This file is a short policy essay. Sennholz treats NAFTA as a political and bureaucratic arrangement presented under the rhetoric of free trade but structured, in his view, to preserve privileges, regulate exchange, and expand administrative power. Its scope is not a clause-by-clause legal analysis; rather, it is a libertarian political-economic critique of the agreement’s likely effects on migration, business location, Mexican agriculture, mining, oil, manufacturing, and state power.
No matter what we may think of NAFTA, the agreement will be felt in many quarters.
The essay’s central thesis is that NAFTA is not genuine free trade. Sennholz argues that while the agreement promises liberalization among Canada, Mexico, and the United States, its practical operation is compromised by exceptions, side accords, and protections for favored interests. His opening conceptual move is to distinguish the symbol of free trade from the institutional reality of managed trade.
NAFTA officially raises the beautiful flag of free trade and peaceful exchange, but then quietly takes it down again with numerous qualifications, regulations, side accords, sequels, and supplements.
The structure proceeds from general principle to sectoral examples. First, Sennholz frames NAFTA as a product of political bargaining: Mexican unions and monopolies seek protection; American unions fear capital flight and immigration; environmental and labor provisions are used to restrain adjustment. He then invokes economic law against political design, insisting that incentives will continue to operate despite legislation.
Despite all the political maneuvering, economic principles always prevail in the end.
From this premise, Sennholz turns to migration and business location. Mexicans enter the United States, he argues, because wages, working conditions, and welfare benefits are more attractive; NAFTA does not alter those underlying causes. Likewise, firms do not simply chase low wages, because productivity, infrastructure, legal institutions, and consumer discipline matter more than nominal labor costs.
Business tends to locate wherever natural and institutional conditions are best; consumers who are the final authority in all business matters compel it to seek the best location.
This is the essay’s main analytical counter to popular fears of mass relocation to Mexico. Sennholz depicts Mexico as burdened by corruption, red tape, union militancy, poor infrastructure, political instability, and a history of expropriation. Thus NAFTA’s regulatory complexity cannot improve conditions; it more likely strengthens officials and commissions.
NAFTA cannot be expected to improve business conditions in Mexico or the United States.
The later sections apply this critique to major Mexican sectors. In agriculture, Sennholz attacks the ejido system as a politically imposed obstacle to productivity. Real free trade, he argues, would benefit Mexican consumers and force institutional reform.
If NAFTA actually would lift all trade barriers, U.S. farm products would flood the Mexican market, benefiting Mexican consumers immediately and forcing Mexican agriculture to abandon its senseless, unproductive system.
Mining receives a similar treatment: Mexico has rich resources, but Sennholz contends that environmental side accords are designed to burden rather than liberate production. Oil is the clearest example of protected statism. PEMEX remains insulated from competition, and energy allocation therefore remains politicized.
NAFTA expressly stipulates that PEMEX will remain in political hands, protected from the fresh air of competition.
Manufacturing completes the argument. Even where foreign firms have entered Mexico, Sennholz emphasizes content rules, power shortages, and bureaucratic controls. His conclusion is therefore skeptical of both protectionist alarm and official celebration: NAFTA neither unleashes free exchange nor creates the institutional basis for prosperity. Its relevance lies in its early warning that “free trade agreements” can become vehicles for managed trade, regulatory harmonization, and political compromise rather than market freedom.
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