NAFTA Trade Readiness -- Creating Equal Partners? Cyrus Reed Texas Center for Policy Studies Austin, Texas Cr@texascenter.org 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

Overview Lessons from Case Studies Growth Overwhelms Its Own Benefits Trade Readiness: NAFTA Institutions a Small, but Needed Step Forward Next steps and Recommendations 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

Overview: TCPS Case Studies 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

Lessons Learned Water in Sonora, Development Plan in Oaxaca, Hazardous Waste Facilities in Tabasco, Maquiladora Production in Aguascalientes Difficulty in obtaining access to basic information needed to make sound development decisions, either by citizens or governments Changing economic and legal framework makes it difficult for both local organizations and governments to control or guide their own development– Some benefits locally but also negative impacts, as localities play catch up with infrastructure and other demands made outside the local market Economic changes spurred by export-led development have undermined local markets and alternative development strategies NAFTA has produced winners and losers in Mexico, as any economic agreement would Civil society, however, has not stood idly by, but sought to enact change, from an alternative PPP, to a new state emissions registry in Aguascalientes to demands for more information about hazardous waste facilities Public Participation, access to information, appropriate environmental/labor standards need to be considered along with investor rights and tariff reductions 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

Some General Observations No nation has developed without trade (but have any developed under these rules) Need growth to help poor, but how do you grow equitably – does it have to be only through foreign-led investment? What of the internal market? E.g. Aguascalientes – automotive rules the exception; what happens when recession hits With open economy, need more governmental control mechanisms, not fewer 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

Trade Readiness The Asymmetries of Trade Should have been dealt with up front U.S. vs. Mexican economy Capacity to assess investment proposals Capacity to recapture part of investment for infrastructure, growth mitigation Issue of farm subsidies Labor – US Economy has imported Mexican Labor where foreign investment has not –has not been addressed Let countries help their local industry, farmers IF local farmers are “inefficient” is the only alternative to let them starve? Once they sell off land, that option goes… 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

Growth Outstripping Its Benefits? Export-led, foreign-investor development leads to growth, and economic benefits, but no mechanism to deal with impacts of growth..degradation, natural resource exploitation, worker squatter communities, hazardous waste, etc. 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

How did NAFTA address Trade Readiness/Asymmetries Labor/Community/Latino/Enviro groups made the US/Mexico border a high priority To get a couple border votes, two new institutions were created – BECC and NADBANK BECC– Assess and certify environmental infrastructure projects along the border NADBANK – Fund the projects and also fund community adjustment assistance program 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

Some Results: Loans, Grants and Technical Assistance 58.6 3.0 11.1 23.9 49.1 13.6 0.2 1.9 4.3 7.1 10.0 11.5 14.1 434.9 426.6 355.6 265.3 181.8 119.3 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

Results of BECC/NADBANK Experiment Between 95 and 2003, BECC has certified more than 70 environmental infrastructure projects with value of $1.58 billion; and spent $30 million in technical assistance to some 200 projects NADBANK has approved 17 loans for $59 million and spent $426.4 million in EPA grants on 47 water and wastewater projects; also spent $15 million in CAIP grants Both institutions have created public participation mechanisms, sustainable development criteria and utility management training and more of a bottom-up development model Institutions not directly related to trade per se, but were needed because growth had outstripped local capacity and no fiscal mechanism was in place to take care of the need Has expanded to deal with air quality, energy, hazardous waste and most recently, agricultural conservation grants 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico

Commission on Environmental Cooperation Also has dealt with trade asymmetries: Assessing and attempting to develop a more common toxic release inventory; Sound management of chemicals Hazardous waste regulations

SO What does this NAFTA experience with Institutions tell us? NAFTA Institutions can teach us something and should not be ignored They are not, on the other hand, the model for CAFTA/FTAA –very limited in scope– and did not deal with Asymmetries of Trade or Trade Readiness, instead largely responding to U.S. interest group concerns…… 7/7/2019 Towards Sustainable Trade in the Americas? Lessons from Mexico