NAFTA has created a new geographical reality for U.S. and global companies. A new book takes a closer look at the differences and similarities of the "new" North America.
BY JOACHIM BAMRUD
Before Subcomandante Marcos led a ragtag army of Indian rebels in Chiapas on New Year's Day 1994, the date was supposed to mark the beginning of a new era for Mexico. Thanks to the North American Free Trade Agreement (NAFTA), which went into effect that day, Mexico was going to take one major step closer to the wealth and prosperity of its northern neighbor. President Carlos Salinas had on more than one ocassion confidently predicted that it was only a matter of time before Mexico would leave the Third World and enter the First World.
As we know that didn't quite happen. Instead, 1994 turned out to be one of Mexico's worst years in recent history, starting with the armed rebellion that gave investors the impression of an unstable country and ending with a crash in the local currency that had repercussions throughout the Americas.
As one of the New York Times correspondents in Mexico, Anthony DePalma covered first-hand the increased expectations in 1993 and the disaster of 1994 before later ending up as a correspondent in the United States' other neighbor, Canada.
As a result, he managed to obtain a unique perspective on the "new" North America, as seen through the eyes of both top officials and average citizens. The result is Here: A Biography of the New American Continent (PublicAffairs).
While the book clearly is not targeting business readers, it does provide some useful observations on the NAFTA sector and particularly the high-level fight for the trade pact by such players as Salinas and Canada's then-Prime Minister Brian Mulroney and his successor Jean Chretien (who, much like Bill Clinton, first was a NAFTA sceptic, then a NAFTA champion).
NAFTA clearly helped Mexican consumers, DePalma points out. Before the pact, quality products from abroad were basically limited to expensive stores catering to the country's elite. With NAFTA, U.S. chains like Wal-Mart, Kmart and J.C. Penney opened outlets that provided those products to a broad segment of Mexicans. And that meant, more pressure on Mexican producers to improve their quality.
"With grocery store shelves in Mexico City, Monterrey, Ciudad Juárez, and Tijuana filling with imported goods, Mexican retailers and manufacturers realized they had to become competitive," DePalma writes.
Yet, for all its benefits and despite its name, NAFTA didn't offer completely free trade, thanks to various concessions given to each country in the negotiations. Mexico managed to obtain a 15-year excemption before having to eliminate import tariffs on corn - thus protecting its national corn industry. The United States obtained protection for its tomato growers against Mexican tomato exports and Canada obtained concessions to protect its "culture" from free trade (a concept that clealy hasn't worked, as DePalma observes in his book).
"Wasn't NAFTA supposed to [eliminate] all barriers to cross-border business?" DePalma asks. "Of course, if NAFTA was supposed to do that, the agreeement would have been one page long and simply stated that all trade could move unhindered across the borders."
Case in point: The latest controversy over Mexican truck traffic to the United States, which DePalma has covered amply for The New York Times (and which ocurred after the book was concluded). In a clear violation of NAFTA - and despite protests from President Bush - the U.S. Congress has imposed restrictions on Mexican trucks crossing the U.S. border.
While both Mexican and Canadian officials initially thought NAFTA would help these two countries combine their resources to better face the pact's dominant partner, in reality the free trade agreement ended up boosting Mexican and Canadian trade with the United States rather than with each other - cementing the United States' position as the dominant NAFTA partner by far, according to the book.
But this was, of course, not necessarily a bad thing for a country like Mexico. Despite Mexico's tradition of corruption and dismal record in fighting drugs, the United States has refocused its public focus from the negative to the positive - to the dismay of some U.S. drug officials, according to DePalma.
But above all, NAFTA has put Mexico into a new geographical category. While the country is still seen as part of Latin America, NAFTA has led top U.S. multinationals to include Mexico in its North America division, along with Canada and the United States.
"In many respects, the business community underwent a continental conversion far faster than politics and certainly much faster than the three societies themselves," DePalma writes. "Automobile fuses and small-screen television sets crossed the borders effortlessly, but we made it tougher for our Canadian and Mexican neighbors to enter the United States."
That economic integration, along with the boost in U.S. exports to Mexico, was obviously the key reason Clinton decided to "bail out" Mexico when its peso crashed in 1994. No longer could the United States treat a major crises south of the border as a foreign policy issue, but rather one linked to its own domestic economy, as the book points out.
"The people of North America might still be strangers to each other, but now they were strangers living in the same house, who had to help out in a crisis whether we wanted to or not," DePalma writes.
And yet, Mexico is not the United States or Canada. Despite belonging to the NAFTA club, the country still has to deal with a host of challenges that sets it apart from its trade partners. Those challenges include poverty, class discrimination and corruption.
DePalma points to a visit to Canada by Ernesto Zedillo, who impressed local businessmen with his economic education and understandable English, yet could not overlook that one "little" detail: "Only one thing kept them away, they said, and that was the stink of corruption that seemed to be rising wherever Mexican soil was turned," he writes.
An interview Canada's then-ambassador gave to a local Mexican magazine didn't help, either. "When I arrived here I thought I knew all there was to know about corruption, but I was wrong," the ambassador said. After Mexico protested, he was called home, but not punished and continued to serve the Foreign Ministry, according to DePalma.
And despite Zedillo's vow that "no one was above the law" and his efforts to punish Salinas' infamous brother Raul on corruption (and murder) charges, the bribes continued.
"Many Mexicans who believed the difficult political reforms of 1994 and 1995 would end official corruption were disappointed, and their disappointment was in danger of hardening into cynicism," DePalma writes. "Petty corruption was a plague, infecting everything, from the municipal offices where my neighbors got their driver's licenses to the highest levels of law enforcement, the courts, and the army."
Until the September 11 attacks, Mexican-U.S. relations appeared to be on a fast track for significantly closer releations - largely due to the fact that the United States had a president who had close relations with Mexico before being elected and that Mexico had its first opposition president in more than seven decades, bringing a new level of legitimacy to the office.
While Mexico has clearly taken a back burner to the international fight against terrrorism, it is still unclear to what degree the new picture will affect U.S.-Mexican relations. But, as DePalma points out in Here, NAFTA has helped bring the two countries (and Canada) closer than ever.
Originally published in Latin Business Chronicle, December 17, 2011.
Here. A Biography of the North American Continent. By Anthony De Palma, Public Affairs, 2001
Copyright © Joachim Bamrud.