"Nightline" made a segment a few years ago concerning border towns in light of the impending ten-year anniversary of the North American Free Trade Agreement (NAFTA). For those of you who don't know what that is, here is a five-second summary: NAFTA is a document that ensures the free movement (no tariffs) of goods, services, and capital. Funny: no labor. For those of you who do know what that is, do not post angry comments describing the various other corollaries of the agreement. I'm talking basics, here.
Anyway, the segment featured El Paso and Juarez, two cities with a border between them, struggling to make due in the era of free trade. All factory businesses that once dotted El Paso have moved across the border into Juarez. As a result, Juarez generates $1.6 billion in tax revenue, although it sees only 6% of that money from the central Mexican government. Simultaneously, however, Juarez's infrastructure is weakened by the influx of population. An estimate predicts that in ten years, Juarez will be completely bereft of fresh water.
El Paso is facing similar problems, albeit the US government has stepped in to alleviate the problem a little. Former factory workers are retrained for new jobs and the largely bilingual workforce is being put to good use (think Indian call centers, sans the Indians). But they, too, are suffering infrastructure issues.
So, here's my question: is NAFTA good or bad? If it's bad, should we nix it or reform it?
Personally, I think NAFTA is a gift of Olympus, because I'm a dirty, dirty, Friedmanite free-trader. I think it has some essential flaws (such as the Chapter 11 clause that allows corporations to sue the foreign governments of the Agreement for "extortion," which may just be heavier taxing), but I think that the responsibility of putting the revenue to good use lies on the local government. The Mexican government is so marred by corruption that it's not surprising there are cities without water. Even Adam Smith said government was necessary, and it was necessary for those exact purposes: to provide an infrastructure[, an army, and a judicial system].
In terms of regionalism, there tends to be an osmotic effect. For example, in the European Union, newer members receive European wealth from neighbors better off and the region stabilizes. However, there are often situations in which members drag the collective economy down, as is now the case with Germany, Italy, and France. I still maintain, though, that regionalism is a great idea. Europe is the world's largest exporter. Duty-free is a beautiful thing.
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