Thoughts on Nafta

http://web.lexis-nexis.com/universe/document?_m=fa48042a8f0d2f56594a3de460822a5c&_docnum=5&wchp=dGLbVlb-zSkVb&_md5=cfa1c33303ad064180ae18742e96e4b8

I really wish I could figure out how to get smaller links.
Anyway, this is an article from Business Outlook about a recent Senate panel discussion on the pros and cons of NAFTA. In short, trade has increased, as might be expected from a free trade agreement. American agricultural exports in particular have grown by 160%. However, as manufacturing jobs have been created in Mexico, a nearly as large number of Mexican farmers have been driven from the market by American competition. Nancy Peloski (sic) believed that Mexican farmers had lost more than they gained from NAFTA.

So farmers left the land, and a similar number (greater in fact) took up manufacturing jobs. Historically, it was the increased productivity of farms that led to the large supply of labor that fueled the Industrial Revolution. So Mexico's poverty and large-scale unemployment, which existed before NAFTA, have been reduced somewhat as industrialization takes place. NAFTA has not solved all problems instantly, but that's not what it was for. It was to create wealth through increased trade and help the economic development of Mexico, which it has done to a significant (though not enormous) degree. NAFTA is awesome.

Mexico's Corn Tariff

http://find.galegroup.com/itx/tab.do?subjectParam=Locale%2528en%252C%252C%2529%253AFQE%253D%2528su%252CNone%252C6%2529Mexico%253AAnd%253ALQE%253D%2528JN%252CNone%252C9%2529Economist%2524&qrySerId=Locale%28en%2C%2C%29%3AFQE%3D%28ke%2CNone%2C6%29Mexico%3AAnd%3ALQE%3D%28JN%2CNone%2C9%29Economist%24&sgHitCountType=None&inPS=true&sort=DateDescend&tabID=T003&sgCurrentPosition=0&subjectAction=DISPLAY_SUBJECTS&prodId=EAIM&searchId=R1&displaySubject=&userGroupName=beloit_main&prevSubject=&searchType=AdvancedSearchForm

Behind this (admittedly unseemly) link, there is the full text of a recent article in the Economist about a price spike in corn (which the British news magazine calls "maize,") which has led to a similar spike in the price of the tortillas everyone in Mexico eats. The cause? Mexican corn tariffs.
Under NAFTA, tariffs are being reduced, and the Mexican corn tariff is set to be eliminated next year. However, when the American ethanol craze began, the price of American yellow corn went up 50% (in Chicago, specifically). Mexican users of yellow corn (for things like cattle feed) started buying up white corn instead, which Mexicans use to make tortillas. Prices rose fast. Without the tariff, Mexican companies would be able to import corn at subsidised American prices, increasing supply. With the tariff, it's cheaper to buy up other sources of corn, so of course that's what they did.
Mexico's trade-freindly President, Felipe Calderon, responded quickly, increasing the allowed amount of tariff-free imported corn. But Lopez Obrador, the second-place finisher in a recent presidential election (and self-declared "legitimate president of Mexico") has accused him of allowing monopolistic importers to fix prices.

It Begins

This is the first post of a blog I'm starting as part of International Economics. Happy Zeroth Birthday, Blog! I'm actually posting this in class at the behest of the professor, so I'll get down to the interesting things later.