2018 NSDA Nationals HSPF

Mission San Jose's Devesh Kodnani and Ishan Maunder win the National Tournament on a 9-6 decision over Flanagan's Eden Medina and Christian Sheerer.

The resolution is: "Resolved: On balance, the benefits of United States participation in the North American Free Trade Agreement outweigh the consequences."

Pro

Con

Con Constructive

For the last time ever, Devesh and I negate the resolution. Our sole contention is halting Mexico's development. Prior to NAFTA, Mexico was on a path to sustainable long-term development. As Mark Weisbrot, director of the Center for Economic and Policy Research, explains, Mexico's program of planned industrial development, domestic enterprise, and rigid social programs brought record levels of growth in the years before NAFTA. From 1960 to 1980, Mexico's GDP per capita doubled, leading to increases in living standards for the vast majority of Mexicans. If the country had continued to grow at this rate, as nations like South Korea did, it would be living in European standards today.

Simultaneously, Mexico used a gradual approach to open itself to the world market while protecting national industries. As Cordova Brookings explains, following the 1982 debt crisis, Mexico began gradually liberalizing its economy, eventually eliminating trade licenses and simplifying tariffs. During this period, the lobby of Congress finds that Mexico diversified its exports, moved towards self-sufficiency in food and most consumer goods, and expanded domestic production. Unfortunately, NAFTA brought this development to a halt, plunging Mexico into the global economy headfirst with no regulation or protection of domestic industry. As we spur rights, NAFTA brought Mexico's industrial and developmental policies to an end, enshrining rapidly deregulated trade and investment in a binding agreement.

Specifically, Rocha of the Institute for Policy Studies states that under NAFTA, corporations were granted the legal power to sue the Mexican government whenever it passed programs that could interfere with corporate profits. This resulted in a chilling effect where the Mexican government was effectively blackmailed out of passing reforms that served the public interest. Instead, NAFTA reversed progress and electrocuted the Mexican economy in two ways:

  1. Destroying domestic industry without any domestic regulation: NAFTA shifted trade to American multinational corporations, quickly taking over Mexico's key industries, destroying jobs for the poor and working class. As Rocha writes, NAFTA has unequivocally been a net job destroyer for Mexico, as companies like Walmart displaced scores of businesses, causing more than 600,000 companies to go bankrupt during the current administration alone. For example, in the agricultural sector, Rhys Pro finds that roughly five million permanent farm jobs were lost due to agricultural monopolies. Thus, he concludes that the Mexican unemployment rate has averaged roughly five percent under NAFTA, whereas in the pre-NAFTA age, it was only three percent.
  2. Creating financial dependency: As Weisburg explains, because Mexican institutions were still developing when NAFTA was enacted, the deal increasingly tied the country to American investment, meaning any recession would hit Mexico harder as the US would pull all its money out of the market. Indeed, financial crises in 1994, 2001, and 2008 all had a more severe impact on Mexico than any other country in the region, as Reuters verifies. Mexican dependence on America's economy pushed an additional 5 million people into poverty during the 2008 recession alone. Worst of all, this dependence means that shocks in the prices of basic goods, which used to be stable, are now highly volatile. Laura Coulson of The New York Times finds that under NAFTA, Mexican consumers now pay more for food in general as price bites on the international market have pushed millions of the poor into starvation.

For these two reasons, Professor Dani Rodrik of Harvard University concludes that almost all of the world's developing country success stories, such as China, Taiwan, Japan, and South Korea, avoided rapid globalization and instead used a gradual approach to liberalization with the government playing an active role in restructuring the economy and buffering it against volatile markets. Lee SPRO further states that since 2000, Mexico's economy has grown at less than half the rate of the rest of Latin America, while most other countries have implemented developmental policies that cut the overall rate of poverty in Latin America by one-third. Mexico has made no progress whatsoever. In other words, given Mexico's roughly 60 million people living below the poverty line, NAFTA prevented the country from lifting tens of millions of people into the middle class.

For these reasons, we strongly negate the resolution. Thank you.

