Nov 3, 2015

Q&A: Economist Gerardo Esquivel says full benefits of NAFTA elude Mexico

World News Report: Next week, the George W. Bush Institute, the public policy arm of the former president’s library in Dallas, will launch a North America Scorecard with an assessment that the North American Free Trade Agreement has been a boon to the United States, Canada and Mexico.

Gerardo Esquivel offers up a slightly different point of view, specifically that Mexico has not done as well as the other nations.

Esquivel is a Harvard-educated professor of economics at El Colegio de México, where he serves as the editor of Estudios Economicos. His previous work included stints for the International Monetary Fund, the Inter-American Development Bank and Mexico’s Central Bank.

One of NAFTA’s many goals was to bring North America closer, economically, through trade. Has that happened?

There is no doubt that there has been greater economic integration in North America in terms of trade and investment flows. However, that has not reduced the economic gap between Mexico and the other two NAFTA countries. In that sense, the goal of bringing North America closer has not been fully attained after more than 20 years of operation.

Where has NAFTA been successful?

The main benefit of NAFTA has been for consumers as a whole. It is clear that consumers from the three countries have benefited from having access to a greater diversity of goods and with cheaper prices than they would face without NAFTA. In other dimensions the benefits are less clear-cut because, as in any free trade agreement, there have been winners and losers, either in terms of regions, employment or sectors.

What about the downsides?

There are always sectors and regions that lose with a free trade agreement. In some cases, as in Mexico’s southern region, there have been no plans or programs to compensate the zone for not profiting from NAFTA. This has implied greater regional divergence within Mexico.

However, more generally, the main downside of NAFTA has been its inability to actually reduce the welfare gap between Mexicans and their northern neighbors. NAFTA was a good tool to promote trade and investment, but it has been an inefficient tool to promote development and economic convergence within the North American area.

Overall and more than 20 years later, is Mexico better off, or not, with NAFTA?

Mexico is slightly better off. However, that is not the key question. The relevant question is whether Mexico could have used NAFTA to be even better than it currently is. An interesting comparison is that Mexico is one of the countries in Latin America that has grown the least since 1994. That means that Mexico is not necessarily better than countries that did not have the preferential access to the North American market that Mexico has enjoyed for the past 20 years. Therefore, this somehow suggests that the benefits from NAFTA had been rather limited. Poverty in Mexico is as pervasive today as it was 20 years ago, whereas inequality is even bigger. This means that although there are some sectors and regions that have improved substantially as a result of NAFTA, these benefits have not been evenly distributed, and there are many other regions, sectors and segments of the population that have not benefited as much.

Beyond economics, what do you see as NAFTA’s role in making Mexico a more open society?

That has also had pros and cons. In some sense, we can think that NAFTA has contributed to the creation of a greater polarization in the Mexican society along some dimensions. For example, many of those living or working in the exporting sector tend to see political and economic openness as something positive. However, others perceived it in a completely different way. The fact that benefits from NAFTA have not been evenly distributed in Mexico may somehow explain part of the polarization we have observed in politics and also in terms of the economic prospects for the future.

Many critics believe NAFTA didn’t take into consideration the human aspect, the movement of people. What is your view on that?

I agree with that view. Since its very conception, NAFTA was seen as an alternative to reduce migration. Remember the famous Salinas de Gortari’s dictum: “We want to export goods not people.” However, since then, many millions of Mexicans have emigrated to the United States, separating families and generating a lot of distress in those left behind. NAFTA has not helped to promote temporary migration and has not reduced mobility barriers. On the contrary, even with NAFTA there has been considerable opposition to allow and regulate the movement of people within the region (the fence on the border, the Canadian visa requirement for Mexicans, etc.). Therefore, this should also be seen as one of the great failures of NAFTA, that is, its inability to create the conditions for a true economic integration that should involve not only the free movements of goods but also a freer movement of people across borders.

This Q&A was conducted, edited and condensed by Dallas Morning News Mexico correspondent Alfredo Corchado. Reach him at

No comments:

Post a Comment