Ukraine's European Revolution?

[Admiral Yi]

I'm not sure I understand.  Cancelling NAFTA today would put us back at the same policy situation as 1994, so status quo ante in that sense, yes: but watching the economic chaos it would reap in 2014 Mexico would be far from demonstrating the alt-hist point of Dorsey's scenario, that Mexico would be like that (or comparably bad off) today had they never signed NAFTA.

Why not?  If Mexico were to legislate pre-NAFTA tarrifs and regulations then after an adjustment period it would presumably return to a level of agricultural output, prices, employment, consumption, etc., that would have obtained if NAFTA had never been implemented.

[garbon]

I think even my American friends would agree that the growing gap between the rich and the rest in most of the developed world is not a sustainable and viable model of society.

What is this in reference to?

[Capetan Mihali]

I'm not sure I understand.  Cancelling NAFTA today would put us back at the same policy situation as 1994, so status quo ante in that sense, yes: but watching the economic chaos it would reap in 2014 Mexico would be far from demonstrating the alt-hist point of Dorsey's scenario, that Mexico would be like that (or comparably bad off) today had they never signed NAFTA.

Why not?  If Mexico were to legislate pre-NAFTA tarrifs and regulations then after an adjustment period it would presumably return to a level of agricultural output, prices, employment, consumption, etc., that would have obtained if NAFTA had never been implemented.

I would tend to think the massive changes that have taken place in Mexico over the last 20 years, some amount of which must be attributable to NAFTA, have transformed the country enough that it's impossible to just cancel NAFTA today and see what kind of development Mexico would have had in its absence.

[Admiral Yi]

I would tend to think the massive changes that have taken place in Mexico over the last 20 years, some amount of which must be attributable to NAFTA, have transformed the country enough that it's impossible to just cancel NAFTA today and see what kind of development Mexico would have had in its absence.

What kind of irreversible transformations do you have in mind?

[Barrister]

I think even my American friends would agree that the growing gap between the rich and the rest in most of the developed world is not a sustainable and viable model of society.

I think the gap between the developed, and developing world, is a big problem.  But my understanding is that gap is shrinking, not growing.  You've had tremendous economic growth in China, India, Brazil, and other countries that has lifted millions out of poverty.

[alfred russel]

And Mihali, of course they could return to the status quo ante if they wanted to.

I'm not sure I understand.  Cancelling NAFTA today would put us back at the same policy situation as 1994, so status quo ante in that sense, yes: but watching the economic chaos it would reap in 2014 Mexico would be far from demonstrating the alt-hist point of Dorsey's scenario, that Mexico would be like that (or comparably bad off) today had they never signed NAFTA.

I realize this is debatable from some angles, but the signing of NAFTA didn't create economic chaos in Mexico.

[Capetan Mihali]

I would tend to think the massive changes that have taken place in Mexico over the last 20 years, some amount of which must be attributable to NAFTA, have transformed the country enough that it's impossible to just cancel NAFTA today and see what kind of development Mexico would have had in its absence.

What kind of irreversible transformations do you have in mind?

I think the decline in Mexican agriculture changed the country to the point where just having the old tariffs wouldn't get you close to the old economy/society.  Those peasants whose produce was no longer competitive either went somewhere else (Mexico City, the USA, northern maquilladoras) and adopted a new life there, or they did something else (produce drugs) and adopted a new way of life at home, and I don't see turning the clock back.  The drug trade is a biggie.  You have a cartel infrastructure and institutional culture today that wasn't remotely present in 94, and it isn't going to go away soon, whether or not NAFTA is repealed.  Urbanization and emigration are also biggies.  The children of city-dwellers are going to stay in the city, and a lot more Mexicans are settling permanently or semi-permanently in the US.

Beyond that, I don't really know.  But if we cancelled NAFTA today, would looking at the US economy after a transitional period give us a good idea of what our own economy/society would be like had we never signed it?  A lot has changed in the structure of the US political economy in the last 20 years, again some of that owing to NAFTA itself, and it's not going to come back just because the tariffs change.

[Capetan Mihali]

And Mihali, of course they could return to the status quo ante if they wanted to.

I'm not sure I understand.  Cancelling NAFTA today would put us back at the same policy situation as 1994, so status quo ante in that sense, yes: but watching the economic chaos it would reap in 2014 Mexico would be far from demonstrating the alt-hist point of Dorsey's scenario, that Mexico would be like that (or comparably bad off) today had they never signed NAFTA.

I realize this is debatable from some angles, but the signing of NAFTA didn't create economic chaos in Mexico.

I'm referring to the hypothetical chaos you said Mexico would reap if they withdrew from NAFTA today.

[derspiess]

and a lot more Mexicans are settling permanently or semi-permanently in the US.

I've been told quite often that this is a good thing all-around.

[Admiral Yi]

One big objection to the narrative you're constructing Mihali is that you seem to be ascribing the rise of the Mexican narcotrafficantes to the loss of protected agricultural markets, whereas most commentaries I've read ascribe it to the enforcement program in Colombia. 

So in my narrative, without NAFTA you still have drug transshipment moving to Mexico.

[Capetan Mihali]

One big objection to the narrative you're constructing Mihali is that you seem to be ascribing the rise of the Mexican narcotrafficantes to the loss of protected agricultural markets, whereas most commentaries I've read ascribe it to the enforcement program in Colombia. 

So in my narrative, without NAFTA you still have drug transshipment moving to Mexico.

