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NAFTA also isn't having a positive effect on wages in Mexico. notes on NAFTA ======== July 20, 2005 | Issue Brief #214 NAFTA's cautionary tale Recent history suggests CAFTA could lead to further U.S. job displacement1 by Robert E. Scott and David Ratner http://www.epi.org/content.cfm/ib214The rise in the U.S. trade deficit with Canada and Mexico through 2004 has caused the displacement of production that supported 1,015,291 U.S. jobs since the North American Free Trade Agreement (NAFTA) was signed in 1993. Jobs were displaced in every state and major industry in the United States. Two thirds of those lost jobs were in manufacturing industries. The proposed Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) duplicates the most important elements of NAFTA, and it will only worsen conditions for workers in the United States and throughout the hemisphere (Faux, Campbell, Salas, and Scott 2001). Since NAFTA took effect, the growth of exports supported approximately 1 million U.S. jobs, but the growth of imports displaced domestic production that would have supported 2 million jobs. Consequently, the growth of the U.S. trade deficit with Mexico and Canada caused a net decline in U.S. production that would have supported about 1 million U.S. jobs. Before adopting an agreement such as DR-CAFTA, it is important to understand the following about NAFTA's effect on U.S. jobs: * The 1 million job opportunities lost nationwide are distributed among all 50 states and the District of Columbia. Those affected most in terms of total jobs displaced include: California (-123,995), Texas (-72,257), Michigan (-63,148), New York (-51,582), Ohio (-49,886), Illinois ( -47,701), Pennsylvania ( -44,173), Florida (-39,987), Indiana (-35,157), North Carolina ( -34,150), and Georgia (-30,464) (see Appendix Table A-1). * The 10 hardest-hit states, as a share of total state employment, are: Michigan (-63,148, -1.44%), Indiana (-35,157, -1.19%), Mississippi (-11,630, -1.03%), Tennessee (-25,588, -0.94%), Ohio (-49,886, -0.92%), Rhode Island (-4,482, -0.91%), Wisconsin (-25,403, -0.90%), Arkansas (-10,321, -0.89%), North Carolina (-34,150, -0.89%), and New Hampshire (-5,502, -0.87%) (see Appendix Table A-2). <more> ====== http://www.epinet.org/content.cfm/briefingpapers_bp147November 17, 2003 | EPI Briefing Paper #147 The high price of 'free' trade NAFTA's failure has cost the United States jobs across the nation by Robert E. Scott Since the North American Free Trade Agreement (NAFTA) was signed in 1993, the rise in the U.S. trade deficit with Canada and Mexico through 2002 has caused the displacement of production that supported 879,280 U.S. jobs. Most of those lost jobs were high-wage positions in manufacturing industries. The loss of these jobs is just the most visible tip of NAFTA's impact on the U.S. economy. In fact, NAFTA has also contributed to rising income inequality, suppressed real wages for production workers, weakened workers' collective bargaining powers and ability to organize unions, and reduced fringe benefits. NAFTA is a free trade and investment agreement that provided investors with a unique set of guarantees designed to stimulate foreign direct investment and the movement of factories within the hemisphere, especially from the United States to Canada and Mexico. Furthermore, no protections were contained in the core of the agreement to maintain labor or environmental standards. As a result, NAFTA tilted the economic playing field in favor of investors, and against workers and the environment, resulting in a hemispheric "race to the bottom" in wages and environmental quality. False promises Proponents of new trade agreements that build on NAFTA, such as the proposed Free Trade Agreement of the Americas (FTAA), have frequently claimed that such deals create jobs and raise incomes in the United States. When the Senate recently approved President Bush's request for fast-track trade negotiating authority1 for an FTAA, Bush called the bill's passage a "historic moment" that would lead to the creation of more jobs and more sales of U.S. products abroad. Two weeks later at his economic forum in Texas, the president argued, " t is essential that we move aggressively , because trade means jobs. More trade means higher incomes for American workers."
The problem with these statements is that they misrepresent the real effects of trade on the U.S. economy: trade both creates and destroys jobs. Increases in U.S. exports tend to create jobs in this country, but increases in imports tend to reduce jobs because the imports displace goods that otherwise would have been made in the United States by domestic workers.
President Bush's statements—and similar remarks from others in his administration and from members of both major parties in Congress—are based only on the positive effects of exports, ignoring the negative effects of imports. Such arguments are an attempt to hide the costs of new trade deals, in order to boost the reported benefits. These are effectively the same tactics that led to the bankruptcies of Enron, WorldCom, and several other major corporations.
The impact on employment of any change in trade is determined by its effect on the trade balance, the difference between exports and imports. Ignoring imports and counting only exports is like balancing a checkbook by counting only deposits but not withdrawals. The many officials, policy analysts, and business leaders who ignore the negative effects of imports and talk only about the benefits of exports are engaging in false accounting.
