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

2. 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

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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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