Part One

Economic Comparison: Ohio and Mexico

Ohio’s economy, if it was a sovereign state, would rank 21st in the world with a GDP of $583 billion in 2014. This would place it between Sweden and Switzerland. Ohio’s per-capita GDP for that same year was $45,887. Ohio’s economy is the 7th largest in the U.S., ranking the state just behind Pennsylvania and ahead of New Jersey. Ohio’s economy (if it was a country) would rank 33rd in the world, just behind the United Arab Emirates, when adjusted for purchasing power parity. (2014, Ohio.gov and World Bank statistics) While Agriculture, Forestry, Fishing and Hunting only make up .73% of Ohio’s annual GDP, this masks the fact that most of the money that comes from Ohio’s agriculture is generated in food processing plants and through agri-business which falls under manufacturing in the secondary sector. Agriculture combined with agri-business, food processing, marketing and distribution, employs one in seven Ohioans and generates $93 billion annually. Ohio was part of the United States’ early industrial core; with Iron and Steel produced around Youngstown the state ranked number two in the U.S. in steel production in the early 1900’s. But Ohio’s poverty rate was 15.8% in 2014 (U.S. Census Bureau), and poverty varies considerably across the state. As a rustbelt state, Ohio has experienced losses. The U.S. Steel plant in Youngstown closed in 1980, for example. 40.2% of Youngstown residents live at or below the poverty line, making in one of the poorest cities in the U.S. For more on poverty in Youngstown, click here. Cleveland, Cincinnati and Columbus combined produced over 62% of Ohio’s GDP between the three metro-areas (Ohio.gov).

Mexico’s economy has become increasingly oriented towards manufacturing in the just over twenty years since NAFTA was enacted, according to the CIA world fact book. Mexico has become the United States’ second-largest export market, and third-largest source of imports. With a per-capita GDP of $18,500 in 2015 and a total GDP of $2.2 trillion, Mexico’s economy ranked 15th in the world, between Spain and Indonesia (The World Bank). The country’s breakdown by sector was:

GDP Composition Workforce

agriculture: 3.5% 13.4%

industry: 34.1% 24.1%

services: 62.4% (2015 est.) 61.9%

But poverty is pervasive in Mexico since NAFTA. The poverty rate is 45.5% (Wilson Center, Mexico Institute). The number of people living in extreme poverty has declined in recent years, and sits at 9.8% because of a cash transfer program called Oportunidades, and because of the expansion of healthcare towards universal coverage through a program called Seguro Popular (Wilson Center). But the percentage of people living in poverty is about the same as before NAFTA, and the total number of people living in poverty is up because of population growth.

Maquiladoras

NAFTA created 500,000 jobs in manufacturing, along with rapid population growth in border cities where the Maquiladora factories are located (Rhoda and Burton). Since small-scale Mexican farmers could not compete with cheap imports from the United States, NAFTA accounted for the loss of 1.3 million agricultural jobs. Because these were based in rural areas, NAFTA has also contributed to rapid urbanization in Mexico with much of the growth occuring in border cities. Around 2000 many U.S. companies had Maquiladora factories including Ford, GM, Honda, Mattel, Sony, IBM, Fischer Price, and Xerox. The Free Trade Zones that operated near the border were initiated in the 1960’s to provide opportunity for U.S. companies to import raw materials into Mexico without duties for the purposes of manufacturing there. They evolved into places where labor and environmental laws were frequently overlooked. Since wages in these zones were 1/5 to 1/6 of what a U.S. worker would demand they also provided cheap labor. Most of the workers in Maquiladoras are young women. Factory owners say they are more compliant and have smaller hands, making them better at manual work that requires dexterity.

Part Two: NAFTA and Trade

7. Describe the goals of the North American Free Trade Agreement from the Mexican government’s point of view.

8. Why has NAFTA fueled the loss of agricultural jobs? Describe the process.

9. How has NAFTA triggered rural to urban internal migration? Explain the process.

10. Ernst Ravenstein, in his “laws of migration” from 1885 concluded that “Migrants proceeding long distances generally go by preference to one of the great centers of commerce or industry.” How might moving a long distance from a rural area to a Maquiladora encourage cross-border migration by Mexicans?

How does the Gravity Model apply here?

You are watching: NAFTA: GDP and Migration. Info created by GBee English Center selection and synthesis along with other related topics.