NAFTA supporters frequently tout the benefits of exports while remaining silent on the effects of rapid import growth (Scott 2000). Former President George H.W. Bush, whose administration negotiated NAFTA, recently claimed that "two million NAFTA-related jobs have been created in the United States since 1993" (Bush 2002). But any evaluation of the impact of trade on the domestic economy must include the impact of both imports and exports. If the United States exports 1,000 cars to Mexico, many American workers are employed in their production. If, however, the United States imports 1,000 cars from Mexico rather than building them domestically, then a similar number of Americans who would have otherwise been employed in the auto industry will have to find other work.
Another critically important promise made by the promoters of NAFTA was that the United States would benefit because of increased exports to a large and growing consumer market in Mexico. This market, in turn, was to be based on an expansion of the middle class that, it was claimed, would grow rapidly due to the wealth created in Mexico by NAFTA. Thus, most U.S. exports were predicted to be consumer products destined for consumption in Mexico.
In fact, most U.S. exports to Mexico are parts and components that are shipped to Mexico and assembled into final products that are then returned to the United States. The number of products that Mexico assembles and exports—such as refrigerators, TVs, automobiles, and computers—has mushroomed under the NAFTA agreement. Many of these products are produced in the Maquiladora export processing zones in Mexico, where parts enter duty free and are re-exported to the United States in assembled products, with duties paid only on the value added in Mexico. The share of total U.S. exports to Mexico that is represented by Maquiladora imports has risen from 39% of U.S. exports in 1993 to 61% in 2002.2 The number of such plants increased from 2,114 in 1993 to 3,251 in 2002 (INEGI 2003a, 2003b).
Growing trade deficits and job losses
NAFTA's impact in the United States, however, has been often obscured by the "boom-and-bust" cycle that drove domestic consumption, investment, and speculation in the mid- and late 1990s. Between 1994 (when NAFTA was implemented) and 2000, total employment rose rapidly in the United States, causing overall unemployment to fall to record low levels. But unemployment began to rise early in 2001, and 2.4 million jobs were lost in the domestic economy between March 2001 and October 2003 (BLS 2003). These job losses have been primarily concentrated in the manufacturing sector, which has experienced a total decline of 2.4 million jobs since March 2001. As job growth has dried up in the economy, the underlying problems caused by U.S. trade deficits have become much more apparent, especially in manufacturing.
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http://www.chomsky.info/articles/199401--.htm
The Clinton Vision: Update
Noam Chomsky
Z Magazine, January, 1994
1. Clinton's Bottom Line
November 17 was a grand day in the career of Bill Clinton, the day when he proved that he is a man of firm principle, and that his "vision" -- the term has become a journalistic reflex -- has real substance. "President Emerges As a Tough Fighter," the New York Times announced on the front page the next day. Washington correspondent R.W. Apple wrote that Clinton had now silenced his detractors, who had scorned him for his apparent willingness to back down on everything he claimed to stand for:
"Mr. Clinton retreated early on Bosnia, on Haiti, on homosexuals in the military, on important elements of his economic plan ; he seemed ready to compromise on all but the most basic elements of his health-care reforms. Critics asked whether he had a bottom line on anything.
On NAFTA, he did, and that question won't be asked much for a while."1
In short, on unimportant matters, involving nothing more than millions of lives, Clinton is a "pragmatist," ready to retreat. But when it comes to responding to the calls of the big money, our hero showed that he has backbone after all.
The importance that the corporate world saw in the NAFTA issue was revealed with some clarity in the final stages. Usually, both the President and the media try to keep their class loyalties somewhat in the background. This time, all bars were down. Particularly striking was the bitter attack on labor for daring to interfere in the political process, understood to be the domain of business power in a well-ordered democracy.
The logic is familiar. When ordinary people enter the political arena, we have a "crisis of democracy"; things are OK, however, when the President is able to "govern the country with the cooperation of a relatively small number of Wall Street lawyers and bankers," as the Eaton Professor of the Science of Government at Harvard (Samuel Huntington) has explained, articulating the vision of democracy propounded by elite opinion for hundreds of years.
Accordingly, corporate lobbying was considered unworthy of mention -- a reasonable decision; one also doesn't report the air we breathe.
President Clinton denounced the "naked pressure" and "real roughshod, muscle-bound tactics" of organized labor, "the raw muscle, the sort of naked pressure that the labor forces have put on." They even resorted to "pleading...based on friendship" and "threatening...based on money and work in the campaign" when they approached their elected representatives. Never would a corporate lobbyist sink that low; those who believe otherwise merely reveal themselves to be "Marxists" or "conspiracy theorists," terms that are the cultivated equivalent of four-letter words or a punch in the nose, a last resort when you can't think of an argument. Front-page stories featured the President's call to Congress "to resist the hardball politics" of the "powerful labor interests." Business was reeling from the onslaught, unable to face the terror of the mob. At the outer limits of dissent, Anthony Lewis berated the "backward, unenlightened" labor movement for the "crude threatening tactics" it employed to influence Congress, motivated by "fear of change and fear of foreigners."
