Free trade's false promises

[Joanne98]

John McCain has just returned from his so-called "free trade tour" in Mexico and Colombia where he highlighted the success of the North American Free Trade Agreement (Nafta) and showed his support for the stalled and controversial US-Colombia Free Trade Agreement.

It is unusual for a presidential candidate to travel abroad during a campaign and even more unusual to cite Nafta as a success story in Mexico. One can debate the benefits of Nafta in the US, but there is a consensus that Nafta has not lived up to its expectations in Mexico. Rather than learn from Nafta's mistakes, the US-Colombia Free Trade Agreement replicates Nafta and is projected to make Colombia worse off as well.

After Nafta, Mexico did witness a surge in exports and foreign investment, and for a while a bump in employment. However, such increases did not translate into growth and prosperity - economic growth in per capita terms has been just over 1% annually and poverty and inequality remain persistent.

Although foreign investment has surged, total investment has lagged at less than 20% of GDP - one of the reasons why Mexico's economy has barely grown in per capita terms since Nafta. More recently, foreign investment has waned as China became increasingly competitive. Moreover, foreign investment created an "enclave economy" the benefits of which are confined to an international sector not connected to the wider Mexican economy. In fact, foreign investment put many national firms out of business and transferred only limited amounts of technology.

It was hoped that Nafta would make Mexico an export powerhouse and that manufacturing exports would serve as the employment engine for the developing nation. Unfortunately manufacturing generates only 100,000 jobs per year, nowhere near the amount needed to satisfy the close to one million new entrants into the workforce. The result is that 500,000 people enter the US each year (another major controversy in the campaign), and the rest migrate to Mexican cities and tourist areas to work in the informal economy where there are no benefits or job security.

On the environment, the Mexican government estimates that the economic costs of environmental degradation have amounted to 10% of GDP each year.

The Colombia agreement seems to be on the same path. According to new estimates by the UN Economic Commission for Latin America, the agreement will actually make Colombia worse off by up to $75m or one-tenth of 1% of its GDP. According to the study, the losses to Colombia's textiles, apparel, food and heavy manufacturing industries that will face new competition from US imports will outweigh the gains in Colombian petroleum, mining and other export sectors.

Continued>>>
http://www.guardian.co.uk/commentisfree/2008/jul/08/usforeignpolicy.colombia

[Lasher]

1. The US is exporting textiles?

I thought the US textile industry was just about gone.