NAFTA: Helping China, Now Hurting Mexico, And Destroying America’s Economy - Political Opinion

The controversy surrounding the North American Free Trade Agreement (NAFTA) typically concerns the devastation of U.S. manufacturing via outsourcing entire industries and labor to Mexico. However, a new study released in World Development highlights how NAFTA has created an economic niche for China to exploit Mexico, the very nation the agreement was meant to prop up.

Over 85 percent of Mexico’s exports are destined for the U.S., and over half of those exports are threatened by Chinese competition, according to the Center for International Policy, meaning that Mexico is rapidly losing ground in the U.S. market, while China gains. Through avoiding agreements like NAFTA, China is able to deploy the exact policies these treaties would outlaw. Therefore, China is able to outperform Mexico and every other developing nation in the world.

Initially, NAFTA relocated American jobs to our southern neighbor where labor was cheap and laws were less restrictive. However, NAFTA also opened the Mexican economy up to unfettered free-trade with little to no government involvement; a system which the U.S. unfortunately endorses. Meanwhile, China’s approach to free-trade has come with a significant amount of government protective control, regulation and intervention.

NAFTA forced Mexico to let its economy be driven by market forces; China chose instead to mold its entire economy into a market force. After 14 years, Mexico has seen little development in the way the NAFTA signatories had hoped, but China has become a world economic leader. Furthermore, China has positioned itself to usurp much of the export production that has maintained the Mexican economy for over a decade.

One of the only industries in Mexico which seems protected from Chinese interference is its automotive production; this is due in part to the incredible expense of shipping vehicles and parts across the Pacific Ocean versus merely driving them across the U.S.-Mexico border.

Many in the government, including Democratic Presidential candidate Barack Obama, have encouraged a renegotiation of NAFTA in order to protect American production and American workers from cheaper Mexican competition. It now seems that we should also be worried about the prospect of China undermining Mexico just as Mexico undermined the United States.

Mexico represents a serious competitor for American industrial jobs due to its lack of safety, environmental and employment standards. China is a nuclear power lead by a regime whose ideology is fundamentally hostile to our own. We must act to correct the mistakes of past administrations, and renegotiate or renounce these antiquated “free-trade” agreements. We must do so not only to protect our jobs, but also to ensure that we do not give even more power to a political and economic machine which is destroying us.

Source Center for International Policy:

A recent study… published in the journal World Development shows how the rise of China undermines Mexico’s bid to become a major export-oriented economy. We find that over half of all Mexico’s exports to the United States are under “threat” from China… This is particularly concerning given that over 85% of all Mexican exports are destined for the United States and that Mexico has preferential access to the U.S. market.

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Our analysis comparing penetration of U.S. markets by Mexico and China finds that the only exports where Mexico is gaining U.S. market share faster than China are those related to the automotive and transportation sectors.

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With high oil prices, attention in Mexico has partly shifted away from the economy. Yet, with Mexico’s proven reserves dwindling at a rapid rate the economy will again need to turn to the manufacturing sector for growth and development. If Mexico doesn’t rethink its industrial and macroeconomic policies, China may take away the ladder to economic development that Mexico seeks to climb.

Source: Economy in Crisis

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