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http://www.zmag.org/chomsky/articles/9303-nation-nafta.html
Notes of NAFTA:
"The Masters of Man"
Noam Chomsky
The Nation, March 1993
Throughout history, Adam Smith observed, we find the workings of "the vile maxim of the masters of mankind": "All for ourselves, and nothing for other People." He had few illusions about the consequences. The invisible hand, he wrote, will destroy the possibility of a decent human existence "unless government takes pains to prevent" this outcome, as must be assured in "every improved and civilized society." It will destroy community, the environment and human values generally -- and even the masters themselves, which is why the business classes have regularly called for state intervention to protect them from market forces.
The masters of mankind in Smith's day were the "merchants and manufacturers," who were the "principal architects" of state policy, using their power to bring "dreadful misfortunes" to the vast realms they subjugated and to harm the people of England as well, though their own interests were "most peculiarly attended to." In our day the masters are, increasingly, the supranational corporations and financial institutions that dominate the world economy, including international trade -- a dubious term for a system in which some 40 percent of U.S. trade takes place within companies, centrally managed by the same highly visible hands that control planning, production and investment.
The World Bank reports that protectionist measures of the industrialized countries reduce national income in the South by about twice the amount of official aid to the region -- aid that is itself largely export promotion, most of it directed to richer sectors (less needy, but better consumers). In the past decade, most of the rich countries have increased protectionism, with the Reaganites often leading the way in the crusade against economic liberalism. These practices, along with the programs dictated by the International Monetary Fund and World Bank, have helped double the gap between rich and poor countries since 1960. Resource transfers from the poor to the rich amounted to more than $400 billion from 1982 to 1990, "the equivalent in today's dollars of some six Marshall Plans provided by the South to the North," observes Susan George of the Transnational Institute in Amsterdam; she notes also that commercial banks were protected by transfer of their bad debts to the public sector. As in the case of the S&Ls, and advanced industry generally, "free-market capitalism" is to be risk free for the masters, as fully as can be achieved.
The international class war is reflected in the United States, where real wages have fallen to the level of the mid-1960s. Wage stagnation, extending to the college-educated, changed to sharp decline in the mid-1980s, in part a consequence of the decline in "defense spending," our euphemism for the state industrial policy that allows "private enterprise" to feed at the public trough. More than 17 million workers were unemployed or underemployed by mid-1992, Economic Policy Institute economists Lawrence Mishel and Jared Bernstein report -- a rise of 8 million during the Bush years. Some 75 percent of that is permanent loss of jobs. Of the limited gain in total wealth in the eighties, "70% accrued to the top 1% of income earners, while the bottom lost absolutely," according to M.I.T. economist Rudiger Dornbusch.
Structures of governance have tended to coalesce around economic power. The process continues. In the London Financial Times, James Morgan describes the "de facto world government" that is taking shape in the "new imperial age": the I.M.F., World Bank, Group of 7 industrialized nations, General Agreement on Tariffs and Trade (GATT) and other institutions designed to serve the interests of transnational corporations, banks and investment firms.
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The Zapatista Uprising
excerpted from the book
Profit Over People
by Noam Chomsky
Seven Stories Press, 1999
http://www.thirdworldtraveler.com/Chomsky/ProfitsOverPeople_Chom.html
http://www.thirdworldtraveler.com/Chomsky/ZapatistaPOP_Chom.html
The New Year's Day uprising of Indian peasants in Chiapas readily be understood in this general context. The uprising coincided with the enactment of NAFTA, which the Zapatista army called a "death sentence" for Indians, a gift to the rich that will deepen the divide between narrowly concentrated wealth and mass misery, and destroy what remains of the indigenous society.
The NAFTA connection is partly symbolic; the problems are far deeper. "We are the product of 500 years of struggle," the Zapatistas' declaration of war stated. The struggle today is "for work, land, housing, food, health care, education, independence, freedom, democracy, justice, and peace." "The real background," the vicar-general of the Chiapas diocese added, "is complete marginalization and poverty and the frustration of many years trying to improve the situation."
The Indian peasants are the most aggrieved victims of Mexican government policies. But their distress is widely shared. "Anyone who has the opportunity to be in contact with the millions of Mexicans who live in extreme poverty knows that we are living with a time bomb," Mexican columnist Pilar Valdes observed.
In the past decade of economic reform, the number of people living in extreme poverty in rural areas increased by almost a third. Half the total population lacks resources to meet basic needs, a dramatic increase since 1980. Following International Monetary Fund (IMF)-World Bank prescriptions, agricultural production was shifted to export and animal feeds, benefiting agribusiness, foreign consumers, and affluent sectors in Mexico while malnutrition became a major health problem, agricultural employment declined, productive lands were abandoned, and Mexico began to import massive amounts of food. Real wages in manufacturing fell sharply. Labor's share in gross domestic product, which had risen until the mid- I 970s, has since declined by well over a third. These are standard concomitants of neoliberal reforms. IMF studies show "a strong and consistent pattern of reduction of labor share of income" under the impact of its "stabilization programs" in Latin America, economist Manuel Pastor observes.
