New York Times  [Printer-friendly version]
November 19, 2003


By Celia W. Dugger

As the North American Free Trade Agreement nears its 10th anniversary,
a study from the Carnegie Endowment for International Peace concludes
that the pact failed to generate substantial job growth in Mexico,
hurt hundreds of thousands of subsistence farmers there and had
"minuscule" net effects on jobs in the United States.

The Carnegie Endowment, an independent, Washington-based research
institute, issued its report on Tuesday to coincide with new trade
negotiations aimed at the adoption of a Nafta-like pact for the entire
Western Hemisphere. Trade ministers from 34 countries in the Americas
are gathering now in Miami.

The report seeks to debunk both the fears of American labor that Nafta
would lure large numbers of jobs to low-wage Mexico, as well as the
hopes of the trade deal's proponents that it would lead to rising
wages, as well as declines in income inequality and illegal

Though sorting out the exact causes is complicated, trends are clear.
Real wages in Mexico are lower now than they were when the agreement
was adopted despite higher productivity, income inequality is greater
there and immigration has continued to soar.

"On balance, Nafta's been rough for rural Mexicans," said John J.
Audley, who edited the report. "For the country, it's probably a wash.
It takes more than just trade liberalization to improve the quality of
life for poor people around the world."

The Carnegie findings strike a much more pessimistic note than those
of a World Bank team that concluded in a draft report this year that
the trade accord "has brought significant economic and social benefits
to the Mexican economy."

The bank's economists argue that Mexico would have been worse off
without the agreement as the country struggled to recover from a deep
financial crisis in the mid-1990's and that the income gap between
Mexico and the United States is smaller than it would have been

Luis Serven, research manager for Latin America at the bank, said in
an interview that he disagreed with the Carnegie report's contention
that the trade agreement had hurt small subsistence farmers. He also
said that the higher productivity Mexico had achieved in the Nafta
years was ultimately the only route to higher wages there.

The intensity of the debate about the agreement's consequences is
likely to grow with the approach of the pact's 10th anniversary in
January as pro- and antiglobalization forces marshal arguments to
influence negotiations for a Free Trade Area of the Americas and for a
new bilateral trade deal between the United States and Central

Carnegie's policy experts stop short of contending that Mexico
would have been better off without the agreement. "Mexico
would have been better off with a better Nafta," said Sandra
Polaski, a senior associate at Carnegie who was director of
economic research at the Nafta labor secretariat from 1996 to

The authors of the report say developing countries have much to learn
from Mexico's mistakes in the Nafta deal.

Trade negotiators for Central and South American countries, they said,
should bargain for more gradual tariff reductions on corn, rice and
beans -- the staples of subsistence farming -- to give peasants time
to adjust to tough competition from large, highly efficient and
heavily subsidized American farmers.

Carnegie's researchers also say developing countries should push
international donors and rich countries to finance transitional
assistance for the retraining of workers and farmers displaced by
global competition.

Developing countries should also seek greater leeway to promote the
use of domestic suppliers in manufacturing over imported components --
a step that would increase job creation, the authors say.

The Carnegie report argues that the growth in manufacturing resulting
from the trade agreement was largely offset by lost employment among
rural subsistence farmers, who were adversely affected by falling
prices for their crops, especially corn -- a problem intensified by
the Mexican government's decision to lower tariff barriers to
American-grown corn even more rapidly than the agreement required.

"This is a trade pact which opened the U.S. economy to Mexico very
profoundly, including years when the United States experienced its
best growth in decades," Ms. Polaski said. "Yet we can't see a clear
net increase in jobs in Mexico. You'd expect strong growth. You
wouldn't have expected to need a magnifying glass to find it."

The trade agreement also reinforced and magnified changes in Mexico's
rural economy -- brought on by a broad array of other policies -- that
are damaging the environment, according to Scott Vaughan, an economist
who recently left Carnegie to head the environmental unit at the
Organization of American States. For example, he contends that the
agreement has accelerated the shift to large-scale, export-oriented
farms that rely more heavily on water-polluting agro-chemicals and use
more irrigated water compared with producers of similar crops for the
Mexican market.

A Carnegie Endowment for International Peace report finds Nafta
did not bring job growth to Mexico.

Avg. annual employment change by sector in Mexico

BEFORE NAFTA (1984-1993): +2%
AFTER NAFTA (1993-2002): -2%

BEFORE NAFTA (1984-1993): +6
AFTER NAFTA (1993-2002): +4

BEFORE NAFTA (1984-1993): +6
AFTER NAFTA (1993-2002): +4

*Includes financial and social services, transportation,
utilities, trade, communications

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