Can NAFTA Change Mexico?

THE RISKS OF FREE TRADE

Many Mexicans have welcomed NAFTA as an undisguised blessing, whatever its effects on the United States. In the government and among the general population the agreement is seen as a ready course to modernization. President Carlos Salinas de Gortari's policies have consciously supported this impression. His administration has determinedly pursued NAFTA as part of a dual strategy. Economically, the trade agreement was to provide Mexico's ailing economy with the foreign capital injections it has long required for sustainable growth. Politically, an expanding Mexican economy-one linked to the United States-would help lay the foundations for an eventual and controlled democratic transition.

Overlooked, however, has been the fact that NAFTA itself entails great risks. No country has ever attempted to develop an export manufacturing base by opening its borders so quickly and indiscriminately to more efficient and lower-cost producers. No nation today, not even the United States, has so willingly sacrificed an industrial policy or an equivalent form of managed trade. By unilaterally renouncing these advantages, Mexico will lose far more jobs in the next few years than it will create. Old industries and agricultural producers will die, be swallowed up or join with foreign ventures, long before the new jobs arrive.

Mexico is not a modern country. True, over the past half-century it has witnessed dramatic change. An inward-looking, illiterate and agrarian land has become an urban, partly industrialized nation with a growing middle class and a nascent civil society. But Mexico's underlying problems persist. It retains a largely corrupt and unchallenged state that possesses only the merest trappings of the rule of law. The enduring obstacles to Mexico's modernization-its repeated failure to transfer power democratically or to remedy the ancestral injustice of its society-remain and will require Mexico to continue to change itself, with or without a trade accord...