One site I like I found last week is "Patterico's Pontifications," the writers there do a great job of analyzing the "Los Angeles Times." I had post the "Times" NAFTA article recently with a critique and send a letter to the Times and to Patterico's about it.
Patick Frey, one of the writers at "Patterico's," sent a reply today and posted an article at his site about it. You will notice their pet name for the "Times."
January 03, 2004
THE POWER OF THE JUMP
Another installment in our semi-regular feature, "The Power of the Jump," documenting examples of the Los Angeles Dog Trainer's use of its back pages to hide things it doesn't want you to see.
Reader LindyBill points me to a story from yesterday's Dog Trainer titled NAFTA 10 YEARS LATER: After Initial Boom, Mexico's Economy Goes Bust. The subhead reads: "Supporters say the free-trade zone has been a success, but critics point to the loss of jobs, factories and investment." The portion printed on the front page begins: "The heady early years of the North American Free Trade Agreement brought Oscar Garcia opportunities he had scarcely dreamed of." The story goes on to describe how Garcia's plant was shut down, and Garcia was laid off -- an example typical of the rest of the Mexican economy in recent years.
Anyone reading the front page only -- as most people do -- would come to the conclusion that NAFTA has done nothing to help Mexico, and indeed may have hurt it.
The intrepid reader who makes his way to page A36 will discover that any such impression has no basis in fact.
Once you have read the entire article, it is clear that the appropriate headline would have been something like this: "NAFTA Not a Cure-All for Mexico" -- with a sub-head reading: "Experts agree that NAFTA has brought investment to Mexico's economy, and benefits to Mexican consumers. But other countries have reaped more benefits from the lowering of trade barriers." But you have to read past the jump to learn the critical facts.
The second paragraph after the jump states: "Government officials and many economists insist NAFTA has been a success." (Note how economists -- not just NAFTA "supporters" as stated in the headline -- say the agreement has been successful.) The problem is that other countries (in particular China) have been more competitive as well -- because those countries have also benefited from the removal of trade barriers. As the article explains at page A36,
trade barriers have fallen around the world, devaluing Mexico's special status.
. . . .
But the biggest disappointment for some was that NAFTA did not shield Mexico from the broader forces of globalization.
One reason is that the special status conferred on Mexico by the treaty is no longer so special. Many other countries, including most Caribbean nations, now enjoy the same status. Textile and apparel companies have been moving from Mexico to lower-cost locales such as Honduras and Costa Rica for years.
A bigger blow to Mexican businesses was China's entry into the World Trade Organization in 2001, which meant Chinese products could easily enter North America. Although Chinese products are subject to duties, they still are often cheaper than Mexican goods.
. . . .
"Five years ago, Mexico was the logical place for manufacturers to go. Now China is logical," [economist Jonathan Heath] said.
In other words, the problem here is not that NAFTA didn't work for Mexico. Free trade (or "freer" trade, since many of these countries still pay some duties) just worked better for some other countries than it did for Mexico. Once Mexico was no longer unique in enjoying the benefits of free trade, it had to compete with other countries that could provide goods more efficiently:
"The issue is not whether Mexico is competitive. It is that other countries have become more competitive," said Alfredo Thorne, an economist at J.P. Morgan Chase & Co. in Mexico City. Competing in the world economy is like going up a down escalator, he said: "If you stop making progress, you lose ground."
Without NAFTA, Mexico would have been going down that escalator even more swiftly. Imagine how much worse off Mexico would have been without the following benefits:
NAFTA opened the door to $125 billion in foreign investment in hundreds of Mexican factories and offices. At the peak of its impact, NAFTA generated at least 2 million jobs in Mexico . . . .
. . . .
"The figures speak for themselves. Before NAFTA, foreign investment was $5 to $6 billion per year, and now it averages twice that, all because those companies saw opportunities in investing in Mexico," said Mauricio Gonzalez, an economist at the North American Development Bank in San Antonio.
"NAFTA was the most important economic development for Mexico in 20, maybe 50 years," said Jose de Jesus Valdez, president of the largest industrial trade association in Monterrey, Mexico's chief industrial city.
In late 1994, the trade accord's first year, a peso devaluation sent Mexico's economy into a deep recession. The devaluation slashed consumers' purchasing power, but it made the country even more attractive to foreign investors because it cut labor costs in dollar terms by nearly two-thirds.
Companies ranging from frozen food processors to makers of hotel bedspreads opened or expanded in Mexico. Ford, General Motors and other car makers invested billions of dollars in new or existing plants, and auto production grew to 1.9 million vehicles in 2000, twice the 1995 figure.
The growth of Mexico's auto industry was a special source of pride. The industry produces up to six jobs in supplies, services and transportation for each job on the assembly line. And the domestic production made cars more affordable for Mexicans.
Mexico's non-oil exports rose to $146 billion in 2002 — three times the pre-NAFTA level.
The trade pact also gave Mexicans access to a wider variety of goods, from banking services and beef cuts to cars and movies.
"The great surprise for Mexicans going shopping in Los Angeles is that supermarkets are the same as here," said Luis de la Calle, a former Mexican government official who is now a business consultant. "Ten years ago, the quality and variety of products on the shelves was less and prices were higher."
By opening the country to U.S. and Canadian imports, NAFTA also forced Mexican companies large and small to become more efficient and focused.
The economic benefits of NAFTA -- all listed on the back pages -- go on and on. Unfortunately, Mexico's competitive advantage from being one of the few countries with free trade did not last. But that is not NAFTA's fault. That is the nature of competition. Leaving the lazy readers with the impression that NAFTA is somehow to blame for the state of Mexico's economy is not responsible journalism
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