NAFTA has Harmed Mexico Much More Than a Wall Will Ever Do
President Trump is unlikely to fulfill his dream of forcing Mexico to pay for his proposed wall along the United States’ southern border. If it is built, it would almost certainly be US taxpayers footing the bill, with some estimates as high as $50 billion. But it’s worth taking a step back to look at the economics of US-Mexican relations, to see how immigration from Mexico even became an issue in US politics that someone like Trump could try to use to his advantage.
NAFTA (the North American Free Trade Agreement) is a good starting point. While it has finally become more widely recognized that such misleadingly labelled “free trade” agreements have hurt millions of US workers, it is still common among both liberal and right-wing commentators to assume that NAFTA has been good for Mexico. This assumption is forcefully contradicted by the facts.
If we look at the most basic measure of economic progress, the growth of GDP, or income, per person, Mexico ranks fifteenth out of 20 Latin American countries since it joined NAFTA in 1994. Other measures show an even sadder picture. According to Mexico’s latest national statistics, the poverty rate in 2014 was 55.1 percent ― actually higher than the 52.4 rate in 1994.
Wages tell a similar story: almost no growth in real (inflation-adjusted) wages since 1994 ― just about 4.1 percent over 21 years.
Why did Mexico fare so poorly under NAFTA? We must understand that NAFTA was a continuation of policies that began in the 1980s, under pressure from Washington and the International Monetary Fund, when Mexico was particularly vulnerable during a debt crisis and world recession. These policies included the deregulation and liberalization of manufacturing, foreign investment and ownership (70 percent of Mexico’s banking system is now foreign owned). Mexico also moved away from the pro-development policies of the previous decades toward a new, neoliberal prescription that tied Mexico ever more closely to its northern neighbor and its questionable ideas about economic development.
The purpose of NAFTA was to lock in these changes and policies in an international treaty, so that they would be more difficult to reverse. It was also designed to add special privileges for transnational corporations, like the right to sue governments for regulations that reduced their potential profits ― even those dealing with public health or environmental safety. These lawsuits are decided by a tribunal of mostly corporate lawyers who are not bound by precedent or any national legal system.
About two million net jobs were lost in Mexican agriculture, with millions more displaced, as imported subsidized corn wiped out small farmers. From 1994–2000, immigration to the US from Mexico increased by 79 percent, before dropping off in the 2000s.
Now about that wall: if the Mexican economy had just continued to grow post-1980, as it did for the two decades prior, Mexicans would have an average income at European levels today. Extremely few Mexicans would take big risks to live or work in the US. But growth collapsed after 1980, under Washington’s failed experiment. Even if we look just at the 23 years post-NAFTA ― the much better years ― GDP per person has grown by just 29 percent, a fraction of the 99 percent growth from 1960–1980.
The wall would cause significant environmental as well as economic damage, if it is ever built. But it is the long-term damage that Washington has helped visit upon the Mexican economy that has brought us to the point where a US president could even propose such a monstrosity.
This article originally appeared on the Sacramento Bee.
Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).