MEXCAN
9th January 2003, 21:35
http://www.globalexchange.org/ftaa/20030108_503.html
Farm problems expose weak link of NAFTA
San Diego Union Tribune
January 2, 2003
James O. Goldsborough
They celebrated NAFTA's 9th anniversary in Washington last month just as the news from Mexico was turning bad. It appears illegal immigration from Mexico has increased under NAFTA, not decreased as expected.
One of the best arguments for the North American Free Trade Agreement, one that helped tip the balance in the House's narrow, 234-200, ratification of the pact, was the idea that it would reduce Mexican illegal immigration. NAFTA would make Mexicans richer, and with higher incomes more would stay home.
U.S. opposition to the pact, led by presidential candidate Ross Perot, was motivated primarily by the fear of losing U.S. jobs to Mexico, something that didn't happen. NAFTA's free-trade dynamic helped usher in the greatest decade of U.S. prosperity and the lowest unemployment rate since World War II.
Mexico and Canada didn't do badly either. All three NAFTA nations saw their gross domestic products increase by nearly a third between 1993 and 2000. Starting from a smaller base, Mexico would have done better than a third, but saw its growth hobbled by the 1993 peso devaluation.
But illegal immigration did not abate. There are some 4 million Mexicans residing illegally in the United States according to INS estimates, and they are still crossing at a rate of about 150,000 per year. Mexico's astounding population growth - which doubled its population in a generation to about 100 million - put even more pressure on the border.
Most of these immigrants come from Mexico's poor farm regions, which have been hurt by NAFTA. Last summer, as the Jan. 1, 2003, deadline for the removal of tariffs from farm products approached, Mexican officials began sounding the alarm.
On New Year's Day, well-subsidized U.S. farmers began selling wheat, rice, potatoes, pork, apples and barley to Mexico duty-free. Under this pressure, Mexico's subsistence farmers are doomed.
"We are facing the prospect of 4 or 5 million peasant farmers deciding that their only option is to cross into the United States," Rodolfo Garcia Zamora of the Autonomous University of Zacatecas told Copley News Service reporter Jerry Kammer.
The situation will get worse in five years when final tariffs are removed on corn, the farm staple that accounts for 55 percent of Mexico's cultivated land. If Mexico's unemployed rice and barley farmers seek to cross the border, what happens when its 4 million corn farmers are out of business?
That's what free trade is all about, you say: winners and losers. Overall, NAFTA has been a boon for Mexico, transforming a $1.6 billion U.S. trade deficit in 1993 to a $31 billion U.S. trade surplus in 2002. Mexican farmers may be hurting, but Mexican manufacturers are not.
Free trade raises prosperity through a principle called comparative advantage. The trouble is that comparative advantage, which forces nations into more efficient economic specialization, can also bring undesirable social changes.
Mexico has 8 million farmers. Economic forces that drive these people into crowded cities or across borders - whatever arguments of economic efficiency lie behind them - are good neither for Mexico nor America.
With their cities already crowded, most industrial nations don't want to depopulate rural areas. The European Union and United States pay farmers directly to stay put - though GDPs would rise faster if they left the land. The record 2002 farm bill pays U.S. farmers $190 billion over 10 years, with big farmers getting the biggest checks.
Mexico is too poor and has too many farmers to subsidize at European or American farm rates. U.S. farmers, 2.7 percent of the work force, receive an average $20,000 annually. EU farmers, 4.8 percent of the work force, receive $16,000. Mexican farmers, 20 percent of the work force, receive $1,000.
What's missing from NAFTA is precisely the element that makes the EU work. The EU's regional policy pays money directly from wealthy industrial nations such as Germany to less wealthy agricultural nations such as Greece, Portugal and Spain. The result is that EU farmers stay put.
Like the U.S. farm bill, the EU subsidies violate the principles of free trade and comparative advantage, but do so for a higher cause: social stability.
The absence of a regional stability mechanism in NAFTA is its great weakness. Unlike the rural nations of Europe (which included France and Italy when the EU treaty was signed in 1955), Mexico lacked the political muscle to insist on a regional pact when NAFTA was signed. Washington, unfortunately, was not far-sighted enough to see the need for one.
The result is that Mexico now faces an agricultural crisis that affects the United States as well. The pressures NAFTA puts on Mexico as farm tariffs are removed and the date for still broader reductions comes nearer can only be solved bilaterally.
The Bush administration should propose negotiations leading to a transfer of funds that helps Mexico's farmers stay on the farm and reduces illegal immigration.
