Arizona Republic | By Tessie Borden | Sept. 11, 2003
Mexico has become the poster child for what free trade can do to a developing country, and supporters and opponents are using its experience to push agendas at this week's meeting of the World Trade Organization.
It's a fitting example.
Free-trade economic policies, which require dropping tariffs and subsidies, letting each country trade on what it produces best and allowing the "invisible hand of the market" to regulate economies, have been at work in Mexico for almost 10 years in the form of the North American Free Trade Agreement.
And while those policies introduced a universe of new consumer goods to Mexicans and boosted the country's manufacturing sector, they also helped bury Mexican agriculture and drop more Mexicans into the ranks of the poor.
So at this week's meeting, developing countries are asking, in an ever-louder voice: Is free trade good for us, or does it just help rich countries dominate our markets?
This meeting is serving as a kind of referendum on that question.
Mexico, because of its size and proximity to the United States, is a leader among developing countries. Those countries now are considering the consequences of free trade for smaller, weaker countries in light of the triumphs and failures they see here.
"Mexico is much more developed in comparison to Central America and many South American countries," said John Audley, director of the Trade, Equity and Development project at the Carnegie Endowment for International Peace, a think tank. He said Mexico was the Latin American country best positioned to deal with the pressure of changes stemming from free trade and even it could not handle the fallout.
Opening began in '80s
Mexico began opening its economy in the late 1980s, when it joined the General Agreement on Tariffs and Trade, predecessor of the WTO. Until then, its closed economy gave farmers heavy subsidies and set up the government as a guaranteed, last-ditch buyer of their grain. On the other end, consumers bought at a subsidized price. But all those subsidies contributed to high inflation and monetary crises that the government tried to fix with periodic devaluations.
Mexico removed most supports to satisfy the World Bank and the International Monetary Fund, which conditioned loans and aid on those changes. It left in place only two programs that, because of their structure, favored large Mexican vegetable producers.
In the meantime, maquiladoras, foreign-owned assembly plants of export goods, began to boom along the U.S.-Mexican border, providing a jobs escape valve with few worker protections but relatively good wages for hundreds of thousands willing to migrate to the border.
When NAFTA came along in 1994, that boom intensified. So did the opening of the markets and the flow of imports. Suddenly, small farmers with 2-acre plots found themselves competing head-to-head with multimillion-dollar U.S. agri-industrial companies that pushed their political weight at home to get credits and subsidies from the U.S. government. The farmers got routed.
Part of the problem with agriculture is that it does not fit neatly into the assumptions of liberalized trade theory.
Rich and poor countries alike have a stake in food production, and each has a different comparative advantage, said Sandra Polasky of the Carnegie Center. The United States, for example, is very efficient in producing corn. But Mexico has an ancestral, religious relationship to corn that it will not give up, and its own inefficient system for years had the advantage of providing a living for tens of thousands of peasants.
In December, Mexican farmers banded together to demand fairer trade terms in a movement whose name reflected their desperation: The Countryside Can Bear No More. They marched 20,000-strong to the centers of government to demand a fairer trade situation.
In May, they signed an agreement with Mexican President Vicente Fox in which he agreed to negotiate to protect some of their export crops. The victory underscored the value of meetings the Mexican farmers had been having for the past three years with farmers in Central and South America. The farmers have shown up in force at the WTO meeting, taking part in an alternative forum proposing crop prices that let farmers make a living.
Nations join forces
Like the farmers, developing countries have seen the value of banding together.
In recent weeks, the United States and the European Union submitted a proposal to the WTO on agriculture trade rules. Some countries denounced the proposal as the rich countries' effort to define the playing field. The U.S. Trade Representative's Office said the proposal had been a WTO request.
China, Brazil and India responded with their own proposal, which calls for developing countries to slow the drop in their trade tariffs until their farmers can catch up technologically and organizationally. But the United States complained that the new proposal sets up a two-tier system that makes equity elusive.
Fox promised in his State of the Union speech on Sept. 1 to support small farmers and poor countries at the WTO. But his words Wednesday were muted. Instead of calling for a stop to the "enormous farm subsidies" of developed countries, as he had previously, he focused on improving countries' positions through liberalizing trade.
"We have to stop the vicious cycle in which, on the one hand, donor countries give aid for development to receiving countries, while on the other, they impede their progress through trade barriers," Fox said. "It is not enough to prettify current forms of globalization with compensatory policies."
U.S. trade officials responded to the new cohesiveness among developing nations by inviting some countries into bilateral trade deals that make them more pliable at the WTO, Audley said, and if the strategy works, it does not bode well for a truly multilateral agreement.
A workable solution will become a reality only if the United States commits to acting in the interest of real equitability, said Mark Ritchie, president of the Institute for Agriculture and Trade Policy.
"It's ultimately a political problem inside the United States," Ritchie said. "The real trade debate will be in the halls and dining rooms and churches and community organizations in the United States ... like it or not, the United States is a giant player."Arizona Republic:
