Rethinking NAFTA | Bleader

Wednesday, December 27, 2006

Rethinking NAFTA

Posted By on 12.27.06 at 07:23 AM

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What should economists do when things don't turn out the way their model predicted? Admit it publicly and ask why. NAFTA promoter Brad DeLong offers a role model (PDF):

"Success at creating a stable, property-respecting domestic environment [in Mexico] has not delivered the rapid increases in productivity and working-class wages that neoliberals like me would have confidently predicted when NAFTA was ratified. Had we been told back in 1995 that Mexican exports would multiply fivefold in the next 12 years we would have had no doubts that NAFTA was going to be, and would be perceived as, an extraordinary success."

Several factors worked against Mexico: its own deficiencies (corruption, crime, and low education levels), competition from cheap Chinese exports, and competition from the midwest (described by DeLong as "a gigantic and heavily subsidized corn and pork producing machine").

"We can no longer repeat the old mantra that the neoliberal road of NAFTA and associated reforms is clearly and obviously the right one," he concludes. "Would it have been better to have urged President Carlos Salinas de Gortari to focus his efforts on investments in education and infrastructure and on trying to clean up corruption rather than on free trade?  Perhaps." 


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