Nafta Should Have Stopped Illegal Immigration, Right?
By LOUIS UCHITELLE
As relatively well-paying jobs disappeared, Mexico’s average wage for production workers, already low, fell further behind the average hourly pay of production workers in the United States, and Mexicans responded by migrating.
“The main thing that would have stemmed the flow of people across the border was a rapid increase in wages in Mexico,” said Dani Rodrik, an economist and trade specialist at Harvard’s John F. Kennedy School of Government. “And that certainly has not happened.”
Something similar occurred in agriculture. The assumption was that tens of thousands of farmers who cultivated corn would act “rationally” and continue farming, even as less expensive corn imported from the United States flooded the market. The farmers, it was assumed, would switch to growing strawberries and vegetables — with some help from foreign investment — and then export these crops to the United States. Instead, the farmers exported themselves, partly because the Mexican government decided to reduce tariffs on corn even faster than Nafta required, according to Philip Martin, an agricultural economist at the University of California, Davis.
“We understood that the transition from corn to strawberries would not be smooth,” Professor Martin said. “But we did not think there would be almost no transition.”
A financial crisis also dashed expectations. One expectation was that the Mexican economy, driven by Nafta, would grow rapidly, generating jobs and keeping Mexicans home. The peso crisis of 1994-95, however, provoked a steep recession, and while there was some big growth later, the average annual growth rate over Nafta’s lifetime has been less than 3 percent.
The financial crisis struck just months after Nafta came into existence, undermining, early on, the Mexican government’s ability to spend money on roads, education and other necessary government functions.
“We underestimated Mexico’s deficits in physical and human infrastructure,” said J. Bradford DeLong, an economist at the University of California, Berkeley, and a Treasury official in the Clinton administration.
But, he says, without Nafta the migration would have been even greater. For instance, he says, there would not have been as much investment in the north of the country.
Finally, the steady flow of Mexicans to the United States has produced a momentum of its own — what Jeffrey Passel, a demographer at the Pew Hispanic Institute, calls a “network effect,” in which young Mexicans travel to the United States in growing numbers to join the growing number of family members already here.
The upshot is that Mexican migration to the United States has risen to 500,000 a year from less than 400,000 in the early 1990s, before Nafta, Mr. Passel estimates. Roughly 80 percent to 85 percent of immigrants are here illegally, he says.
The peso crisis, recession, the network effect — their impact may have been beyond anyone’s control, but not the assumptions about how the market and the government would act.
“We have indeed had one disappointment after another on this score,” Mr. Rodrik said, noting that the same assumption about government spending is part and parcel of the agreements, now before Congress, with Columbia, Peru and Panama.
“The main thing that would have stemmed the flow of people across the border was a rapid increase in wages in Mexico,” said Dani Rodrik, an economist and trade specialist at Harvard’s John F. Kennedy School of Government. “And that certainly has not happened.”
Something similar occurred in agriculture. The assumption was that tens of thousands of farmers who cultivated corn would act “rationally” and continue farming, even as less expensive corn imported from the United States flooded the market. The farmers, it was assumed, would switch to growing strawberries and vegetables — with some help from foreign investment — and then export these crops to the United States. Instead, the farmers exported themselves, partly because the Mexican government decided to reduce tariffs on corn even faster than Nafta required, according to Philip Martin, an agricultural economist at the University of California, Davis.
“We understood that the transition from corn to strawberries would not be smooth,” Professor Martin said. “But we did not think there would be almost no transition.”
A financial crisis also dashed expectations. One expectation was that the Mexican economy, driven by Nafta, would grow rapidly, generating jobs and keeping Mexicans home. The peso crisis of 1994-95, however, provoked a steep recession, and while there was some big growth later, the average annual growth rate over Nafta’s lifetime has been less than 3 percent.
The financial crisis struck just months after Nafta came into existence, undermining, early on, the Mexican government’s ability to spend money on roads, education and other necessary government functions.
“We underestimated Mexico’s deficits in physical and human infrastructure,” said J. Bradford DeLong, an economist at the University of California, Berkeley, and a Treasury official in the Clinton administration.
But, he says, without Nafta the migration would have been even greater. For instance, he says, there would not have been as much investment in the north of the country.
Finally, the steady flow of Mexicans to the United States has produced a momentum of its own — what Jeffrey Passel, a demographer at the Pew Hispanic Institute, calls a “network effect,” in which young Mexicans travel to the United States in growing numbers to join the growing number of family members already here.
The upshot is that Mexican migration to the United States has risen to 500,000 a year from less than 400,000 in the early 1990s, before Nafta, Mr. Passel estimates. Roughly 80 percent to 85 percent of immigrants are here illegally, he says.
The peso crisis, recession, the network effect — their impact may have been beyond anyone’s control, but not the assumptions about how the market and the government would act.
“We have indeed had one disappointment after another on this score,” Mr. Rodrik said, noting that the same assumption about government spending is part and parcel of the agreements, now before Congress, with Columbia, Peru and Panama.
While there is opposition to these proposals, it is mainly from Democrats who want a better safety net for American workers who might be hurt.
The European Union, in contrast, assumes little about government spending on the part of economically weaker nations joining it. The union itself has hugely subsidized the improved services needed by entering countries like Portugal, Spain, Greece and Poland, rather than leave financing to the relatively meager resources of entering countries.
The European Union, in contrast, assumes little about government spending on the part of economically weaker nations joining it. The union itself has hugely subsidized the improved services needed by entering countries like Portugal, Spain, Greece and Poland, rather than leave financing to the relatively meager resources of entering countries.
The money is used not only for public investment, Mr. Rodrik noted, but also to subsidize companies setting up operations in the new countries and to support government budgets.
“I am not saying Nafta was a bad agreement,” Mr. Rodrik said. “But more than a trade agreement is required for countries to converge economically. And Nafta has been viewed as a shortcut to convergence without having to do all the other stuff.”
“I am not saying Nafta was a bad agreement,” Mr. Rodrik said. “But more than a trade agreement is required for countries to converge economically. And Nafta has been viewed as a shortcut to convergence without having to do all the other stuff.”
Fonte: The New York Times, February 18, 2007
