From Protectionism to NAFTA: A Historical Perspective on the United States - Mexico Trade Relationship

Abstract

One of the issues of the 1992 Presidential debate was whether the candidates supported the North American Free Trade Agreement. This agreement, which was proposed by Mexico's President Carlos Salinas in 1990, would implement free trade between the U.S., Mexico, and Canada. Controversy has surrounded the issue since its conception. Proponents argue it will stimulate the economies of all countries involved, creating jobs and making consumer goods less expensive. Opponents think it will actually cause more harm than good by shifting investment from the U.S. to Mexico, thus bringing about unemployment and depressed wages in the United States. This paper looks at this agreement in a historical perspective, first by examining the relationship between the U.S. and Mexico in recent years. Part I discusses how this relationship has progressed throughout most of this century. A sketch of the Border Industrialization Program is presented, followed by a list of conditions that have led Mexico to seek freer trade with the United States. Finally, an illustration of Carlos Salinas and his policies is given, since Salinas was the instigator of NAFTA. Part II looks at the North American Free Trade Agreement itself. The first section describes the agreement and its objectives. Section B follows with an argument that free trade will shift investment from the U.S. to Mexico, rather than simply creating investment in Mexico. In Section C, it is demonstrated that this shift in investment will depress wages and deskill jobs in the United States. Section D examines NAFTA in the historical perspective of the Free Trade Agreement that was signed between the U.S. and Canada in 1989. Finally, the last section shows that NAFTA's future success cannot be based upon the fact that the European Community has been so successful, as some proponents have tried to do. Part III offers some conclusions and suggestions that may help NAFTA be more successful. This paper will attempt to explain why the NAFTA will need some adjustments if it is to be as successful as its creators hope.