Sunday, March 4, 2018

The Truth about NAFTA: Good for the US. Bad for Mexico and its Workers.

People in the US, most notably president Trump, are fueling criticism of NAFTA for being bad for US workers. But a closer look reveals most of the negative effects of NAFTA have been endured by workers in Mexico. At the very least, negotiations should be driven towards increased protections and labor standards so the promise NAFTA made to help improve the lives of workers in Mexico, can be fulfilled. 

Most studies show that NAFTA was not the main cause of the loss of manufacturing jobs in the US. The US has shed two-thirds of relative manufacturing employment since 1971. Many factors have contributed to this decline in technology and the reduction in transportation costs of manufactured goods. Some research has suggested the number of jobs displaced by NAFTA amounts to about 120,000 or 0.1% of the US labor force. 

While NAFTA has had little effect on the US aside from a small decrease in manufacturing jobs and a boom in avocado consumption, it has been a disappointment for Mexico. During NAFTA’s proposal, it was sold as something that might shrink the salary gap between Mexico and the US. However, Mexico’s economy has grown at the dismal rate of 1.2% per capita year from 1994-2016

Mexico’s labor productivity has grown by less than 10% since 1994 when NAFTA took effect. During the same period, Canada’s labor productivity grew by 3 times that of Mexico’s and US productivity grew by 4 times that of its southern neighbor. Mexican manufacturers make an average of $13 a day while US workers with similar jobs make $25/hour which is a large increase for the US since 1994. 

NAFTA also promised to create an agricultural boom in Mexico. More than twenty years later Mexico imports 45% if the food it consumes. It relies on the US for staple Mexican crops like corn, rice, and beans. In fact, 99% of the corn in Mexico comes from the US. Why? Competing with agricultural giants has put farmers in Mexico out of work. And there is a lot of evidence that the quality of the food coming out of the US has contributed to an obesity problem in Mexico. 

Perhaps a renegotiation of NAFTA can be a good thing for Mexico. Putting labor standards in place has been suggested by several US senators in the form of ILO conventions.  Canadian prime minister Justin Trudeau has pushed for implementing strong and progressive labor standards in a negotiated version of NAFTA. Hopefully, they will make some progress.