NAFTA's Mixed Record

The View From Mexico

Workers on the assembly line at the General Motors plant in Guanajuato, Mexico, November 2008. (Henry Romero / Courtesy Reuters)

When the North American Free Trade Agreement was proposed, it set off a vigorous debate across the continent about its benefits and drawbacks. Today, 20 years after it came into effect, perhaps the only thing everyone can agree on is that all sides greatly exaggerated: NAFTA brought neither the huge gains its proponents promised nor the dramatic losses its adversaries warned of. Everything else is debatable. Mexico, in particular, is a very different place today -- a multiparty democracy with a broad middle class and a competitive export economy -- and its people are far better off than ever before, but finding the source of the vast changes that have swept the country is a challenging task. It would be overly simplistic to credit NAFTA for Mexico’s many transformations, just as it would be to blame NAFTA for Mexico’s many failings.

The truth lies somewhere in between. Viewed exclusively as a trade deal, NAFTA has been an undeniable success story for Mexico, ushering in a dramatic surge in exports. But if the purpose of the agreement was to spur economic growth, create jobs, boost productivity, lift wages, and discourage emigration, then the results have been less clear-cut.

PLUSES AND MINUSES

Without a doubt, NAFTA has drastically expanded Mexican trade. Although exports began increasing several years before the treaty was finalized, when President Miguel de la Madrid brought the country into the General Agreement on Tariffs and Trade (the predecessor of the World Trade Organization) in 1985, NAFTA accelerated the trend. Mexico’s exports leapt from about $60 billion in 1994 (the year NAFTA went into force) to nearly $400 billion in 2013. Manufactured goods, such as cars, cell phones, and refrigerators, compose a large share of these exports, and some of Mexico’s largest firms are major players abroad. Moreover, the corollary of that export boom -- an explosion of imports -- has driven down the price of consumer goods, from shoes to televisions to beef. Thanks to this “Walmart effect,” millions of Mexicans can now buy products that were once reserved for a middle class that was less than a third of the population, and those products are now of far superior quality. If Mexico has become a middle-class society, as many now argue, it is largely due to this transformation, especially considering that Mexicans’ aggregate incomes have not risen much, in real terms, since NAFTA entered into force.

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