NS3040 Winter Term 2015

Pre-NAFTA Assessment

NAFTA Cost/Benefits U.S. I

• Stephen Stamos, Reflections on the Proposed U.S.-Mexico Free Trade Agreement, 1993

U.S. Perspective• Positive aspects

• U.S. firms have better access to cheaper labor/parts

• Increased access to growing export markets

• Liberalized foreign investment laws in Mexico

• Expansion of financial and services sectors to México

• Mexico becomes a very reliable sure of petroleum

• Enhance Mexico’s political stability

• Overall a net employment gain

• Increase the competitiveness of U.S. firms

• Assist U.S. banks in resolving Mexico’s debt service

• Ease immigration pressures

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NAFTA Cost/Benefits U.S. II

U.S. Perspective

•Negative Aspects

• Employment loss in select industries and regions

• Forced restructuring in sectors like agriculture

• Downward pressure on U.S. wages/standard of living

• Increased competition for small-medium sized firms

• Uneven regional impact

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NAFTA Cost/Benefits Mexico I

Free Trade for Mexico

•Positive aspects

• Increased direct private foreign investment

• Repatriation of “flight capital.”

• Increased economic growth

• Increased Export Growth

• Increased diversification of the economy

• Increased employment and Income

• Increased expansion of the internal market

• Promote a more modern and open economy

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NAFTA Cost Benefits Mexico IIFree Trade for Mexico

•Negative Aspects

• Increased integration with the U.S. Economy – increased vulnerability

• Worker and community Issues: health, safety and the environment

• Child labor laws and regulations

• The adjustment realities for Mexican firms

• The changing structure, composition and composition of production in Mexico

• Uneven regional economic impact – Northern border versus other areas

• A challenge to Mexico’s historic nationalism

• Compromises future policy options in terms of the external debt situation 5

NAFTA Cost Benefits Mexico III

• Real Questions for Mexico

• Re-examination of the positives

• Will capital flight return?

• Will wages (real income) increase?

• Will domestic markets expand?

• Will the pace of immigration slow?

• Will foreign investment flow significantly to where it is needed?

• What will be the character of a more open and modern economy that is driven by export-led growth?

• Will the lost standard of living of the 1980s be regained for those who lost it?

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NAFTA Cost Benefits Mexico IV

The Real Questions for Mexico

•A Re-examination of the negatives

• Will the negatives be even worse than imagined?

• What kind of protections can be built into the agreement to seriously address genuine negatives

•Final Thoughts

• NAFTA obviously inevitable

• When U.S. economy strong the positive economic influences will be more self evident, especially in the Northern border states

• While economic benefits for parts of Mexico obvious, for Salinas NAFTA a essential part of his neoliberal reforms to bring Mexico into the global economy.

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