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http://www.ratical.org/co-globalize/NAFTA@7/mx.html
April 2001 | EPI Briefing Paper
For a printer-friendly version of this report, download an Acrobat PDF version of this paper.
To view the press release for this report, click here.
NAFTA AT SEVEN
Its impact on workers in all three nations
Jump to a specific report:
* Introduction
* NAFTA’s Hidden Costs: Trade agreement results in job losses, growing inequality, and wage suppression for the United States
* False Promise: Canada in the Free Trade Era
* Online supplement to the U.S. report: NAFTA's impact on the states
The impact of NAFTA on wages and incomes
in Mexico
by Carlos Salas, La Red de Investigadores y Sindicalistas Para Estudios Laborales (RISEL)
Mexico is much changed in the seven years since NAFTA was implemented in 1994. Although Mexico now has a large trade surplus with the U.S., Mexico has also developed a large and growing overall trade deficit with the rest of the world. In fact, Mexico’s net imports from the rest of the world now substantially exceed its net exports to the United States. Official unemployment levels in Mexico are lower now than before NAFTA, but this decline in the official rate simply reflects the absence of unemployment insurance in Mexico. In fact, underemployment and work in low-pay, low-productivity jobs (e.g., unpaid work in family enterprises) actually has grown rapidly since the early 1990s. Furthermore, the normal process of rural-to-urban migration that is typical of developing economies has reversed since the adoption of NAFTA. The rural share of the population increased slightly between 1991 and 1997, as living and working conditions in the cities deteriorated.
Between 1991 and 1998, the share of workers in salaried<1> jobs with benefits fell sharply in Mexico. The compensation of the remaining self-employed workers, who include unpaid family workers as well as small business owners, was well above those of the salaried sector in 1991. By 1998, the incomes of salaried workers had fallen 25%, while those of the self-employed had declined 40%. At that point, the average income of the self-employed was substantially lower than that of the salaried labor force. This reflects the growth of low-income employment such as street vending and unpaid family work (for example, in shops and restaurants). After seven years, NAFTA has not delivered the promised benefits to workers in Mexico, and few if any of the agreement’s stated goals has been attained.
Running hard but falling behind
Despite a quick recovery from the 1995 peso crisis and a peak 7% gross domestic product (GDP) growth rate in 2000 (Figure 2-A), NAFTA still has failed to help most workers in Mexico.
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http://multinationalmonitor.org/hyper/issues/1992/10/mm1092_10.html
Economics
The NAFTA Nightmare
by Bill Day
AMID A STORM OF PROTEST, the leaders of the United States , Mexico and Canada announced on August 12 the conclusion of negotiations over a free trade agreement encompassing the vastly different countries of North America. The Bush administration released a summary of the North American Free Trade Agreement , but declined to release the actual text until it is translated into legal language. The agreement faces perfunctory approval in the Mexican and Canadian legislatures, which are controlled by the same parties which hold those countriesÆ executive positions. In the United States, however, the agreement must be ratified by the Democratic controlled Congress, where it is sure to be the subject of heated debate.
While the administration and industry groups boast that NAFTA will create jobs and prosperity, unions, environmental groups and consumer advocates predict it could result in increased pollution, lost jobs, lower wages and contaminated food. Consumer advocate Ralph Nader says that NAFTA was created "of the Du Ponts, for the General Motors, and by the Exxons," benefitting multinational corporations at the expense of labor, health, safety and environmental standards in all three signatory countries.
"We oppose it," says Burnie Bond, a spokesperson for the AFL-CIO. "The agreement does not have adequate protection for labor rights, worker health and safety or the environment." The AFL-CIO estimates that if Congress approves NAFTA, 73 percent of U.S. workers will suffer annual wage losses of approximately $1,000 and 500,000 to 600,000 workers will lose their jobs to lower-paid Mexican workers over 10 years.
In sharp contrast, industry representatives express enthusiasm for the proposed agreement. Howard Lewis, a spokesperson for the National Association of Manufacturers (NAM), says, "From what we know about it, it appears to be an impressive agreement that will be beneficial to many U.S. companies."
Costing jobs
The central element in the congressional debate over NAFTA is likely to be its effect on employment. Critics of the agreement contend it will cost hundreds of thousands of U.S. jobs, as U.S. businesses shift production from the United States to low-wage Mexico. The United States Trade Representative (USTR) concedes that some U.S. workers will be displaced as a result of the agreement, but estimates that between 600,000 and one million new jobs will be created by exports to Mexico. The Washington, D.C.- based Economic Policy Institute (EPI), in a recent report authored by Jeff Faux and Thea Lee, estimates NAFTA will cost half a million U.S. jobs.