I'm not sure which enforcement program specifically you have in mind, but the Colombians continue to produce/move cocaine and powder heroin, and they bring it to the US via Mexico but also via D.R. then P.R. and other Caribbean routes.  You're right in that US domestic enforcement made the 80s style of Cessnas and Key West obsolete, and made the Mexican border more attractive.

But drug cultivation/production inside Mexico has taken off dramatically in the last 15 years.  Black tar heroin used to be strictly a West Coast thing, but it's taken off in all sorts of places that used to have a really minor heroin scene, and it dominates the US outside of the Northeast and Detroit/Chicago (where Colombian powder is the norm).  This is heroin made in Mexico from Mexican poppies.  Despite the more relaxed attitude and recent legalization efforts, Mexican marijuana is a huge business, perhaps more profitable for the cartels than any other drug.  I've seen the figure recently estimating 2/3 of US marijuana is grown in Mexico, though it's probably going to decline.  And the reality of the meth trade is that almost all of it is produced in Mexico now, with the precursor chemicals shipped directly from China to the cartels and manufactured in huge labs.

So while enforcement is definitely part of it, I think the displacement of the rural economy must be part of it as well.

EDIT:  Another big factor is the fact that the cartels needed Mexican gangs in the US to facilitate sales as well as people willing to transport it.  The huge increase in migration to the US, which I think can be more closely linked to the economic changes, was absolutely a necessary prerequisite for the drug trade to develop as it has.

[The Minsky Moment]

Main Findings

•NAFTA has produced a disappointingly small net gain in jobs in Mexico. Data limitations preclude an exact tally, but it is clear that jobs created in export manufacturing have barely kept pace with jobs lost in agriculture due to imports.

So low value added agricultural jobs have been replaced by higher value added manufacturing jobs.  That is how development is supposed to happen.

There has also been a decline in domestic manufacturing employment, related in part to import competition and perhaps also to the substitution of foreign inputs in assembly operations. About 30 percent of the jobs that were created in the maquiladora assembly plants in the 1990s have since disappeared. Many of these operations were relocated to lower- wage countries, particularly China.

It's true that the maquiladora operations that competed on low labor costs in the 90s were hurt by China.  But higher wages in China is pushing some of that back.  More importantly, manufacturing in Mexico over the last decade moved up the value added scale, in areas like automotive and even increasing aerospace.

Mexican agriculture has been a net loser in trade with the United States, and employment in the sector has declined sharply. U.S. exports of subsidized crops such as corn have depressed agricultural prices in Mexico. The rural poor have borne the brunt of adjustment to NAFTA and have been forced to adapt without adequate government support.

Basically the issue here is that from a pure economic efficiency POV it may be optimal for Mexican farmers to bring their skills physically across the border to produce on more efficient and productive US farms.  Whetheer that makes sense holistically is another question.  There is a basis here to criticize policy (i/e/ "adequate government support") but IMO this is not really the problem of NAFTA per se but other policies not being properly in sync.

Productivity has increased in Mexico over the last decade. NAFTA likely played a significant role, because Mexico cut tariffs deeply and was exposed to competition from its giant neighbors. The desirable growth in productivity may have had the unwanted side effect of reducing the rate of job growth, since fewer new jobs were created as workers already on payrolls produced more.

This is just a tautology.  Productivity = output/employment, so productivity is inversely related to employment.   By definition, more productivity will mean slower employment if one holds output still.  The question is whether in the absence of NAFTA employment would have been higher and output the same, or -- more likely -- employment close to the same and output lower.  I see no reason to think the former would be true.

•   Real wages for most Mexicans today are lower than when NAFTA took effect. The stunning setback in wages is mainly attributable to the peso crisis of 1994-1995. However, during the NAFTA period, productivity growth has not translated into wage growth, as it did in earlier periods in Mexico. Mexican wages are also diverging from, rather than converging with, U.S. and Canadian wages

•   Income inequality has been on the rise in Mexico since NAFTA took effect, reversing a brief declining trend in the early 1990s. Compared to the period before NAFTA, the top 10 percent of households have increased their share of national income, while the other 90 percent have lost income share or seen no change. Regional inequality within Mexico has also increased, reversing a long-term trend toward convergence in regional incomes.

Again I suspect we are dealing with forces and policies here other than NAFTA itself.  One - competition from China - was already mentioned.

[Valmy]

I think even my American friends would agree that the growing gap between the rich and the rest in most of the developed world is not a sustainable and viable model of society.

Well that is a bug not a feature.  We are not sure yet what is causing that.  However, we are seeing global poverty going down significantly.

[Valmy]

So while enforcement is definitely part of it, I think the displacement of the rural economy must be part of it as well.

EDIT:  Another big factor is the fact that the cartels needed Mexican gangs in the US to facilitate sales as well as people willing to transport it.  The huge increase in migration to the US, which I think can be more closely linked to the economic changes, was absolutely a necessary prerequisite for the drug trade to develop as it has.

Now wait a second just how devastated has the agricultural section of the Mexican economy been?  You make it sound like a nuclear bomb hit it.  I am looking at the stats and it looks like it remains one of the top producers of agricultural products in the world.

[derspiess]

I am looking at the stats and it looks like it remains one of the top producers of agricultural products in the world.

Well yeah, but take away avocados, onions, limes, lemons, sunflower seed, dry fruits, papaya, and peppers and they're not leading the world in anything