A "common market" among the United States, Mexico and Canada -- one allowing the free flow of labor and capital, as well as goods -- would benefit all three countries with few negative effects, New Mexico State University Economics Professor Jim Peach said.

Peach discussed the idea Wednesday during a presentation on Mexico's economic and demographic trends, part of a weekly series of presentations scheduled through April by NMSU's Center for Latin American Studies.

Peach said Mexican President Vicente Fox previously proposed a three-country "common market" to former President Bill Clinton and to presidential candidates George Bush and Al Gore -- and met with stunned silence from all three. But, he added, the idea is sure to be debated seriously within the time frame of the current administration.

"It's no accident that President Bush is meeting Friday with President Fox," he said.

Peach said a U.S.-Mexico-Canada common market would be workable under two conditions -- a three-country-wide minimum wage and the guarantee of jobs in Mexico, with government serving as the employer of last resort.

"Twenty to 30 percent of Mexico's labor force currently is unemployed. In economic terms an unemployed person is an unused resource. With a North American Common Market, there's a real possibility of achieving income convergence between the United States and Mexico," he said.

He said such a move is essential to helping Mexico raise its per capita income to a level near that of the United States, something that would benefit both countries. The North American Free Trade Agreement (NAFTA) alone is not enough to make this happen, he said.

Mexico's gross domestic product per person is $4,500 per year, while the United States' gross domestic product per person is $36,000 per year, he said. Given the disparity it will take Mexico 100 years to equal the United States' current level if it grows at a rate of 2 percent per year, which has been the average U.S. growth rate over the past 100 years, he said.

Mexico has tied its current economic development strategy to exports, yet 85 percent of its exports go to one market -- the United States, Peach said.

"NAFTA can't provide the necessary economic incentive (to raise Mexico's per capita GDP). The Chicago Cubs have a better chance of winning the World Series," he added.

The benefits to the United States of a drastic improvement in Mexico's per capita wealth would be an improvement in Mexicans' ability to buy U.S. goods -- a market some experts project to be 200 million people by 2050 -- and the availability of a younger Mexican labor pool to counterbalance the aging U.S. work force and to provide healthcare for aging U.S. residents, he said.

The alternative to improved Mexican incomes is "scary," he said.

"Fifty years from now the (income) gap could be 16 to 1, an incomparable gap between two neighboring countries. We don't have the resources to enforce our current immigration laws," he said.

He said he recognizes there are significant risks in the proposal. On a local level, a more open border would reduce the economic role of border communities.

"There would clearly be costs to specific industries and regions, but the benefits outweigh the costs," he said.

He said he did not think, however, that a more open border would significantly hurt the U.S. job market.

"For one thing, there is not a single labor market; it's broken up into many different, smaller, labor markets. For another, I think the wave of people coming here would be much smaller than people think, if you had a high minimum wage and assured jobs in Mexico. The extra income would have an economic multiplier effect and improve opportunities in both countries," he said.

Peach said he recently made his proposal to a meeting of maquiladora managers in Juarez, Mexico, and got a mixed, but not unfavorable, reaction.

"When I made the proposal two of the 20 people there said, 'It would cause a serious disruption.' But, after they thought about it, they said, 'No, no, it really wouldn't,'" he said.

Jack King
Feb. 13, 2001

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