The authors further predict that NAFTA will encourage U.S. industry to move production to Mexico to take advantage of low wage rates and lax industry regulation. As a result, the report says, U.S. workers will lose jobs, or be forced to accept lower wages to compete with cheap Mexican labor. Faux and Lee cite 1990 Department of Labor statistics which list the hourly wage for manufacturing workers as $14.83 in the United States, $15.94 in Canada and $1.85 in Mexico.
"I think that this version of NAFTA will be very hard on working class people," Lee says. She predicts that U.S. workers in several types of industry will suffer: those in industries already moving to Mexico, such as automobiles and auto parts, consumer electronics and apparel, who will be subjected to both job and wage losses; workers employed at small- and medium-sized businesses that cannot relocate and will become unable to compete with corporations in Mexico; and workers in small service businesses, like restaurants, which will undergo hardship when large plants move out of their neighborhoods. Finally, Lee argues, growers of products currently protected by high tariffs, such as winter fruits and vegetables, cotton and peanuts, will suffer when the tariffs are removed by NAFTA.
Faux and Lee point out that blue-collar workers who lose their jobs are unlikely to gain access to the high-skill, high-wage jobs that might be created by increased exports to Mexico.
Lewis counters that U.S. labor must adjust to inevitable changes in the job market. "The era of the low-skill, high-pay job is over," he says, "and weÆd better adjust to it. ThatÆs not the way the competition is going at this point in the game." Lewis recommends that the way to "adjust" is not to regulate trade, but to invest in education and training.
Faux and Lee assert that CanadaÆs loss of 461,000 manufacturing jobs from June 1989 to October 1991 after adoption of the U.S.-Canada trade agreement is a portent of the likely outcome of the expanded free trade agreement with Mexico. But Malcolm McKechnie, press attache at the Canadian Embassy in Washington, attributes the loss of jobs to the recession, noting that both exports and the Canadian trade balance have increased since the agreement.
Critics of the agreement argue that corporate flight to Mexico will not benefit Mexico or Mexican workers, since corporations will be moving South precisely to take advantage of the countryÆs low wages, worker rights, safety and environmental standards. NAFTA-induced investments will replicate the record of the string of maquiladoras (foreign-owned plants in Mexico which export to the United States) on the U.S.-Mexican border, where "there is no floor on how low you push wages and no limit on how badly you abuse the environment."
"NAFTA is an extension of the maquiladora production system to the entire Mexican economy," Lee says. "The point of the maquiladora is to import parts from the United States, assemble them with Mexican labor and export them to the United States." According to Lee, because goods produced in the maquiladoras are sold in the United States, corporations have no incentive to pay a living wage. "Very few firms producing in the maquiladoras have any intention of selling their goods to the workers who work there. So it doesnÆt matter if you pay 60 cents an hour, because you know that person isnÆt going to buy the automobile or refrigerator or bra that youÆre producing. YouÆve ruptured the connection between production and consumption."
Bond agrees that NAFTA will only further the maltreatment of Mexican workers. "The agreement doesnÆt do anything to encourage Mexican wage levels to rise. ... If anything, investments of hundreds of millions of dollars along the border has lowered the standard of living," she says. "There is nothing in this agreement, such as adequate labor standards, to offset the tendency of American corporations to exploit Mexican workers."
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Published on Tuesday, April 25, 2006 by CommonDreams.org
Immigration Flood Unleashed by NAFTA's Disastrous Impact on Mexican Economy
by Roger Bybee and Carolyn Winter
http://www.commondreams.org/views06/0425-30.htm
The recent ferment on immigration policy has been so narrow that it has excluded the real issue: family-sustaining wages for workers both north and south of the border. The role of the North American Free Trade Agreement and misnamed 'free trade' has been scarcely mentioned in the increasingly bitter debate over the fate of America's 11 to 12 million illegal aliens.
NAFTA was sold to the American public as the magic formula that would improve the American economy at the same time it would raise up the impoverished Mexican economy. The time has come to look at the failures of this type of trade agreement before we engage in more and lower the economic prospects of all workers affected.
While there has been some media coverage of NAFTA's ruinous impact on US industrial communities, there has been even less media attention paid to its catastrophic effects in Mexico:
* NAFTA, by permitting heavily-subsidized US corn and other agri-business products to compete with small Mexican farmers, has driven the Mexican farmer off the land due to low-priced imports of US corn and other agricultural products. Some 2 million Mexicans have been forced out of agriculture, and many of those that remain are living in desperate poverty. These people are among those that cross the border to feed their families. (Meanwhile, corn-based tortilla prices climbed by 50%. No wonder many so Mexican peasants have called NAFTA their 'death warrant.'
* NAFTA's service-sector rules allowed big firms like Wal-Mart to enter the Mexican market and, selling low-priced goods made by ultra-cheap labor in China, to displace locally-based shoe, toy, and candy firms. An estimated 28,000 small and medium-sized Mexican businesses have been eliminated.
