NAFTA: what it was, what it is not and what is left to do.

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The twentieth anniversary of the North American Free Trade Agreement (NAFTA) has provided several reflections upon the effects it had over the growth of the Mexican economy as well as the benefit of its citizens. Two decades ago, the rhetoric said to public opinion regarding this historical agreement, a trademark in Carlos Salinas’ administration, was characterized with bloating the expectations over the progress and modernity that an opening up of the markets would bring. On the other hand, critics of NAFTA have claimed that it has a large number of flaws and, thereby, turn into a useful fetish as to explain all of the country’s structural imperfections. However, the analysis over the first twenty years of NAFTA is an opportunity to demystify the results of the agreement – both positive and negative – as well as to think about how to maximize the benefits that it can still provide for the country.

NAFTA was not only a tipping point in Mexico’s trade policy but also in its political system. It is true that the agreement gave an unprecedented boost to the export and manufacturing sector of the country (non-oil exports have grown almost 700% in two decades). Likewise, competition in trade allowed the rise and diversification of the supply for consumer goods. However, other of the transitory effects of the integration of the Mexican economy in the context of opening up of the international markets was to reduce the margin of decision-making within economic policy, whose past irresponsibility had led to frequent crises. Despite the undeniable benefits for the economy, the opening up was not accompanied with public policies that would enable to exploit the full potential of the agreement, to provide greater benefits for a larger sector of the population as well as to counterweight the cost of those that weren’t benefitted in the negotiation.

Ending the barriers for protectionism enabled the market to eliminate Mexican companies that were not able to adapt and compete. Other sectors had the opportunity of not immediately entering into liberalization thinking that, theoretically, it could be strengthened and end up integrating in a fixed deadline. The best example of the lights and shadows of this process was the Mexican countryside. Despite the extensive period that happened before the full entry into force of NAFTA in agricultural matters – 15 years – the government kept on promoting welfare policies that did little on leading the sector towards competitive levels, condemning it to the unavoidable: its ongoing impoverishment. It is true, the U.S. and the most powerful countries in the world in agricultural matters have very aggressive subsidy policies that favor producers, but their focus is not to perpetuate poverty, but enhancing development.

On the other hand, NAFTA does not prevent the government from issuing adequate legislation that will allow competition in highly concentrated markets, of having a true rule of law, of promoting – not hailing – incoming industries, of expending more efficiently on infrastructure, boosting innovation and strengthening the abilities of Mexican workers through the education system, among other things. There is no policy that is able to solve all the economic problems of a country, not NAFTA or the energy reform or any other whatsoever.

If Mexico aims to efficiently take advantage of the commercial conditions that NAFTA has enabled, it should be capable of boosting policies with the purpose of enhancing the gains from the aforementioned opening. Likewise, thinking about “re-launching”, “deepening” or “renegotiating” the agreement is nonsense. Taking a step forward in the context of the North American trade agreement will highly depend on the establishment of reforms that will truly influence development, boost productivity and competitiveness, enhance the creation of added value, aim for the knowledge and technology transference; in sum, let Mexico fulfill its duties rather than wait for others to do it for itself.


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