Mexico will not close its wage gap with the United States without free movement of workers, Mexico’s economy minister Ildefonso Guajardo said in an interview days before the start of a renegotiation of the North American Free Trade Agreement. Low wages in Mexico have made the country attractive to US manufacturers under the 1994 trade deal, a major gripe for US President Donald Trump, who says NAFTA has resulted in massive US job losses.
Guajardo, 60, an economist who played a role in the original NAFTA negotiations, was interviewed at the Reuters Latin America Investment Summit. He travels to Washington next week with the Mexican delegation to reopen the deal which underpins $1 trillion of trilateral annual trade between Mexico, the United States and Canada.
For Mexican wages to reach US levels, workers would have to move freely in the region so that labor supply could meet demand, Guajardo said, noting Mexico’s large young, working age population. Guajardo used the example of the European Union to back his argument, saying the differences in wages between countries in that bloc had reduced because workers were able to migrate to find jobs.
He acknowledged such free movement was well beyond the remit of the new NAFTA talks that start on August 16 as part of a Trump campaign promise to renegotiate or ditch the deal. “That would be a different level of ambition,” he said. “If the United States can’t agree about the essence of immigration reform, it would be (unrealistic) to hope that NAFTA enters into the immigration debate.”
Along the border US average wages are about five times higher than Mexican wages, the largest per capita wage differential of any land border on the planet. The 23-year-old trade deal has done little to close the gap, although Guajardo pointed our that wages had improved in the export sector.
Guajardo said wages in Mexico would rise somewhat as a result of strong demand from the auto industry and of labor reforms brought in by President Enrique Pena Nieto, which will give more rights to workers to form independent unions and negotiate contracts.