oriented commercial farm and the small, less effi-
cient “ejido.” While “ejidos” account for about 54
percent of total land area in Mexico, the average
“ejido” farm is about five hectares. This disparity
may only increase as trade is liberalized and the
“ejido” system is changed, resulting in further con-
centration of income at the upper end of the scale and
detracting from the stated goal of fostering broad-
based income growth throughout the economy.
Changes in agricultural structure affect not only
farmers but entire rural Commimities as well. Are the
winners from freer trade willing to compensate those
who lose? This question is of key importance to
trade negotiators trying to design an acceptable tran-
sition scheme for implementing NAFTA.
Little was mentioned about the role that NAFTA
may serve in setting the stage for additional eco-
nomic integration throughout the Western Hemi-
sphere. Based on recent U.S. action to stimulate
economic integration in the Western Hemisphere
through the Enterprise for the Americas Initiative, it
appears that NAFTA is only the precursor of what
will be an entire series of trade, investment, and debt
reduction plans affecting Latin American nations. In
fact, since mid-1990, the U.S. has signed trade and
investment framework agreements with Bolivia, Co-
lombia, Ecuador, Chile, Honduras, Costa Rica,
Venezuela, El Salvador, and Peru. In addition, a
similar framework agreement has been proposed
with the 13 nation Caribbean Community. Is it prob-
able that a Western Hemisphere trading bloc is
emerging?
According to Drucker, that may be precisely what
is occurring. Since the early 1960s, most nations
have engaged in adversarial trade relationships
which are designed to compete not on market share,
but on the ability to drive the competition from the
market altogether. As adversarial trade continues,
what then may follow? To counter adversarial trade
and ensure access to markets, it becomes necessary
to establish strong trade relationships, best accom-
plished by signing reciprocal trade and investment
agreements with neighboring countries. Following
the development of reciprocal trade relationships,
trade patterns are modified to reflect transnational
realignment of trade and investment interests. Reci-
procity and subsequent realignment will likely lead
to the development of strong regional interests based
on mutually advantageous trade and investment
laws. These regional interests will lead to the forma-
tion of regionalism, fostering the development and
growth of regional trading blocs. Although Europe
and Eastern Asia show strong signs of taking these
three steps, this process is particularly evident in the
Western Hemisphere. Although NAFTA is impor-
tant, it appears to be only the beginning of what could
become a fully integrated economy throughout the
region.
With the recent upturn in trade, many analysts
seem to have forgotten that Mexico has the develop-
ing world’s second largest external debt, valued at
$94 billion in 1990. With about 44 percent of all
export revenue used to service this debt, Mexico’s
economic well-being is closely tied to the ability to
access international markets, especially the United
States, which makes securing NAFTA, and with it,
access to the largest market in the world, of key
economic and political importance to Mexico. Be-
cause of this interdependence, Mexico has a vital
stake in the level of U.S. interest rates and inflation,
but more importantly, in the changes in purchasing
power within the United States. In the future, Mex-
ico’s economic fortunes will ebb and flow more than
ever before with those of the United States.
Segarra makes several assertions worthy of further
discussion: (1) sustained income growth in Mexico
is in the best interests of the United States; (2)
substantial trade liberalization has already occurred
in Mexico; and (3) political interests in the United
States may be less supportive of passing a NAFTA
than we have been led to believe.
Without a doubt, as incomes in Mexico increase,
more food and basic agricultural products will be
imported. Much of this increased trade will likely be
with the United States. What will be required for this
sustained income growth to occur? First, there is a
need for broad-based economic development within
Mexico. If incomes become more evenly distributed,
the potential for the development of a large, middle
income class is greater. Research by the Dallas Fed-
eral Reserve Bank indicated that through the 1970s,
there was a strong propensity for the “trickle down”
effect to occur in Mexico (Haslag et al.). The key
question is whether or not those same economic
relationships still hold.
Mexico has taken bold measures to liberalize trade.
The maximum tariff rate has been reduced from
almost IOO percent in 1985 to under 20 percent in
1990. Import licenses have been liberalized, al-
though they still affect about 40 percent of all agri-
cultural imports. Much progress has been made
without a trade agreement. Why, then, work to secure
a NAFTA? Most of the reforms instituted in Mexico
since 1986 have been through executive decree.
Those reforms can be reversed in the same way.
NAFTA will assure that reforms are institutionalized
and made a permanent part of the law of the land in
Mexico. This stability is especially vital if Mexico
hopes to attract foreign investment and maintain it
over the long term.
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