On August 8th, the birthday of Mexican revolutionary Emiliano Zapata, 5,000 rural Mexican farmers poured into Mexico City. They blocked off roads and government buildings around the city’s central square to protest the free trade policies of Vincente Fox, the new Mexican president. And they called for agricultural subsidies as the price of their cash crops plummeted in light of increasing imports from the United States. The situation in Mexico is a practical illustration of the way in which free trade transforms a country, and the care with which one needs to implement free trade policies.
When countries trade freely with each other, they will produce different goods. Considering the case of the United States trading with Mexico one would expect that each country would import goods made more cheaply in the other country. Since the United States has an abundance of land, its agriculture costs are lower than Mexico’s. Since Mexico has an abundance of unskilled labor, its manufacturing costs are cheaper than those of the United States. We would expect that Mexico would export manufacturing goods and import food, and the reverse would happen with the United States.
Surely this is a simplified view of the world, but this is what we observe in Mexico today. Imported grains flow into Mexico. The sons of farmers flow into border cities to take higher paying jobs in manufacturing plants that export their goods to the United States. While this transformation makes the two countries better off as a whole -- all the goods they buy are cheaper -- it makes specific groups worse off. The supply of food in Mexico increases, lowering prices and hurting farmers. The demand for unskilled labor in the US falls, lowering the wages of US workers. That is why US organized labor protested NAFTA; this is why Mexican farmers protest now.
To his credit, Vincente Fox has seen the benefits that trade will bring to Mexico as a whole and has not wavered on his commitment to free trade. But he must be careful to consider the impact that free trade will have on Mexican culture if he wishes to see free trade and his administration reign in Mexico.
A long digression into Mexican history would be out of place, but to recognize the importance Emiliano Zapata played in Mexico, one only needs to hear Mexican farmers shouting “Viva Zapata!” as they march through the city. It was his revolution, beginning in 1910, that overthrew the dictator Porforio Diaz and established the communal farms these farmers work on today. These farmers see their farms as signs of victory over oppression, so it is no wonder that they react so angrily to Fox’s policies that seem to take away their land, not by force, but through the market.
Fox should not underestimate this anger, and must take measures to placate the farmers. Not only will it help preserve his political future, but it makes good economic sense as well. The whole economic argument in favor of free trade notes that free trade is good because it increases the output of all countries involved, In turn it is good because, through resource redistribution, everyone can end up better off. Fox should begin to take from those who benefit from free trade, the manufacturers, and give to those who are hurt, the farmers. And while he has reasons to be reluctant -- his desire to encourage farmers to switch to crops that take advantage of Mexico’s relatively mild winters is one -- he must not be too slow to act. For, as one protest organizer commenting on the results of Fox’s policies said, “Rural Mexico could explode. This could take us to the edge of anarchy.” And while this is surely an exaggeration, Fox should not forget his country’s history and underestimate the determination of the Mexican farmer. He should, as should the leaders of all countries who pursue free trade policies, aid those Mexicans marginalized by free trade. He should aid the sons and grandsons of Zapata, the Mexican farmers.