Pro Constructive

We affirm. We believe that the resolution should be evaluated on two dimensions. First, the implications of continuing American involvement in NAFTA, and second, the impact that American participation in NAFTA has already brought to the region.

Our first contention is what American participation will continue to bring. President Trump has turned away from multilateral institutions since taking power and has demonstrated resolve in following through on campaign promises. For instance, he has withdrawn from the Trans-Pacific Partnership, suspended military exercises with South Korea, and has long threatened to leave NAFTA. These actions jeopardize American relations with our closest allies and risk plunging the world into disarray, which would only allow rival powers like China to fill the void in global leadership that the United States has abdicated. Global Americans, a think tank on Latin American issues with support from the Ford Foundation, writes that if the United States pulled out of NAFTA, it would leave a large economic vacuum that China could fill. This is problematic as they continue that a retreat by the United States is a serious risk to American influence. They add that China sees economic influence as eventually leading to diplomatic influence. The expansion of Chinese influence as a global leader would be disastrous as they have poor human rights records and emphasize leading countries govern themselves, which is just a euphemism for turning a blind eye to authoritarianism. In Deal 17 of the Washington Post, it is argued that Chinese global leadership would significantly curtail individual freedoms and encourage cracking down on political dissidents.

Our second contention is what NAFTA has already done for the region. In 1994, the Mexican economy plunged into a recession because of investor fears and political violence. NAFTA prevented a protracted Mexican recession in three ways. First, by enabling export-oriented growth. Because exports are driven by demand in other countries, they are resilient in times of recession in the home country. When Mexico, but not the U.S., experienced economic instability, exports remained stable. Lustig '17 empirically finds that Mexico's economic recovery began in 1995 with the decline in GDP that year, followed by 5.1 percent growth in 1996. The engine of Mexico's recovery, he '17 of the 538, specifies that Mexican exports more than quadrupled since NAFTA went into effect. Comparatively, Ber Fisher '01 of the Journal of Public Economic Perspectives concludes that NAFTA greatly reduced the harms the peso crisis would have otherwise had, concluding that without it, Mexican exports would have fallen 52 percent more.

Second, by boosting investor confidence. Ber Fisher again writes that NAFTA's promise of sustained official economic relations reassured investors about the prospects for recovery and growth of the Mexican economy. In the aftermath of the peso crisis, Lustig '97 of Brookings noted that NAFTA was crucial for Mexico's economic recovery by encouraging exports and foreign direct investment, quantifying that FDI in Mexico would have been 40 percent lower without NAFTA. Because FDI is long-term capital investment, Telo '17 of the ERC explains that FDI is tied to regional long-term economic resilience.

Third, by incentivizing US bailout. If the US had left Mexico to face its crisis alone, America would have experienced its own domestic financial crisis from the close linkages forged by NAFTA. Consequently, Lacunae '99 of the International Journal of World Peace emphasizes that there is no doubt that Mexico's recuperation was due to the United States, which had no choice but to help Mexico or suffer economic chaos itself. Additionally, Humphrey of U Utah in 2000 documents that as the peso value plummeted, devaluation hurt investors and the legitimacy of NAFTA itself. President Bill Clinton could not afford inaction and jeopardize the success of a Louanne landmark trade deal. Instead, the US bailed out Mexico, lending billions of dollars and stifling the crisis. Mexico's GDP during the crisis reflected a disastrous economic downfall, yet a year later, Mexico recuperated thanks to the economic support of NAFTA.

The impact is preventing a peso pinata. William Orme in his 1998 book writes that NAFTA kept the peso's slide from accelerating into a free fall, and absent NAFTA, Mexico's crash would have been instantaneous and far more severe. We in 2007 furthers that the bailout left Mexico much better off than its counterparts who had experienced similar crises without US support, like Argentina, whose own peso crisis more than doubled the country's poverty rate. Vasquez '02 of Cato emphasizes that the 1995 bailout of Mexico, by restoring confidence and enabling quick economic recovery, stemmed the outbreak of a global financial crisis. Thus, we affirm.

