Naysayers Lose One to NAFTA

Ever since the North American Free Trade Agreement went into effect on Jan. 1, 1994, its detractors have declared it a failure. Two and a half years later, with a solid 17.2% increase in California exports to Mexico and Canada in the first trimester of 1996, the pronouncement seems not only premature but silly.

NAFTA involves a long-term process of removing trade barriers between Canada, the United States and Mexico. The idea is that the free flow of goods will enhance the productivity, profitability and competitive position of the whole region. Even before NAFTA’s implementation, trade among the three countries was on the rise.

A series of unexpected problems in Mexico--the Chiapas uprising, two political assassinations and the peso devaluation, all in 1994--created doubt for many about whether NAFTA would have a positive effect. This doubt persisted in some quarters even as the volume of trilateral trade was increasing.

In the first four months of this year, California sold goods to Mexico and Canada worth about $5.1 billion. Canada is now the state’s second-largest national commercial partner (after Japan) and Mexico is in fourth place (after South Korea).

California is selling computers, electronic components, industrial machinery, chemical, rubber and plastic products and many other manufactured goods to Mexico. These products have created well-paying jobs here, returning revenues to the Golden State.

Although economically battered, Mexico still registered a 20.4% jump in exports from California during the first three months of 1996, compared with 1995. Just think of what the gain might have been had Mexico not been reeling from a financial crisis.

Last year, California’s exports to Mexico amounted to $7.3 billion, which is nothing to sneeze at. Exports from Texas to Mexico were a staggering $21.8 billion. The numbers serve as an important reminder: The trade relationship with Mexico is of key financial importance to this state, and, as the Texas experience shows, it can be even more lucrative.