* Wages along the Mexican border have actually been driven down by about 25% since NAFTA, reported a Carnegie Endowment study. An over-supply of workers, combined with the crushing of union organizing drives as government policy, has resulted in sweatshop pay running sweatshops along the border where wages typically run 60 cents to $1 an hour.
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http://www.siliconv.com/trade/tradepapers/naftaafta.html
NAFTA 3 1/2 Years Afta
by Jim Callis & Valli Sharpe-Geisler
The Bush administration promised "jobs, jobs, jobs". The Clinton administration promised improved environmental and working standards. Now, after three and a half years of NAFTA the people of Canada, Mexico and the U.S. suffer from the broken promises, while the self-interested proponents of NAFTA, who invested millions in campaign contributions, reap the benefits.
NAFTA Overview:
The North American Free Trade Agreement, or NAFTA, has been portrayed as a simple agreement to lower tariffs and increase trade between the U.S., Canada and Mexico. In fact, the main features of NAFTA establish a comprehensive set of rules that guarantees to multinational manufacturers that their plants in these countries will be protected and that they will have unlimited, free access to the U.S. retail markets for their products. NAFTA guarantees an investors private right of action against a country, state or locality. These rules are enforced by a multinational Secretariat with authority to impose large financial sanctions to force member countries to comply even when federal or state laws differ. It is ironic that this supernational regulation of U.S. commerce has been introduced in the name of "Free Trade". NAFTA has led to a sharply increased flight of manufacturing from the U.S. to Mexico where there is an abundance of capable workers who learn very rapidly and whose wages were only one-seventh of the wages of American workers doing the same job.
NAFTA Results:
The effects of NAFTA on the U.S. have been almost totally negative. The results include a significant loss in U.S. manufacturing capability and tax base. Manufacturers have also been able to negotiate give - backs in both direct wages and benefits from U.S. workers under the threat of expatriating their plant to Mexico. Today, a high school graduate with 5 years experience earns 27% less than his counterpart did in 1979. When experienced manufacturing workers making $17/hr loose their job, they typically are only able to get a service industry job at $11/hr. Since this isn't enough to keep a household afloat a second job is then needed. While in 1975 the compensation of U.S production workers was the highest in the world, today the average U.S. total compensation of about $17/hr is lower than that of Germany, Japan and others. The first major result of the so- called "Free Trade" movement has been to drive down wages even in a period in which productivity and corporate profits have risen greatly.
Summary of NAFTA's Impact on the United States
* MANUFACTURING LOSSES Since its passage an average of one manufacturing plant per day has closed due to NAFTA. * LOWER WAGES -- Since the FTA with Canada in 1988, the average real wages in all three NAFTA countries has declined.
* LOST U.S. JOBS: As of February 19, 1997, the Labor Department has certified that 109,384 workers have qualified for assistance under the one narrow NAFTA unemployment program, NAFTA-TAA. Total NAFTA job loss is estimated at over 600,000.
* FOOD SAFETY STANDARDS: In theory the US could be fined for enforcing our own food safety federal law, if in direct conflict with NAFTA's rules. After about 150 Michigan school children come down with symptoms of the hepatitis A mild liver infection from Mexican-grown strawberries, the impact of not having the freedom to set and enforce our own food safety standard became obvious.
* MERCHANDISE TRADE DEFICIT: The U.S. Bureau of the Census published trade figures* show the combined projected 1996 Canada/Mexico trade deficit to be $41 billion. Under NAFTA, a 1993 $1.7 billion trade surplus with Mexico turned into a massive trade deficit, while at the same time Japan and the European Union have maintained a trade surplus with Mexico.
* PESO BAILOUT: When the strains associated with NAFTA resulted in the collapse in the exchange value of the peso, this rate went to 1/10th of the wages of their U.S. counterparts.
* ILLEGAL IMMIGRATION to the U.S. from Mexico has soared since NAFTA. In 1994 the Border Patrol reported an increase of 30% in illegal entry activity. In 1995 many border areas reported an additional 30% in illegal entries. The principal cause of the increase is the economic dislocations in Mexico due to NAFTA.
* ENVIRONMENTAL: Dramatically worse environmental conditions along the U.S.-Mexico border where recent statistics show the number of children born with birth defects is at 3 times the national average.
* TRUCKING: Over-weighted and poorly maintained trucks make our highways less safe.
* DRUGS: Mexico is now regarded as the drug capital of the Western world. Many of the companies privatized by Salinas were purchased by Mexican drug lords. Mexican gangs now control the cocaine trade and also produce and distribute to the U.S. the methamphetamines which are replacing cocaine in many American areas.