Con Rebuttal

The thesis of our case is that while trade might be a good idea, equal rules for unequal players create unequal outcomes. Our argument is that when the U.S. entered into NAFTA, Mexico was gradually liberalizing its economy, already opening itself up to the world economy. However, NAFTA took away all the regulations and sped up the pace of trade, so Mexico could not acclimate to the trade that was already happening, causing their economy to go into freefall and destroying the livelihoods of the poor in the country.

Let's talk about their framework. They tell you that we should look at continued participation and the impacts of participation in the past. But as Ishan points out in crossfire, the resolution was "the benefits of a college education outweigh the harms." We shouldn't be saying that a current college-educated student should drop out, but rather that they never should have gone to college. That's why the resolution doesn't use the word "continued," for example, which is why we should look toward a world where Mexico never went into NAFTA. Let's deal with their first contention. They tell you that if Trump pulled out of NAFTA, bad things would happen. We say two things. First, we say that, again, this isn't topical because we're talking about a world where the U.S. did not sign onto NAFTA and we stayed with the gradual increase in trade that was happening beforehand. But the second big problem with this argument is that it misses the mark on Trump's current policy. According to The Hill in 2017, Trump actually wants to renegotiate NAFTA. At best, he's not going to pull out because there's far too much pressure in the government. So, you're never going to see this scenario materialize, which means we should focus on the far more probable scenario where the U.S. never signed onto NAFTA and we saw Mexico gradually developing.

Let's deal with their second contention about the benefits of NAFTA. They talked about this '94 recession that was prevented by NAFTA and they give you three reasons. The first reason they give you is that trade increased as a consequence of NAFTA. But according to Professor Moore of Harvard University in 2016, economists are largely in agreement that with or without NAFTA, Mexico and the U.S. would have the same amount of trade virtually today because Mexico was already opening itself up to the world economy and lowering tariffs. The difference is that trade increase would have happened a lot more gradually so Mexico could build itself up. But with NAFTA, it would have had a regressive effect. America couldn't buy up Mexican land, speculate on their markets, and push the poor into starvation and poverty. Then their second warrant here, they talk about how foreign investments cushion the impact of this recession. But this argument is ahistorical because even before NAFTA, a study by the University of Houston finds that from 1982 to 1993, that decade, Mexico was already number one in Latin America in terms of development because what they lacked in foreign investment, they had in domestic investment and domestic enterprise. But NAFTA stripped that away from them, which pushed them to where today they are 18th out of 20 in Latin America. You can see that they've fallen off. But the second overall response to this comes from the Center for Policy Studies in 2015, which finds that there was an increase in FDI, but there was a five times increase in volatile investment after NAFTA. This is things that went to speculating on their stocks and buying up their land, which actually increased the odds of a recession. That's why every recession, '94, '08, all hit Mexico harder than the rest of Latin America because they used the gradual path. Finally, they talk about how the U.S. bailed Mexico out. But there are two problems with this. The first of which is that they can predict somehow that this recession would have led to a global crisis. Then by that same logic, America has an interest in preventing a global crisis. They're going to come up and say that it only would have led to a global crisis under NAFTA, but it's the reason to not have NAFTA so we never risk a global crisis. But the second overall response to this is that the reason Clinton bailed them out is that they were south to the border. That's what he said. We're going to bail out countries that are nearby because we don't want illegal immigrants fleeing there. That's why, for example, America didn't bail out Chile, even though we did have a free trade agreement with them. But we did bail out Mexico in '82 when we didn't have a free trade agreement with them. Finally, the reason you turn this argument against their side is because a study by Harvard University finds in 1997 that the reason this recession started in the first place is because NAFTA made Mexico dependent on United States investment. Then one year later, when political events occurred in Mexico, they were able to pull all that money out of the market, dropping the peso's value by 50%. But without NAFTA, that dependency wouldn't exist. They further that if NAFTA didn't exist, Mexico could have stopped the recession without American bailouts on its own. That's why we're very proud to negate.

