A Look Back: NAFTA fails Mexico

[AmericanLiberal]

The basic facts concerning Mexico's growth in the post-NAFTA period are straightforward. Its growth has been extremely weak in this decade by any measure. While NAFTA may not be the cause of Mexico's weak growth, it is very hard to make the case that Mexico's aggregate economic performance would have been even worse without NAFTA. The World Bank analysis applies flawed econometric analysis that appears to make this case. When the flaws are corrected (or when the results are read more carefully), it turns out that in no version does the study show that NAFTA led to more rapid GDP growth in Mexico. While there are other bases for assessing the benefits and costs of NAFTA, the World Bank's analysis does not provide a basis for supporting claims that NAFTA increased growth in Mexico.

By 2016, the World Bank's regression results imply that NAFTA will have lowered Mexico's per capita GDP by 4.3 percent.

-Center for Economic Policy Research



Mexico's growth was strong only when Keynesian economics was broadly accepted. No surprise there.

Brazil, Argentina, and every other South American country has already REJECTED a CAFTA-like deal. 3 out of the 6 countries supposedly covered in CAFTA have not even accepted it yet. With the record we have of NAFTA's dismal failure, it's no surprise either.

[wli]

1. wage arbitrage depresses consumer spending in a negative feedback loop

There's little or no surprise Mexico's economy tanked as well as the US' economy in response to it.

[AmericanLiberal]

2. It seems people have forgotten Keynes

Very true indeed, cheap labor = low wages = low spending = NO GROWTH!

This is true whichever country you are in.

[wli]

3. it doesn't even take Keynes to figure it out

So all these workers got underpaid. Now who's going to buy the products?

Round 2: the products devalue due to "apparent overproduction" because not enough consumers can afford them, and labor devalues more

... ad nauseam. You can see it coming from a mile off, with next to zero theory.

[enid602]

4. NAFTA

Mexico has done somewhat poorly since NAFTA because we made its entrance dependent upon its joining the WTO, which made it extremely vulnerable to cheap Chinese imports. Next time you're at a gift shop along the border, check out how many of the chochkes (sp?) have labels that say 'Made in China.'