U-Turn Exports:
The NAFTA Lobby points to the strong increase in goods exported to Mexico as proof of the benefits of NAFTA to the U.S. The facts are that only 7% of the goods imported by Mexico in 1995 were consumer goods purchased by Mexicans.These were more than 20% below the pre-NAFTA levels. In fact, 81% of all Mexican 1995 imports were "intermediate goods" the bulk of which were exported after further processing. The balance of Mexican imports were capital goods being used to expand Mexican production capability. These of course will lead to further trade losses in future years. Thus the surge in exports to Mexico are not the beneficial consumer sales the NAFTA Lobby promised, but rather the flow of "U-Turn" parts and plant equipment which was formerly the substance of U.S. based manufacturing. That is, the great export surge represents not an increased in our cash sales, but a loss of U.S. jobs and manufacturing capability. We have a phrase describing this type of surge in exports; ..... " A GIANT SUCKING SOUND ".
NAFTA and Mexico:
While the effects of NAFTA on the United States seem drastic, the effects on Mexico have actually been much more severe. The strains placed on Mexico's monetary system by the need to borrow money for NAFTA's industrial expansion and the political necessity to maintain the illusion of a bustling Mexican economy prior to the GATT vote in the U.S. Congress led to the peso debacle. The results have been devastating to the Mexican people.
Summary of NAFTA's Impact on Mexico
* ECONOMIC DEPRESSION: Since NAFTA, Mexico has fallen into its worst depression since the 1930s. Domestic business loans have prohibitive interests rates exceeding 50% in many cases.
* UNEMPLOYMENT: Since NAFTA, Mexican unemployment has grown by two million.
* BUSINESS FAILURES: Over 28,000 Mexican business have failed since NAFTA.
* LOWER WAGES: The real wages of Mexican workers have fallen by over 1/3 since the passage of NAFTA.
* EXTREME POVERTY: The number of Mexicans considered to be extremely poor has increased from 31% in 1993 to 50% in 1996.
* AGRICULTURE: The huge imports of grains from the U.S. and Canada have driven close to a million Mexican farmers from their lands. NAFTA's passage triggered the revolt in Chiapas.
* EXTERNAL DEBT: The total external debt of Mexico, which must be repaid in hard currencies, has grown from $163 Billion to over $175 Billion in spite of harsh economic measures. Independent economists in both Mexico and other countries believe that Mexico will be forced to "restructure" this debt with at least partial default.
* BORDER REGION POLLUTION: The pollution of the Border region produced by the growth in the number of maquiladora factories spawned by NAFTA has become dangerously worse. The incidence of birth defects and polluted water borne diseases such as dysentery, cholera and hepatitis is the highest in North America.
Summary of NAFTA's Impact on Mexico
During the 1992 election, Clinton pledged to implement NAFTA only after amending the agreement to ensure the protection of the environment and labor standards. However, these were implemented in the form of sham Secretariats which had no enforcement powers and whose objectives are routinely ignored by both corporations and government officials. Clinton's assurances to the contrary, the Maquiladoras continue to be supplied with a labor force which averages less in wages than their counterparts in domestic Mexican factories and who are prevented from joining independent unions.
The NADBank was touted as the means of providing leveraged funding for several of the $20 billions the environmentalists estimated were required to bring water and air quality to minimum health standards in the Border region. While originally adopted as a means of bartering for the votes of Hispanic and environmentalist legislators, the NADbank was then touted as the key mechanism for funding a desparately needed border cleanup that never happened. In fact not until the specter of the 1997 Congressional votes approached did NADbank make any loans at all.
April Fools Day Announcement NO Joke:
In April about 150 Michigan schoolchildren come down with symptoms of the hepatitis A mild liver infection. Officials said that schoolchildren in six states may have been exposed after being served Mexican-grown berries believed tainted with the virus. A food processor in San Diego bought strawberries from Mexico and sold them to the school districts.
Federal law prohibits any school district from buying any food not produced in the U.S. The interesting thing is that this law is in direct conflict with NAFTA's rules. In theory the US could be fined for enforcing our own food safety federal law.
Who are the beneficiaries of NAFTA?:
The most notable are the multinational corporations of all three NAFTA countries whose profits and stock values have soared while the cross border production has cut costs. These members of the U.S. Business Roundtable were the same multi-national corporations who formed USA*NAFTA who, working with the group of Mexican corporations called COECE, were the main business groups funding the NAFTA lobbying effort.
The benefits of NAFTA are not limited to North American companies. The number of Maquiladoras owned by Asian companies has tripled since the passage of NAFTA. Thus Mexico, while having no domestic TV industry, has become the world's largest exporter of TV sets, courtesy of the Japanese plants many of which are centered near Tijuana.
