- The Washington Times - Wednesday, December 17, 2003

Almost a decade of NAFTA has spurred economic development, but the trade agreement alone is not enough to close the gap between the rich and poor in the United States, Mexico and Canada, according to a report the World Bank released yesterday.

The three countries began implementing the agreement, which lowers trade barriers and protects investors, in January 1994 after an intense political debate on the merits of free trade.

Although entrepreneur Ross Perot’s predicted “giant sucking sound” of jobs going south did not emerge, critics contend that the North American Free Trade Agreement has displaced many workers, increased poverty and infringed on the democratic process.

The World Bank study, released just before NAFTA’s 10-year anniversary, said NAFTA increased trade, investment and incomes.

“Free trade definitely brings new economic opportunities, but the lessons from NAFTA for other countries negotiating with the U.S. are that free trade alone is not enough,” said David de Ferranti, the bank’s vice president for Latin America and the Caribbean.

The bank focused on Mexico’s experience through the past 10 years. The report acknowledged difficulties separating the impact of the agreement from other economic factors, such as an economic crisis and currency devaluation in Mexico that lasted from 1994 to 1995 and internal reforms started in the 1980s.

Internal policies, especially solid legal and education systems and investments in infrastructure, are necessary to fully realize benefits of globalization, the bank said.

Not all studies agree with the World Bank findings.

The Carnegie Endowment for International Peace earlier this month said NAFTA has not enabled the Mexican economy to keep pace with growing demand for jobs, has not led to higher wages and has not slowed immigration to the United States, the report said.

Poor people living in the countryside have been hardest hit, the Carnegie report pointed out.

“NAFTA has been neither the disaster its opponents predicted nor the savior hailed by its supporters. But while NAFTA’s overall impact may be muddled, for Mexico’s rural households the picture is clear — and bleak,” John J. Audley, a senior associate at Carnegie, wrote in the report.

Public Citizen, the consumer rights group founded by Ralph Nader, called the pact a disaster.

“Under the NAFTA model, most people in the three countries were losers, while only a few of the largest corporations who helped write NAFTA were the major winners,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

The World Bank, which generally supports free trade but did not have a hand in negotiating NAFTA , acknowledges that the benefits are not spread equally across Mexico. Northern border states in Mexico have benefited the most, while southern states largely have been left behind.

“NAFTA definitely further plugged Mexico into the most dynamic economy in the world, but the country’s development across the 1990s, including the NAFTA period, was unequal,” said Guillermo Perry, the World Bank’s chief economist for Latin America and the Caribbean.

But the report said NAFTA did not adversely effect workers or farmers.

The report also makes recommendations for future trade agreements, such as easing trade in textiles and apparel and allowing easier movement of workers.

Those types of measures are politically volatile in the United States.

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