastating effects on millions of
people in Mexico, Canada and the U.S.”
Public Citizen says NAFTA has eliminated
99 percent of Mexico's agricultural
tariffs, meaning, for example, that
since 1994 the amount of U.S. corn
dumped -- sold at subsidised prices --
on the Mexican market has increased
15-fold.
Similarly, the amount of U.S. beef going
into Mexico has doubled, poultry has
tripled and pork imports have
quintupled.
The sentiment that the NAFTA did a lot
more damage than good to Mexico is also
echoed by activists and economists in
that country.
”A large number of Mexicans feel that
the sacrifices they made for NAFTA over
the last 10 years have exceeded ... the
benefits that have been concentrated in
a handful of people, who were naturally
the promoters of NAFTA -- that's to say,
multinationals, government technocrats,”
said Carlos Heredia, an economist and
former deputy director in Mexico's
Ministry of Finance.
Heredia, who is also the director of 'Equipo
Pueblo', a Mexico City-based non
governmental organisation (NGO), said in
a teleconference Tuesday that when
research groups refer to the benefits of
NAFTA in Mexico they are alluding to the
gains for U.S. multinationals
established in the country yet
registered in the national accounts as
Mexican.
”In fact, it's intra-firm trade,” he
said. ”It's trade between a
multinational established in Mexico and
its headquarters in Detroit or elsewhere
in the United States ... working people
and poor people have paid a high price
for trade liberalisation while benefits
have been extremely concentrated.”
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