Pro Rebuttal

The first thing to evaluate in this round is that prolonging a recession precludes the ability for a country to gradually develop independently. Even if their arguments are true that Mexico boomed and had the ability to develop, it doesn't mean that in busts they can still develop. This is because public spending and investment shrink during recessions, making spending towards development virtually non-existent. This is why Argentina, which experienced a peso crisis but no bailout because it did not have linkages to the US like Mexico had with NAFTA, experienced incredibly volatile and near-zero growth, comparatively lower than that of Mexico's.

Starting on their first contention, their narrative is both counterintuitive and counterfactual. Their Wisebro evidence says that Mexico was experiencing record levels of growth in 1962-80 before NAFTA and before liberalization started, but even that was seriously unsustainable. This is important because it proves that NAFTA was not the main reason for Mexico's slowing growth; it was a necessary move away from protectionism or the gradualism they talked about. They say that Mexico experienced record levels of growth, but in his book about NAFTA, Mayview T writes that the GDP growth seen in the 90s would have been difficult to sustain absent NAFTA. This is because Salinas needed the efforts to lock in the momentum of liberalization due to significant opposition. Specifically, he finds that it would have been far more difficult for a future Mexican government to pursue economic integration had NAFTA been rejected. They talk about ICS and corporations causing a chilling effect, but Gertz '18 at Brookings finds that in light of the current impasse, there's a real possibility that NAFTA's investment rules will be scrapped in NAFTA 2.0. Either by parties agreeing to exclude the stipulation altogether or by including an opt-out clause that all countries would take, meaning that in either case, this warrant would no longer apply.

On the impact bubble, they tell you 600,000 companies went bankrupt. Millenia finds that this was due to a lack of small business credits in Mexico, which the Nieto administration ended up reinstating. They also mention that people will be displaced in the agricultural sector, but Lederman finds that NAFTA actually included stipulations that would have allowed Mexico to put in place tariffs to prevent this from happening, but they chose not to do so, which means this problem is a fault of the Mexican government failing, not a fault of American participation within NAFTA. Even so, we would say this is a non-unique benefit because they're implicitly conceding that food prices in Mexico have decreased. This is the case because Mexican farmers are losing their jobs, meaning they can no longer profitably work, which necessarily means that prices have gone down. We outweigh in two ways: first, on scope, price reductions massively benefit a larger section of the Mexican population; second, on magnitude, price reductions help those in poverty, even if wages have not increased. Lower wages still mean that every dollar gets stretched farther.

Lastly, when they talk about the severity and frequency of recessions, we would say that the frequency and severity risk of recessions is about the same as it was before. This is because Karo finds that having NAFTA increased investor confidence in terms of a long-term trade relationship with Mexico, decreasing volatility of the Mexican economy by 40 percent. Their arguments are empirically false. The reason why Mexico was hit the hardest is because it's one of the most trade-liberalized countries in the world. Mexico has free trade agreements with 46 countries, and only one of those is the United States, meaning they would have been hit hard by recessions even in the absence of NAFTA. They had strong ties to the US even before NAFTA, so they would still be hit by domestic downturns within the United States. They mention that economic downturn and poverty reduction are a lot slower in Mexico than in the rest of Latin America. We say this happened because Mexico experienced the peso crisis, but we say two things: number one, the peso crisis when it spilled over to the rest of Latin America, had the US not bailed them out, and number two, growth would have been a lot worse in Mexico had they not seen the bailout.

On our case, first, they tell you that the bailout did not happen because of NAFTA, but this is not true. Blogger claims NAFTA forced Mexico to devalue the peso, Mexico would have had to devalue it anyway. This is because they pegged the value of the peso to the American dollar in 1988 before NAFTA talks even started and then experienced political violence in 1994 that caused investors to flee the region out of fear. Because the value of the peso was pegged, it was overvalued compared to what investors saw, which means the devaluation would have happened in either world not linked to NAFTA. NAFTA was the only way in which we saw a solution.