The seminarian economist view of NAFTA

By Jennifer Lewis

Unlike many of my younger seminary classmates, I was not reared in a progressive activist culture, powered by internet and social media. I was raised in the era when the power-suit was a necessity for success and the multinational CEO was idealized by most everyone.   As an economist, specifically an agricultural economist by academic training, my natural inclination is always toward freer and more open markets with just enough governmental involvement to ensure everyone follows the law.  So on January 1, 1994, when the North American Free Trade Agreement (NAFTA)   It eliminated tariffs on most goods including agricultural among Canada, the United Stated, and Mexico, at that time becoming the largest free market in the world $6 trillion dollars and 365 million people.

This is an economist dream.  Economist have this theory called the Economic human (man)  basically if everyone economy behaves in their own best interest doing what will maximize their individual utility (happiness), then the economy has a whole will be better off having maximize the aggregate  utility.   And depending what industry you are in the NAFTA has had many beneficial impacts on the trucking and transportation industries by reduction on transit times between countries and tariffs.  It is very difficult, if not impossible to prove on an aggregate level if there have been net job losses or gains or if the trade deficit itself has increased or decreased due to NAFTA.

We can determine the impact of NAFTA on specific industries, businesses or families.  For example the Mexican avocado producers experienced a dramatic increase in US exports.

In 1997, the total volume that went into the U.S. was 6,500 tons (of avocados),” says Carlos Illsley, an avocado farmer. “This year (2005), we think we should be closing around 100,000.”

This production increase means more Mexican farming, packaging, and trucking jobs, but NAFTA  has also hurt many other farmers.   With the US heavily subsidized  corn production  $20,000/ year    for  each grower as compared to $100/ year on average for each Mexican grower.

Mexico dumping graph

These subsidies encourage agricultural dumping or flooding the Mexican market with cheap food, so low in fact that local farmers can no longer complete.  This leads to increased displaced ruralfarm workers’ migration.

Our trade policy has inadvertently created significant farm worker displacement.  There are more Mexican agricultural workers heading north to follow the farming jobs that have followed NAFTA  to the US.    There does not seem to be malicious intent here, just a desire to maximize “utility” (profits), but now that we know this problem exists, it is time that we work toward a more fair trade policy that improve everyone’sutility/ happiness.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s