Farm problems expose weak link of NAFTA
San Diego Union Tribune
January 2, 2003
James O. Goldsborough
They celebrated NAFTA's 9th anniversary in Washington last month just as the news from Mexico was turning bad. It appears illegal immigration from Mexico has increased under NAFTA, not decreased as expected.
One of the best arguments for the North American Free Trade Agreement, one that helped tip the balance in the House's narrow, 234-200, ratification of the pact, was the idea that it would reduce Mexican illegal immigration. NAFTA would make Mexicans richer, and with higher incomes more would stay home.
U.S. opposition to the pact, led by presidential candidate Ross Perot, was motivated primarily by the fear of losing U.S. jobs to Mexico, something that didn't happen. NAFTA's free-trade dynamic helped usher in the greatest decade of U.S. prosperity and the lowest unemployment rate since World War II.
Mexico and Canada didn't do badly either. All three NAFTA nations saw their gross domestic products increase by nearly a third between 1993 and 2000. Starting from a smaller base, Mexico would have done better than a third, but saw its growth hobbled by the 1993 peso devaluation.
But illegal immigration did not abate. There are some 4 million Mexicans residing illegally in the United States according to INS estimates, and they are still crossing at a rate of about 150,000 per year. Mexico's astounding population growth - which doubled its population in a generation to about 100 million - put even more pressure on the border.
Most of these immigrants come from Mexico's poor farm regions, which have been hurt by NAFTA. Last summer, as the Jan. 1, 2003, deadline for the removal of tariffs from farm products approached, Mexican officials began sounding the alarm.
On New Year's Day, well-subsidized U.S. farmers began selling wheat, rice, potatoes, pork, apples and barley to Mexico duty-free. Under this pressure, Mexico's subsistence farmers are doomed.
"We are facing the prospect of 4 or 5 million peasant farmers deciding that their only option is to cross into the United States," Rodolfo Garcia Zamora of the Autonomous University of Zacatecas told Copley News Service reporter Jerry Kammer.
The situation will get worse in five years when final tariffs are removed on corn, the farm staple that accounts for 55 percent of Mexico's cultivated land. If Mexico's unemployed rice and barley farmers seek to cross the border, what happens when its 4 million corn farmers are out of business?
That's what free trade is all about, you say: winners and losers. Overall, NAFTA has been a boon for Mexico, transforming a $1.6 billion U.S. trade deficit in 1993 to a $31 billion U.S. trade surplus in 2002. Mexican farmers may be hurting, but Mexican manufacturers are not.
Free trade raises prosperity through a principle called comparative advantage. The trouble is that comparative advantage, which forces nations into more efficient economic specialization, can also bring undesirable social changes.
Mexico has 8 million farmers. Economic forces that drive these people into crowded cities or across borders - whatever arguments of economic efficiency lie behind them - are good neither for Mexico nor America.
With their cities already crowded, most industrial nations don't want to depopulate rural areas. The European Union and United States pay farmers directly to stay put - though GDPs would rise faster if they left the land. The record 2002 farm bill pays U.S. farmers $190 billion over 10 years, with big farmers getting the biggest checks.
Mexico is too poor and has too many farmers to subsidize at European or American farm rates. U.S. farmers, 2.7 percent of the work force, receive an average $20,000 annually. EU farmers, 4.8 percent of the work force, receive $16,000. Mexican farmers, 20 percent of the work force, receive $1,000.
What's missing from NAFTA is precisely the element that makes the EU work. The EU's regional policy pays money directly from wealthy industrial nations such as Germany to less wealthy agricultural nations such as Greece, Portugal and Spain. The result is that EU farmers stay put.
Like the U.S. farm bill, the EU subsidies violate the principles of free trade and comparative advantage, but do so for a higher cause: social stability.
The absence of a regional stability mechanism in NAFTA is its great weakness. Unlike the rural nations of Europe (which included France and Italy when the EU treaty was signed in 1955), Mexico lacked the political muscle to insist on a regional pact when NAFTA was signed. Washington, unfortunately, was not far-sighted enough to see the need for one.
The result is that Mexico now faces an agricultural crisis that affects the United States as well. The pressures NAFTA puts on Mexico as farm tariffs are removed and the date for still broader reductions comes nearer can only be solved bilaterally.
The Bush administration should propose negotiations leading to a transfer of funds that helps Mexico's farmers stay on the farm and reduces illegal immigration.