Questioning the Divergence
THE PRINCIPAL economic issue Mexicans would raise about any proposal to move to free trade with the United States is that the United States would benefit more than Mexico. Even if one argues that certain Mexican industries might fare quite well in a gradual movement to free trade (as was done in chapter 6), this will not allay Mexico's concern about the effect on its economy and industry as a whole. This chapter examines the theory of backwash--that free trade benefits only the richer country and leaves the poorer country a backwater--and how well it has stood up in other contexts, to reach tentative conclusions about possible outcomes of U.S.-Mexican bilateral free trade.
The theoretical basis for the contention that there will be divergence in production and incomes between more- and less-developed countries was set forth lucidly in the writing of Myrdal.1 Others subsequently embellished Myrdal's theorizing, and dependency theorists, particularly in Latin America, put it in a political context. The essence of Myrdal's argument is that the forces that led to the original divergence reinforce later divergence as well. Industries are formed that improve efficiency by regular capital infusions and in some cases by scale, more possible in richer countries; transportation networks develop in richer areas and remain inadequate or nonexistent in backward areas; people in better____________________