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Saturday, July 01, 2006

NAFTA and Illegal Immigration

According to this article from the Los Angeles Times, much of the illegal immigration from Mexico in recent years may be explained by the joint effects of NAFTA, U.S. farm subsidies, and abundant cheap labor in other parts of the world:

Placing Blame for Mexico's Ills, by Marla Dickerson, LA Times: ...Many Americans are angry that as many as 12 million illegal immigrants, mostly Mexican, are living in the U.S., driven by lack of opportunities at home. Critics are demanding that Mexico right its stumbling economy ... and end its de facto development strategy of shipping its problems north...

But some experts say U.S. economic policies have played a role in fueling the mass exodus. Pushed hard by the United States, Mexico began embracing the ... prescription of privatization, free trade and government austerity in the early 1980s. A quarter of a century later, the results are decidedly mixed and are the heart of Sunday's cliffhanger presidential election in Mexico.

The contest pits leftist Andres Manuel Lopez Obrador, who wants to boost social spending and rethink ... NAFTA..., against conservative Felipe Calderon, who wants to maintain Mexico's policy on free trade and open the country's state-controlled energy sector to private investment...

Strict fiscal and monetary discipline has helped Mexico rise ... from its devastating 1994 peso devaluation. ... Yet the so-called Washington consensus has done little to spur economic growth, reduce income disparity, create jobs and stem migration to the U.S.

Consider the landmark NAFTA agreement. Proponents point to the nearly threefold leap in trade between the United States and Mexico as proof of the pact's success. ... Yet the agreement has yielded little in the way of net job creation or in helping to build the vibrant Mexican middle class that supporters promised.

U.S. and Mexican officials touted the deal as a way to stanch the flow of illegal immigrants by creating jobs in Mexico. The tide of undocumented Mexicans in the U.S. surged after the pact was implemented. Fully two-thirds of undocumented immigrants currently living in the United States have been there 10 years or less...

Many of those people are Mexicans from hard-hit rural areas, the predictable casualties ... of a trade deal that forced Mexico to wrench open its farm sector without a viable transition strategy for millions of subsistence farmers. ...

Some analysts contend that Mexico simply hasn't moved far enough and fast enough down the free-market path, while botching earlier reforms. Privatizations such as the 1990 sale of the state-owned telephone company essentially replaced public monopolies with private ones. Mexico's inefficient state-owned energy companies are harming its competitiveness. Red tape and corruption are strangling innovation.

But ... others contend that some free-market policies simply haven't delivered and are contributing to the immigration friction... Economists point to a host of demographic, cultural and economic factors fueling the mass migration. But many agree that NAFTA accelerated the decades-long exodus of Mexicans from the countryside by opening the nation's markets wider to subsidized U.S. agriculture products.

Mexico has shed nearly 30% of its farm jobs since the trade pact went into effect, according to government statistics. That translates into 2.8 million farmers and millions more of their dependents fleeing their fields. Some have taken subsistence jobs in Mexico's cities, but many have relocated to the U.S. ....

NAFTA experts say negotiators from Mexico and the U.S. knew that rural families ... would be hard hit by the trade deal. The bet was that many of them would find work in Mexico's burgeoning maquiladora export factories. But ... Mexico has lost more than four times as many farm jobs over the last 12 years as it gained in export manufacturing positions, in part because of relentless competition from China...

Mexico's agriculture minister last month pleaded with the U.S. and Canada to allow the country to keep import restrictions on corn and beans, which are scheduled under NAFTA to come off in 2008. Mexican farm groups have warned that the end of protections would send millions more rural dwellers toward the border. The U.S. quickly rejected the proposal.

But Lopez Obrador, who holds a slight lead in opinion polls, has declared that he wouldn't honor Mexico's NAFTA commitment to eliminate barriers on corn and beans if he were elected. ...  That kind of talk has U.S. trade officials and farmers chafing. ...

    Posted by on Saturday, July 1, 2006 at 03:51 AM in Economics, International Trade, Policy | Permalink  TrackBack (1)  Comments (28)

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