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NAFTA No Model for Development - Reports

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By Emad Mekay

Inter Press Service
November 18, 2003


A decade-old trade deal between Canada, the United States and Mexico did not help the latter boost its economy, create jobs or rejuvenate its agricultural sector as promised, say two studies released here Tuesday. The North American Free Trade Agreement (NAFTA) came into effect in 1994 with officials from the three countries promising it would usher in a new phase of economic prosperity for all, particulary for the only developing economy involved. But with NAFTA touted as the blueprint for the controversial Free Trade Area of the Americas (FTAA), a common market of 800 million consumers in 34 countries from Argentina to Canada (excluding Cuba) the earlier deal has come under greater scrutiny.

The findings of the two reports released here are particularly relevant now as ministers from the 34 countries, along with business, academic and civil society leaders, have gathered in this Florida State city this week to discuss plans to create the FTAA by Jan. 1, 2005. At its launch, officials promised that NAFTA would create some 200,000 new U.S. jobs each year, spark higher wages in Mexico, initiate an environmental clean-up and boost the health of citizens.

The reports say the deal failed to fulfill most of these promises. "NAFTA has not helped the Mexican economy keep pace with the growing demand for jobs," says NAFTA's Promise and Reality', by the Carnegie Endowment for International Peace, a Washington-based think tank. While foreign direct investment in Mexico led to the creation of 500,000 manufacturing jobs from 1994 to 2002, the country lost at least 1.3 million jobs in the agricultural sector alone, where one-fifth of Mexicans still work, adds the document.

The report says that the real wages of most Mexicans today are lower than they were when NAFTA took effect. "Despite predictions to the contrary, Mexican wages have not converged with U.S. wages." The other report, 'Unfair Trade', released by Public Citizen and the Global Resource Action Centre for the Environment (GRACE), says that U.S. and Mexican farmers are struggling to survive as a result of NAFTA. "Family farmers in both the U.S. and Mexico are suffering needlessly because of this agricultural crisis," said Wenonah Hauter, director of Public Citizen's Critical Mass Energy and Environment Programme. "It is inconceivable that this situation can continue to be ignored by the government and corporate leaders who held up NAFTA as a saviour to the Mexican farmer."

According to 'Unfair Trade', NAFTA has eliminated 99 percent of Mexico's agricultural tariffs, meaning, for example, that since 1994, the amount of U.S. corn dumped -- sold at subsidised prices -- on the Mexican market has increased 15-fold. Similarly, the amount of U.S. beef going into Mexico has doubled, poultry has tripled and pork imports have quintupled, adds the report. "Farms by the hundreds of thousands have been driven into bankruptcy, creating havoc in the Mexican countryside," the document says. "Three-fourths of the Mexican population now lives in poverty, up 80 percent since 1984."

The United States disputes such figures, arguing that most U.S. corn sold to Mexico is yellow corn used as livestock feed while Mexican farmers mostly grow white corn for human consumption. Washington also says that Mexican farm production increased 50 percent from 1993 to 2001, including output of pork, beef, chicken and vegetables. But Lori Wallach of Public Citizen says figures from the U.S. Trade Representative (USTR) can be misleading. "When they talk about farm production, they are talking about volume. We are talking about farmers," she said, referring to how NAFTA led to multinational companies buying up farmers' lands.

Those companies produce more in terms of volume, but that has come at the expense of hundreds of thousands of small farmers who have lost their livelihoods, Wallach added. The reports point to another negative effect of NAFTA. More than 38,000 small U.S. farms have gone out of business since the deal was implemented, particularly in the winter vegetable industry. Since 1994 the number of tomato farms in Florida has fallen from 230 to fewer than 100, says 'Unfair Trade'.

The reports' findings contradict a brief report released Monday by the U.S. government that argues NAFTA did help the Mexican economy. "NAFTA has resulted in expanded Mexican exports, higher wages for Mexican workers, less poverty, more foreign investment and a stronger agriculture sector," said the report from the USTR office. Washington says one of every five people in Mexico is today employed in export-oriented jobs and that one-half of the 3.5 million new jobs generated in Mexico in 1995-2000 resulted from NAFTA and export growth.

The Carnegie report says that predictions of the benefits of free trade deals like the FTAA are empty promises. "Trade liberalisation is facing a crisis of legitimacy among people around the world, from rural farmers in Latin America to cotton producers in Africa, to manufacturing workers in the United States and Europe," it said. It instead advised governments to "stop making empty promises" that trade will bring news jobs, cleaner environments, or stem the flow of illegal migration. "Free-trade agreements should not be thought of as an end in themselves; nor should they be loaded with unrealistic expectations," said 'NAFTA's Promise and Reality'.

But it appears the advice is not being heeded. Tuesday, U.S. Trade Representative Robert Zoellick announced the launch of new bilateral trade talks with four Latin American countries -- Ecuador, Colombia, Bolivia and Peru. The banner behind him read: "Trade, Hope, Opportunity".

Read the Reports:

  • Public Citizen, Unfair Trade: full report
  • Carnegie Endowment for International Peace, NAFTA's Promise and Reality. Lessons from Mexico for the Hemisphere:
    Introduction - Chapter 1 - Chapter 2 - Chapter 3


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