In terms of the North American Free Trade Agreement (NAFTA), it is usually the government that takes either the credit or the raps for its successes and failures. Yet NAFTA was made for governments to mediate but for business to promote growth and wealth for business communities in the three nations. It’s a trade deal, not a political agreement, that’s what’s at stake today, threatened by The Donald.
In the end, the governments of Mexico, the United States and Canada perform as facilitators of trade in exchange for a cut in the money of all traded products and make a bundle of money on tariffs for supervising the legality of merchandise crossing borders. NAFTA was never tax free.
The idea of NAFTA began in 1987 between former Presidents George H. W. Bush (1988-92) and Miguel de la Madrid (1982-88), when they went on a fishing expedition in the Gulf of Cortes to catch “a dolphin”, interpreted by everyone as the next candidate of the Institutional Revolutionary Party (PRI) in Mexico.
The “dolphin” turned out to be Carlos Salinas de Gortari, who was the main promoter of the free trade agreement idea between Mexico and the United States, which would later be expanded to Canada and cover the entire northern part of the continent.
At the time Mexico was still pretty much a closed-up economy. The government had been sustaining a group of industrialists who had literally full market monopoly of all products and they posed then a great stumbling block to imports, mainly from the United States. President Bush then wanted to see this barrier torn down and so did De la Madrid. It was then that Mexico applied to participate, to open a gate to the rest of the world, in the General Agreement on Trade and Tariffs (GATT) prompting to begin with the maquiladora industry boom.
Maquiladoras were not new. The concept had existed since 1965 as a response to the end of the Bracero Program in which, on a yearly basis, U.S. farmers hired Mexican “arms” (bracero is a word that stems from “brazos”, arms) on a seasonal basis mainly to plant and reap crops. It was thought then that a tariff free flow of merchandise could come into Mexico, and be shipped back to the United States, also tax free. For large manufacturers both in the United States and the far East, this meant a wonderful savings scheme and they took advantage of it.
Personally, in order to witness this movement, I spent from 1988 to 1990 in the Tijuana-San Diego border where the growth of assembly plants went form 200 existing one is 1988 to 800 by 1990. That was indeed a boom to a city better known for being a prostitution haven for sailors from the San Diego Navy Base.
Mexico was at the time a nation of monopolies. If you wanted to set up an electric grid to meet your wattage needs, something basic when establishing a plant, no matter how small, you had to buy wire and most electric materials from a Mexican supplier. Maquiladora manufacturers could not import technology into Mexico.
It was these difficulties to operate in Mexico that forced the negotiation of NAFTA, which finally went into effect in 1994.
But again, NAFTA was there for business operations efficiency and development of a highly undeveloped nation such as Mexico was at the time, and I’m talking a mere 30 years ago.
The question is who negotiated NAFTA? At first sight it was the governments of the three nations but during all the negotiating process there were always “side chambers” in which the business representatives of each of the industries involved in a specific chapter (there are 22 of them) imposed the conditions on the government negotiators. This went on for three years until the final draft was achieved.
Since then on, the Mexican business community trading with the United States – and Canada, up to an extent – put all their eggs in the NAFTA basket which represents up till today over 80 percent of all Mexican trade.
Over the years the talk about diversification has been there but Mexican businessmen have not responded accordingly and continued to sell services and products to the United States, an easy hit customer.
After tasting the honey of free trade, the Mexican government has gone all out in the world inking free trade agreements with as many as 46 nations.
The problem is that the Mexican business community has never taken advantage of this humongous opportunity opened up by the governments that have operated under the free trade concept. Business has never promoted their products or services outside of the easy target of the NAFTA area.
But for them the pie seems to be over, as The Donald has been taking the United States exactly the same way in which Mexico was back in 1988, into being a closed economy. That pretty much is going to leave Mexico out of many a business even if commerce is bound to continue on a bilateral basis.
Very few Mexican entrepreneurs went global during the 23 years NAFTA has been in place thanks to a continued official policy of markets expansion.
Reality is that the government has not failed them; Mexican businessmen have failed themselves.