Global Integration

The effect of NAFTA on the Mexican economy seems to be a good example of the effects of free trade on countries in the short and long terms. NAFTA came into effect on Jan. 1^st, 1994 while Mexico was in the middle of a financial crisis arising from bad economic policy including, among other things, the inflation of the paco because of lack of outside competition. The agreement immediately added to the problem. The agricultural and milk industries which were previously subsidized were probably hit the hardest simply because they were not prepared to compete on the global scales. Mexico’s agricultural wealth became increasingly centralized in the power of a few industrialized farms; causing a polarization of wealth and political backlash. This perhaps, can be compared to the manufacturing industry in the
United States – and its effects seem similar; the polarization of wealth. As more education is required for the job force to remain employed it seams probable that the economy will continue this split between the educated and the uneducated.

Despite this, both the US and the Mexican economy are fairing pretty well. Most economists seem to credit Mexico’s recovery to the forces of NAFTA which forced reform upon the Mexican infustructure. Mexican exports to the US and Canada have doubled since 1994. Indeed,
Mexico now has a free trade policy which is more open than most other countries in the world.

It is worth noting that the recovery of the Mexican economy required heavy subsidies and government incentives similar to the
US’s own agricultural subsidies which support both large and small scale farming efforts. The Mexican economy also is highly subsidized by remittances from Mexican immigrants in the United States, and Mexico received preferential trading rights while their economy was recovering. Therefore, although for all countries free trade may be beneficial in the long run, it most likely will cause temporary economic and political  problems during the transition period, and Mexico this period was amplified by problems with infrastructure.