For Mexico, NAFTA Isn't Delivering on Promise of Higher Wages, Economic Prosperity

What's the opposite of a growth miracle? Whatever the term, it applies in spades to Mexico in the NAFTA era.Poor countries are expected to grow faster than rich ones, and they need to. Trade agreements are supposed to help. Yet by almost any benchmark — certainly the ones trumpeted by the deal's architects a quarter-century ago — the Mexican economy's performance has been dismal.Growth of 2.5 percent a year since 1994 is less than half the developing-world average. It's pretty much the same as the U.S. and Canada. But even that's misleading. Because Mexico's population expands much faster, the economic pie has to be divided among more and more people. So the average Mexican earns less today, relative to U.S. and Canadian peers, than before NAFTA."The main idea was to promote convergence in wages and standards of living,'' said Gerardo Esquivel, an economics professor at the Colegio de Mexico. "That has not been achieved.'' And what meager growth there's been, says Esquivel, has mostly gone to "the upper part of the distribution.''For an emerging market, Mexico has an impressive collection of billionaires, including the world's sixth-richest man. Its poverty rate, meanwhile, is still around early-1990s levels — more than half the population, encompassing a permanent class of the underemployed. Crime and corruption are rampant.All this poses a problem for the U.S., especially now that Donald Trump's in charge. Mexico's glacial economy means there's still a lively incentive for the things Trump hates: the flow of underpaid Mexican labor northwards, and American factories the other way. No wonder, as his trade team trudges through round after round of renegotiation, that the U.S. president is still threatening to blow up the pact altogether.  Continue reading...

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