Down Mexico way - potential impact of NAFTA on the Mexican economy - Editorial

AS THE transforming catalyst of Mexico's economy and society, NAFTA sometimes sounds like the greatest invention since patent medicine. It will supposedly lock in President Salinas's liberalizing reforms, raise Mexico's standards of labor, health, and environmental protection, pave the way for real democracy, and--since these benefits will in turn make Mexico a modern prosperous country--reduce the flow of illegal immigrants to the United States. About such claims, we can make one general point with reasonable certitude: it is hubris to imagine that the U.S. can transform another society in this way, and hubris on stilts to suppose it can be done by eliminating average tariffs of 4 per cent in the U.S. and 10 per cent in Mexico.

Let us, however, examine these claims in particular. Would NAFTA lock in the Salinas reforms? Probably it would help to do so. But most observers believe that these reforms, supported overwhelmingly by Mexico's political and business elites, are entrenched anyway. Here, for instance, is Professor Jorge Castaneda in Foreign Affairs: "The economic reforms ... were largely inevitable; with logical, and necessary, rectifications and adjustments, they are here to stay." Should this confidence be misplaced and popular opinion insist on overturning liberalization, it will not be deterred by the fact that this would also be a slap at the Yankee. Indeed, that might be an additional incentive.

Would NAFTA raise Mexico's level of regulation? We should hope not. The only way that greater regulation can be sustained is on the back of greater prosperity. To go directly for U.S. levels of regulation would suppress, or at least delay, Mexico's economic growth. The snag is that Mexico already has U.S. levels of regulation--on paper. NAFTA and its side agreements would, however, create the likelihood