Trade is, indeed, a two way street, and the US has invested trillions of dollars over the decades in the infrastructure on its side. Our side of the street is pretty, paved, has manicured lawns, lovely homes, cars, and so on. This reflects the investment by the US in its own infrastructure dating back to the era of federal takeover of the rail systems to standardize them and then the investment in the interstate highway system, creation of the inter-coastal waterway system, and federal intervention for flood control on multiple rivers. Of course we also got AMTRACK out of it, but that is another matter.

Some of the other sides of the street look pretty good: Japan is even neater than ours although they have deployed some caltrops and tire shredders here and there, Germany's is much more regulated with so many tolls on the outgoing part that they lose economic efficiencies in trade, and then we hit the unpaved roads, washouts and other sides that have barriers, tollgates, and other such things. When folks leave our lovely street and hit *that* part starting in *those* nations, we see a fundamental problem with free trade that dates back to Wealth of Nations.

One of the pre-suppositions of Wealth of Nations is that there was little in the way of technical skill differences between Nations, say France and Italy. There were some, yes, and the basic division of labor argument is fundamental to understanding the concept of factories and even such extended concepts as "Just In Time" manufacturing. Adam Smith recognized that economic transport distance was bound to change markets and what they would do and how they would react, and he foresaw the economic displacement due to that when centralized industrial organization placed a premium on output. That shift to a divided, decomposited production concept works pretty well at the higher end of manufacturing. Thus the value used to create a commodity lessens as production increases due to specialization of worker roles.

This drives a higher level of efficiency to production as the means to reduce cost and add value. For derived products, such as vehicles, appliances and such, this is an untold good thing. There is a case, however, where in trade schema this falls apart due to the differences in the ability to actually have a society that can participate in a form of manufacture that takes relatively high amounts of sophistication and literacy. For those nations without a predisposition to that, you get economic disparity in production modes, where localized production is swamped by the now highly efficient, fully industrialized economies. Local capital accumulation which may have been pretty decent when a society had relatively protected systems of trade, and are thus backwards, evaporate due to the orders of magnitude difference between the wealthiest of individuals compared to their counterparts in the more efficient system. Introduce free trade and that localized system is disrupted.

I looked at this with regards to NAFTA and Mexico and find that there is one area where Adam Smith puts forward a rough equality of work that has been so changed by industrialization that there is no equality left in it: farming. That is the one area that no one could have imagined would have shifted so hard, so fast and so deeply by automation. Smith goes over that in the early part of WoN in Ch. I, the lengthy paragraph 4. Here commodity pricing between rich and poor nations is seen as equal as the type of manufacture is that of something very low-level. And it is here, not in manufacturing, that Mexico has taken a huge body blow.

Mexican farming has been a traditional 'path out of poverty' and was being supported and slowly advanced by Mexico, as witness its pre-NAFTA shifts to increase production via local means and allow capital accumulation so that children could have the necessities and *time* to go to school. Farming not only produces crops, but it produces excess goods (with good planning) to allow that capital accumulation to take place and is thus a two fold purpose at the bottom of the economic rung - it keeps you fed and gets you income with surplus. We would describe that area of the market as 'protected' and NAFTA removed the barriers that protected that market and, thus, that part of society.

The dirty, nasty trick was that the US had automated its production capability so that highly efficient agribusiness could utilize the latest in modern farming techniques, land use, fertilizers, pesticides, etc. because they have pre-existing and extensive capital investment and outlays. It is very, very efficient to produce commodity goods this way and the shock of such low corn prices started to remove the income stream from the poor, rural farming communities. Like good economic individuals they sought employment elsewhere, and left the inefficient farms behind. They went to the border factories and, when the amount of work did not absorb all the labor, they went over the border to the US. That influx of the mid-1990's first started to raise the 'illegal immigrant' problem.

The US, however, having a highly expansive trade policy, would deliver a systemic shock to Mexico that would, again, cause dislocation. When the border factories were put into direct competition with production in Malaysia, Singapore, Philippines and Red China, the Mexican worker was outcompeted. The late 1990's to 2003, in particular, saw factories south of the border reducing hours, reducing production or even shutting down.

This led to a major problem in Mexico: these workers no longer were farmers, the local capital system had been devastated, the services industry (traditionally rung two in the ladder) was limited, and the education level of this now displaced population was relatively low. Internally, Mexican corruption allowed for larger enterprises that care zero about worker welafare and conditions to flourish: organized crime. Still, many Mexican workers who preferred low paying legal work to high paying illegal went in the only direction left them: north to the US.

Now the lovely system of the US had shock three for Mexico that started to be put out by those wishing to get 'biofuels' and ignoring the arable land to fuel production ratios: ethanol. Corn based ethanol. In 2006-07 the price of corn skyrocketed in Mexico as the wealthy US bought up corn on the world market for inefficient production of ethanol. Even *with* low paying jobs in the US, those coming here could *not* sustain their families as the price of basic foodstuffs increased out of proportion to their purchase capacity.

Where does the relatively unwealthy, unskilled, and underpaid Mexican go now? From all reports the influx of personnel and capital by organized crime groups from overseas is now staggering Mexico's northern provinces. The Federal Army is making a lovely parade show of itself, but effectiveness, given the rising levels of violence and endemic corruption, is proving to be problematical. The US wants to provide a huge, lovely COIN package to Mexico... but ignores that the underlying basis FOR all of this was that free trade ripped up the bottom rungs of the economic ladder in Mexico. After Pakistan, Afghanistan and Iraq, the *next* place the US may need to stage a COIN deal is not Colombia (which is getting a good handle on FARC) but *Mexico*. Actually, being right on the border, this is more worryig than Osama hiding in caves with Ayman directing things. Already the reports of al Qaeda, HAMAS and Hezbollah integrating with the Mexican drug gangs (which themselves overthrew the cartels with the help of FARC) was becoming a worrying thing... in 2003. Things have gotten far, far worse since then. And the increase revenue from oil, going into an already corrupt system, are not helping things, either.

I can see where free trade is an excellent position for a fully industrialized nation, with relatively stable government set-ups and highly invested and capitalized systems of production concentrating on worker efficiency. Indeed, where the use deigns to compete no nation can match it... although we do hear a siren song of lowered price, lower quality and greater production from overseas.

Now, how about free trade with friends and allies to support those that support us, promote and solidify liberty and freedom for those who seek it with us, and not to folks who don't really give a good, hot damn about the US? And for those that wish to take a slower, but perhaps more socially acceptable rate of getting their folks out of poverty... we should have the wisdom to recognize the GOOD in that and not the sort of ephemeral cash bonus to our industrialized economy that it gets. Or is applying the general rule such a necessity that it cannot be seen to have defects in it, in the particular instances and, thusly, needs adjustment? The theory and practice conundrum hits yet again.

aj,

Good points.

However, Mexico's problem is that instead of joining the world system in the 1920s it joined in 1990s. They are suffering from being protected from the winds of change.

Top it off with corruption and American drug laws and you have what you described.

All of Mexico's wounds are self inflicted.

The USSR is in a similar condition. Next will be the Middle East when oil from there can no longer support their populations.

I don't see any way out other than 50 to 100 years of pain.

Let me add that the Us went through a similar wrench between about 1915 and 1940. Twenty five years. Grapes of Wrath time.