Understanding why Nafta failed to live up to its promise can help us to understand the disappointments of trade liberalisation. One of the main arguments for Nafta was that it would help close the gap in income between Mexico and the US, and thus reduce the pressure of illegal migration. Yet the disparity in income between the two countries actually grew by more than 10% in Nafta’s first decade. Nor did Nafta result in a rapid growth in Mexico’s economy.
Growth during that first decade was a bleak 1.8% on a real per capita basis, better than in much of the rest of Latin America but far worse than earlier in the century (in the quarter century from 1948 to 1973, Mexico grew at an average annual rate per capita of 3.2%). President Vicente Fox promised 7% growth when he took office in 2000. In fact, in real terms, growth during his term of office averaged only 1.6% a year – and real growth per capita has been negligible. In fact, Nafta made Mexico more dependent on the US, which meant that when the US economy did poorly, so did Mexico’s.
