NAFTA key to economic, social growth in Mexico

To address the displacement, the Mexican government attempted to create jobs programs in rural areas. But NAFTA had granted large U.S. companies new powers to challenge such programs on grounds they interfere with potential profits.

One such challenge in 2009 saw a NAFTA tribunal order the Mexican government to pay $77.3 million in damages to the U.S.-based agribusiness giant Cargill, a maker and marketer of high-fructose-corn-syrup products.

“So now you have Mexican taxpayers paying big U.S. companies,” Mr. Tucker said.

“So the net impact of a trade agreement like NAFTA is that, on the one hand, it creates displacement, and then on the other, Mexico is put in a bind in terms of how its government can try to navigate social and economic problems created by the agreement.”

Apart from such concerns, others assert the increasingly globalized nature of Mexico’s manufacturing economy has laid the groundwork for decades of future growth.

U.S. investment soared

Before NAFTA, U.S. foreign direct investment in Mexico was roughly $15 billion. Today it’s more than $90 billion.

A growing number of European, Japanese and Chinese firms also are investing in Mexican manufacturing.

Aside from tapping a labor market where unions are largely irrelevant and worker pay averages $6 per hour, foreign companies are attracted by Mexico’s proximity to massive auto sales markets in the United States and Canada.

Twenty-five vehicle-assembly factories owned by foreign automakers - Ford, General Motors, Volkswagen, Honda and Nissan - produced more than 2 million new cars and trucks from Mexico during 2011.

“We’re not talking about people putting brake pads on a car in a free-trade zone on the border,” said Christopher Sabatini, senior director of policy at the Americas Society and Council of the Americas in New York.

“The downside [to the United States], and I say this as a dedicated free-trader, is that Mexico is now on the verge of cutting into the higher-skilled manufacturing, design and engineering jobs,” he added.

“That raises the implication that the U.S. needs to invest in infrastructure, so that … the U.S. higher-skilled manufacturing and design jobs don’t head south.”

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