The 1994 North American Free Trade Agreement effect in Mexico has long been overshadowed by the debate over the effects of the Treaty on the US economy. As key partners in the agreement, the impact that NAFTA has on the Mexican economy is critical to understanding NAFTA as a whole. A key factor in this discussion is the way the Treaty was presented to Mexico; namely, that it would enhance Mexico's economic development by providing more middle-class jobs that would allow more Mexicans to lift themselves out of the lower classes. Thus, wages, jobs, attitudes, and migrations all present important areas of analysis to understand the impact that NAFTA has on the Mexican economy. The overall economic effect of NAFTA on the Mexican economy has been mild considering the promises made about the deal when it is being negotiated. Economic growth is steady at around two percent, but growth is far from the growth that the deal should achieve. However, NAFTA has increased foreign investment in Mexico, and it has allowed Mexico to boost exports that now make up the bulk of GDP of Mexico. NAFTA has a mild effect on employment, and wages remain largely static over the years that NAFTA has existed. Finally, the Mexicans as a whole have a critical view of the trade deal, but generally oppose the complete abolition of the law.
Video Effects of NAFTA on Mexico
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For more information: North American Free Trade Agreement
When NAFTA is being developed to include Mexico, the deal developers present it as a way to create more middle-class jobs in Mexico by increasing development and investment in Mexico. This agreement follows the trend of improving neo-liberal policies in Mexico that ultimately make the implementation of NAFTA possible. Placed in the context of Mexico's wider economic liberalization, NAFTA represents another step in Mexico's economic economic transformation from protectionist to open to trade. The NAFTA section represents an important moment for Mexico and the United States, as it represents the ties of two economies in an unprecedented way between two relatively unequal economies.
Maps Effects of NAFTA on Mexico
Economic Effects
Mexico's economic growth has remained steady between 1.2 and 2.5 percent since the passage of NAFTA, away from large-scale growth NAFTA should lead to. This economic growth has not been translated into wage growth that will create higher wages and reduce inequality. However, Mexican trade has increased rapidly since NAFTA came into effect, with exports increasing from 8.56 percent of GDP of Mexico in 1993 to 36.95 percent in 2013. This increase in exports led to a decline in Mexico's trade deficit. The United States is currently Mexico's largest trading partner, with 88.66 percent of Mexico's exports going to the United States. [1] As a result, Mexico's economy is mostly tied up in the United States. Because of this increased dependence on the US economy, Mexico is affected by the 2008 US financial crisis more than any other Latin American country.
Foreign investment is increasing rapidly after the passage of NAFTA, with billions of dollars annually invested in Mexico. This foreign investment is manifested in increased manufacturing as part of Mexico's exports, with exports to the United States increasing to 88.66 percent of Mexico's exports in 2001. Despite this increase, manufacturing exports have become increasingly concentrated in some industries, meaning that the benefits in turn concentrated. More recently, China's growth as a US trading partner has hampered Mexico's export growth to the US, with China's export growth rate to the US exceeding exports from Mexico. Because US exports cover most of Mexico's exports, and since Mexican imports do not include a high percentage for the US, Mexico feels the economic impact of the growing trade in the United States with China. Overall, Mexican foreign trade is expanding towards and following the path of NAFTA largely as a result of increased manufacturing investment by some companies. In addition, despite the increased trade, a large trade deficit with the United States still exists, and there is a loss of internal work due to subsidized farming in the United States. This internal job loss has greatly affected rural farming, where historically families can support themselves through domestic agriculture. Trade liberalization has brought subsidized maize from the United States, which makes it difficult for rural families to support themselves through agriculture. Corn and other subsidized commodities have led to an increase in food poverty due to the production of centralized agricultural goods.
Jobs and Wages
Overall, the effect of NAFTA on work in Mexico is quite mild. While changes in work have taken place in Mexico since the passage of the Act, various factors may have played a role in change in work. After that part, NAFTA really brings benefits to Mexico, like a more personal investment, but fails initially to create the promised work. NAFTA was passed during the recessionary period in Mexico, which contributed to the minimal effect of the Act. In addition, trade liberalization as a result of the Act contributes to the loss of "nearly two million" agricultural jobs as a result of competition from the highly subsidized US agricultural industry. Overall, unemployment in Mexico increased following the passage of NAFTA, largely due to increased competition from US agriculture. During the time after the passage of NAFTA, internal manufacturing jobs fell by 44,000 while jobs in foreign-owned manufacturing companies grew by about half a million jobs. Overall job growth remains sluggish following the passage of NAFTA. In addition, the opening of the Mexican market lowered the production of internal industries, as more international companies imported cheaper components into Mexico for use in assembly plants; despite an increase in manufacturing, the company uses fewer Mexican components. Growth in labor productivity remains low, in large part due to the dominance of foreign driven manufacturing and stable but low wages that come with manufacturing jobs.
Working side agreements in NAFTA also affect the ability of workers to organize into unions, which in turn affect the quality of work available to workers. This agreement, together with the rest of NAFTA, makes it harder for the Mexican government to ignore following its own labor legislation. Furthermore, the NAFTA section makes it advantageous for established factories and manufacturers to move from southern and central Mexico to northern Mexico closer to the border where collective bargaining is more difficult due to migration and the ease of hiring for low-paid jobs. Overall, unions among the working population have declined from 22.4 percent in the early 1990s to 13 percent by 2012.
