Magazine

Taking Stock Of How NAFTA Stacks Up


Geri Smith and Cristina Lindblad claim that NAFTA "ranks on a par with Europe's creation of the euro, China's casting off of Marxism for capitalism, and Russia's turbulent embrace of a market economy" ("Mexico: Was NAFTA worth it?" Cover Story, Dec. 22). The European Union is much more than a free trade and investment area. It is a complete economic union, with free movement for services, people, and enterprises, as well as a common commercial policy run for the entire membership by a single authority, the European Commission. Twelve of its 15 members use not only the same currency but also euro notes and coins issued by a single central bank (the European Central Bank), which is also entrusted with the setting of a single interest rate for the entire euro zone.

China has not cast off Marxism for capitalism. It has simply allowed capitalism to be practiced within certain special zones where production is carried out mainly by joint ventures with foreign enterprises. In China, therefore, Marxism and capitalism coexist, with the Party still in the driver's seat. Smith and Lindblad may not be too far off the mark regarding Russia, given their tactical use of the word "turbulent" for a qualification.

Ali M. El-Agraa

Fukuoka University

Fukuoka, Japan

"Mexico: Was NAFTA worth it?" recounts Mexico's impressive aggregate growth -- in exports, foreign capital, and total output -- but also reports that over half of Mexicans "have soured on NAFTA." This is not really a paradox: While NAFTA has been good for many businesses, it has been bad for many people. Free trade in most imports and exports has imposed on Mexico huge jobs losses in traditional farming and small manufacturing. It has also depressed wages, worsened income inequality, and intensified the population pressure of "surplus labor" -- all of this aggravated by the U.S. economy's slump from 2000 to 2003.

Edwin P. Reubens

Weston, Fla.

"Happy birthday, NAFTA" (Editorials, Dec. 22) claims that NAFTA is unable to provide "better education to compete with China and India." I would think this is exactly where Canada and the U.S. might help. With great North American research universities second to none, there is ample scope for initiative. The relative "failure" of K-12 public education in the U.S. is largely due to local conditions, not lack of expertise, and there is plenty to share with Mexico on the part of Hispanic educators and Spanish-language education at the elementary and secondary levels. Unlike in the U.S., the photograph [of migrants in Tijuana] suggests that the motivation is there -- and a little networking, even some aid, might go a long way to redress the balance in ways that writers Geri Smith and Cristina Lindblad say ought to help at this historic juncture. These are chances not to be missed for NAFTA and for the hemisphere.

David B. Stewart

Tokyo Institute of Technology

Tokyo Re "Why rubinomics worked" (Books, Dec. 22): I seem to remember the economy prior to Mr. Clinton taking office growing at 5% to 6% with business inventories shrinking rapidly. The problem with the economy was still high unemployment. Once Clinton took office, the talk of a tax increase came closer to reality, and the economy did not take off until 1995 (post Republican sweep). This would tell me that the economy, which was beginning to speed up significantly, was actually slowed by the decision above. As the economy outgrew the tax increase, it later outgrew the deficits (thank you supply-siders).

While Mr. Rubin left office on a high note, we tend to forget how sad a shape the economy was in when Clinton left office. The 1.6% gross domestic product (or around there) growth in the last quarter of the Administration actually misstated how bad things were because business inventories were way too high and continued to grow during this quarter, indicating that the economy was in for a very hard landing, which did come to pass.

Christopher Gavin

Riyadh, Saudi Arabia In "The GOP doth protest too much, methinks" (Economic Viewpoint, Dec. 15), Robert J. Barro's use of the term "cheap Chinese goods" to refer to products made in China and purchased by Americans is a misleading way to label shoes, clothing, and toys that carry the best brand names in American business. Such language maligns China, confuses the public, contributes unfairly to the creation of a negative stereotype, and clouds an issue that will affect the next U.S. Presidential election.

All voters, especially those facing job losses because production has been moved to China, should understand that the decision to relocate factories is made by American management to lower the cost of manufacturing and remain competitive. It is unfortunate that such terminology has seeped into public discourse.

Michael Goldman

Shanghai Re "BP: Where's the big danger now?" (Readers Report, Dec. 15, regarding "The oil lord," European Edition Cover Story, Oct. 27): By frankly stating that Nigeria and Angola are the most "politically turbulent west states" to do business with, BP PLC 's John Browne becomes the ready scapegoat for a farcical Nigerian "patriotism." But he's right: Dangers to investments and investors loom large in the Nigeria economy. The country's financial system is in disarray, exemplified by frequent bank failures, galloping two-digit inflation that has rendered the country's currency worthless, a central-bank staffed by mediocrities incapable of any macroeconomic prescription or monetary-policy solution to persistent inflation and a troubled financial system, absence of any concrete fiscal policy, and an inefficient capital market blatantly abused by fraudulent bank and government officials. Any economy that is plagued by all these market woes poses such obvious dangers to shareholder value that any investor worth the name would stay away from it.

In other parts of the world, an economy on the brink of disaster would be pulled down by its citizens and those responsible put in jail -- as in Indonesia and Argentina. Yet Nigeria continues to totter along -- ethnic dominance holds it together. What company will risk equity capital in Nigeria? Only those that are aiding and benefiting from the decay of Nigeria thrive in a market bedeviled by these turbulences. Doing business there does not require the imperative of "a superior business strategy" because Nigeria is not competitive. It requires taking advantage of its weak structure as a failed state.

Moreover, Nigeria has not ratified international trade pacts, so global capital-market standards are not applicable. And how about its sordid human-rights record, perhaps the 21st century's worst? When all these things are true of a country, that country is too turbulent to do business in. And since all of these apply to Nigeria, BP's Browne is right.

Deebii Nwiado

Gentofte, Denmark


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