Failing at free trade: are poor Mexicans better off after 10 years of free trade? Absolutely not, and Fox must fix it fast.

When the North American Free Trade Agreement (NAFTA) took effect Jan. 1, 1994, the trade pact's enthusiasts told Mexicans that they had entered the "decade of hope." But 10 years later, a more apt description would be the "decade of the raw deal" for the country's poor.

The historic deal has generated much wealth: The combined 406 million citizens of Mexico, the United States and Canada are part of the richest free-trade area in the world, with US$11 trillion combined annual gross domestic product. Trade among the three countries has more than doubled to $614 billion in 2002. Farm goods traded between the United States and Mexico also doubled. Exports from Mexican factories have risen to 30% of gross domestic product.

Yet NAFTA has also failed. It has not provided enough jobs for the 1 million Mexicans who enter the work force each year, causing a surge in illegal immigration to the United States, to 4.5 million from 2.5 million eight years ago. Mexico has lost about 20% of its most-educated workers to its northern neighbor.

Among the very poorest, things are bleak. In 1992, a little more than one in 10 Mexicans lived in extreme poverty, according to the international Monetary Fund. Today, at least half of Mexico's 104 million can't afford the few dollars a day needed to purchase such basic needs as clothing, food, housing and transportation.

Mexico's economic growth rate has averaged just 2.7% per year, the same rate as in the decade prior to NAFTA. The economy shrank in 2001 and grew by only 0.9% in 2002. It may reach 3% in 2003. "NAFTA wasn't meant to be a panacea for Mexico's economic policies," says Sidney Weintraub, an expert on Mexico's economy at the Center for Strategic and International Studies in Washington D.C. "It was improperly oversold. They miscalculated. They didn't have the growth"

Weintraub lays the blame squarely on economic mismanagement and a lack of fiscal reforms by Mexican officials. "Mexico would be worse off without NAFTA," he argues.

Nevertheless, most experts agree that free trade has all but buried Mexican agriculture, eliminating almost 3 million farm jobs over the life of the accord. NAFTA's architects were well aware that free-market policies would allow more efficient and heavily subsidized U.S. multinational agribusiness to undersell and drive out small Mexican farmers.

They envisioned a safety valve--displaced peasants would find jobs in urban factories and at border plants geared for export to the United States, called maquiladoras. And many did. But Mexican factories have taken a giant hit during the current U.S. recession. In the past two years, more than 500 maquiladoras have closed and 300,000 Mexican plant workers lost their jobs. Poor farmers now flood Mexican cities, creating havoc for public services. In Cancun, for example, half of the tourist mecca's residents are not connected to a Sewer system.

And remember that "giant sucking sound" that Texas billionaire Ross Perot warned would happen if Washington lowered U.S. trade barriers? He was right, hut the sucking sound is coming instead from Asia. Multinationals, always looking for the cheapest labor, are moving to China, where workers earn $0.35 an hour toiling in sweatshops compared with Mexico's average of $1.75 an hour.

Fox's challenge. President Vicente Fox must change the rules. He has already been pressured to call for the removal of white corn from the unrestricted-trade list and extend tax exemptions for maquiladoras. But he must also offer subsidies and technology to farmers so they can compete and job training and educational programs to unemployed urban workers. He must also diversify the export market and reach out to Europe. Nearly 90% of Mexico's exports go to the United States.

To pay for these programs, Fox must work closely with the Mexican legislature to enact badly needed tax reforms. Mexico has one of the lowest tax collection rates in Latin America at just 11% of GDP.

NAFTA has mainly benefited rich multinational companies and has not fulfilled its billing as an economic equalizer. It is time the Mexican government helped groups that are less able to shoulder the burdens of free trade.