Wages for workers in jobs made possible by NAFTA remain largely lower than equivalent jobs in the United States. By permanently binding Mexico's economic growth with the heavy-export model, the new jobs created under NAFTA are mostly in the low-wage manufacturing sector, with real manufacturing wages falling to 12 percent below the 1994 level in 2002. Economists in Mexico argue that the higher growth and salaries that the Law should have created have failed to materialize for Mexican workers. Wages in Mexico also stagnated in the years following the passage of NAFTA, and inequality in the country remains high, a trend that reflects the economic trends in the United States. Overall, new revenues are distributed upward, so the new wealth is not distributed to most Mexican workers. Because of this phenomenon, those who benefit most from expressing themselves politically face greater obstacles to entry into the political system because of social isolation and lack of influence through wealth.
Effects on migration and emigration
While NAFTA's main function is not centered on immigration, the passage of the Act liberalizes temporary immigration to the United States. Initial discussions NAFTA did not plan to migrate, because migration was not seen related to the overall economic objectives of NAFTA, and only until later in negotiations that migration has been overcome. However, part of the overall goal for the United States and Mexico in ratification of the Act reduces migration by stimulating Mexico's economy through the creation of more middle-class jobs. When NAFTA was initially authorized, Mexican emigration to the United States soared, although it was not clear whether the Act itself was a direct contributing factor in this wave. However, this part of the wave can be attributed to continued economic stagnation in Mexico and the US agricultural dependence on low-wage migrant workers. The highly subsidized agricultural industry was able to compete with Mexican agriculture following the passage of NAFTA, which affected the ability of rural Mexican farmers to support their own farms. According to the Council on Foreign Relations, the soaring emigration to the United States after the passage of NAFTA could be attributed to the loss of Mexican agricultural work due to subsidized farming in the United States. While it appears that emigration to the United States increased in the short run after the passage of NAFTA, some experts argue that the long-term effects of NAFTA will actually reduce the number of people emigrating as a result of long-term economic benefits.
Attitude toward NAFTA in Mexico
Attitudes toward the economic impact of NAFTA in Mexico vary by class. Among the working class, there is a sense of confusion over the law and the difference between the promises made around the Act and the visible effects of the Act. In a New York Times article written shortly after the NAFTA section shows that among the working class there is a belief that "there will be more jobs, and a larger flow of information and goods." In contrast, business owners and manufacturers have a more optimistic view of NAFTA, believing that "infrastructure and trade contacts will give us a change to sell our products and take advantage of the North American market."
Recently, working-class individuals in Mexico share the view that NAFTA has failed on its promises. Wages for manufacturing workers remain stagnant, and instead of opportunities, many workers see NAFTA as holding back expansion. A worker interviewed for the New York Times indicated that "I think that [NAFTA] will make my life better, that this agreement will create opportunities for everyone". Public opinion polls in Mexico show that two out of three people generally see NAFTA as bad for Mexico. Luis Rubio, a pro-free trade researcher indicates that NAFTA "creates the perception that things are going to get better, but in reality we have two economies, one export and one left behind," indicating the process created under NAFTA is not shared by all. The owners of large companies operating in Mexico even show more criticism of NAFTA, although they blame the Mexican government for failing to "establish a policy to protect Mexican businesses". However, unlike some rhetoric in the United States, Mexicans see NAFTA useful despite the difficulties due to Mexico's economic relations with the United States and ongoing foreign investment. In general, the sentiment among business class is NAFTA needs to be revisited, not deleted. Elites and supporters of free trade in Mexico have been touting NAFTA as a success on the basis of new foreign investment and improving the stability of the business environment in Mexico. They also encourage the idea that failure is caused by a reluctance to switch from the past by those affected by NAFTA. Overall, the working class shares a very negative view of NAFTA, where elites and free trade advocates see NAFTA's benefits outweigh its disadvantages. However, the overall belief is that NAFTA needs to be fixed and not removed.
The sentiment was shared today by Mexican elites. Calls from the United States for the lifting of NAFTA have been met with doubts in Mexico, with the overall belief that NAFTA should be modernized, not replaced or even deleted. In general, Mexico recognizes NAFTA as imperfect, but revocation will decide the economy of the United States that will have far worse results than leaving it or renegotiating. The current President of Peuge Nieto has made an appeal to the deal being reviewed to update it for modern Mexican economies because the initial agreement could not account for the new sectors that have emerged since the passage of NAFTA. Workers and researchers today agree that NAFTA's promises are falling short, but by-and-large they do not call for repeal, support modernization or renegotiations to renew the deal and fix the problems therein.
Implications for Health
NAFTA has health implications for Mexican citizens. In particular, leniency against Foreign Direct Investment (FDI) along with government intervention restrictions has acted as a catalyst for the transition of nutrients. The liberal investment rules of NAFTA accelerate FDI from the United States into Mexican food processing, resulting in increased imports but maintaining limited GDP growth. In 1987, US firms invested $ 210 million annually in the Mexican food processing industry; this figure has increased to $ 5.3 billion per year in 1998 (25-fold increase). Three quarters of the FDI was delegated to processed food production - the sales of processed foods expanded by 5-10% annually between 1995 and 2003. NAFTA also facilitates multi-national alliances with existing domestic companies, resulting in explosive growth of supermarket chains and minimarkets from less than 700 pre-NAFTAs up to 3,850 in 1997 and 5,729 in 2004. A decade of NAFTA saw retail food in Mexico dominated by supermarkets, discounts, and department stores (55%) while 'lesser' loses business. "Tiendas," dominates in small towns but has become an outlet for transnational and domestic food companies to sell and promote their food products to the poorer population. As a result, we see improvements in processed foods in both urban and rural areas.
The increasing US presence in the Mexican food system, with increased exports of corn, soybeans, sugar, snacks, and meat products, has contributed to the shifting of the food system from agriculture to industry. NAFTA's trade policies and market liberalization have transformed the food system in Mexico into a system dominated by the intake of processed foods, sugar, salt, meat and fat. This shift, in turn, causes adverse health consequences - urbanization diseases including obesity and other NCD related nutrients.
References
Source of the article : Wikipedia
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