Mexico Must Lose Subsistence Jobs

by Aaron Lukas

Aaron Lukas is an analyst with the Cato Institute's Center for Trade Policy Studies.

February 2, 2004

Sir, Raj Patel (Letters, January 29) asserts that the North American Free Trade Agreement has "cost" jobs in both Mexico and the US. Yet when businesses face import competition, it means someone must be exporting. Employment patterns shift to reflect comparative advantage; jobs do not simply vanish.

Dr Patel implies that the US is losing its manufacturing base. In fact, manufacturing's share of gross domestic product has stayed relatively stable. Over the period he cites, from 1994 to 2000, US manufacturing output increased by more than 40 per cent. Surging productivity means America is producing more with less - the key to rising national wealth.

It is true that US agriculture subsides are a shameful waste but Mexico's farm sector would face wrenching changes regardless. Many of those now leaving the land are subsistence farmers - people using animals and hand tools to eke out a living. A country cannot climb the economic ladder without letting such jobs go, as all developed countries have done.

Dr Patel's "progressive" organisation, the Institute for Food and Development Policy, apparently prefers bucolic privation for Latin America over higher living standards spurred by free trade. Thankfully, leaders there have rejected such foolish counsel.

This article appeared in the Financial Times on February 2, 2004.