Conclusions:
The problems which NAFTA has inflicted on the people of both the United States and Mexico are severe and traceable to basic flaws in the agreement itself. The major flaws involve the guarantees protecting multinational plant operators (including "National Treatment") in a Mexico in which wages are controlled by government "Pacts" to levels far below those of U.S. workers. Maquiladora wages as low as $5 per day are rationalized as "necessary" to prevent manufacturing flight to even lower wage Central America countries and to control inflation. This in turn helps to drag down U.S. wages and further accelerates the transfer of U.S. plants to Mexico where the number of workers in all Maquiladoras now exceeds one million. We must resolve not to form the close economic associations (of the type that are in NAFTA) with other countries until the labor standards of those countries have been raised. Our trade policy should be aimed at raising the labor standards of our trading partners, not degrading our own. In the formation of the European Union, strict requirements for comparable standards for new members were imposed. These included a prescription that new members must first achieve a GDP per capita equal to at least half that of the average of the existing members. This and similar conditions on infrastructure meant that the entry of countries such as Spain and Greece was delayed for more than a decade while the requirements were met. In the end, the goal of our trade policy must be to improve the condition of all of the people, not to drag our labor standards down in a "race to the bottom". If this means that we must put additional trade constraints on imports from other low wage countries until they too raise their labor standards, then that is our indicated course.
The Clinton Adminstration gave Americans their assurances that NAFTA would include multinational Secretariats which provided for the "upward harmonization" of Labor and Environmental standards of the member countries. In addition, the NADBank was touted as providing funding for the critically needed cleanup of the poisoned Border water systems. All three of these promises have been revealed as transparent shams. "Dirty" U.S. industries charged with toxic waste violations in the U.S.have simply fled to Mexico where the enforcement of these regulations was sporadic or non-existent. NADBank provided no funding at all for badly needed water treatment projects through the first two years of its existence. The Labor Secretariat dismissed two clear cases of Maquiladora owners violating labor standards by claiming it had no jurisdiction. An unmistakable signal that they would do nothing to relieve the suppression of labor standards in Mexico.
It is no longer possible to believe in promises to correct the serious failings of NAFTA after the people's representatives have approved them. We must demand that the corrections be made before the FTAs are approved. At a minimum we should demand that no further extensions of NAFTA to new regions are approved until the flaws which have produced such disastrous consequences are proven to have been fixed.
Stop "Fast Track"! Don't expand NAFTA, Fix it! (Click here to see Action Plan)
http://www2.siliconv.com/siliconv/trade/actionplan.html
========
AlterNet
Blame NAFTA
By David Morris, AlterNet
Posted on April 13, 2006, Printed on May 28, 2006
http://www.alternet.org/story/34768/
The debate about illegal immigration rarely mentions NAFTA. That's regrettable, since the flood of undocumented Mexicans in 2006 empirically challenges the economic philosophy that guided NAFTA's design.
The slogan of those who championed a North American Free Trade Agreement was, "Trade, not aid." NAFTA would solve our problems, they insisted, with little or no transfer of funds from richer Canadians and Americans to poorer Mexicans. By raising Mexican living standards and wage levels, Attorney General Janet Reno predicted NAFTA would reduce illegal immigration by up to two-thirds in six years. "NAFTA is our best hope for reducing illegal migration in the long haul," Reno declared in 1994. "If it fails, effective immigration control will become impossible."
Well, NAFTA succeeded, at least on its own terms. As Jaime Serra Puche, Mexico's former trade minister and chief NAFTA negotiator maintained in 2004, "When you look at NAFTA in terms of what NAFTA was made for, which were trade flows, investment flows, and in general technological transfer and so on, you can say that NAFTA has been a successful enterprise."
Trade volume has soared, from about 30 percent of Mexico's Gross Domestic Product in 1990, to about 55 percent in 2005. Foreign investment has increased by over 225 percent. Yes. When you look at NAFTA in terms of what NAFTA was intended to do, based on what those who wrote it said it was intended to do, it has been a smashing success.
At this point bringing up an old medical adage might be appropriate: "The surgery was successful, but the patient died." NAFTA achieved its intended goals. But the flood of illegal immigration is up, and the standard of living of the average Mexican is down.
Real wages for most Mexicans are lower than when NAFTA took effect. And Mexican wages are diverging from, rather than converging with U.S. wages, despite the fact that Mexican worker productivity has increased dramatically. From 1993 to 2003, worker productivity rose by 60 percent. In the same period, real wages declined by 5 percent.
As NAFTA intended, Mexico has become an export-dependent economy. But this has not benefited most Mexicans. Sandra Polaski of the Carnegie Endowment for International Peace points out that Mexican manufacturing is increasingly based on a production model in which component parts are imported, then processed or assembled and then reexported. In the maquiladora sector, which accounts for most exports, 97 percent of components are imported; only 3 percent are produced in Mexico. The spillover effect of such operations on the broader economy is very limited.
Ironically, one could argue that illegal migration is the only thing saving Mexico from the ravages of NAFTA and preventing it from collapsing into economic and social chaos.
Illegal migration serves as an important safety valve. In the past 10 years, Mexico's working age population increased by a little over 1 million per year, but the number of jobs expanded by only half as much. The annual exodus of 500,000 to 1 million Mexicans keeps unemployment to at least manageable levels.
Migration serves another even more important salutary function: national financial safety net. In 2005, Mexicans in the United States remitted some $20 billion home, about 3 percent of Mexico's national income. Remittances now exceed tourism, oil and the maquiladoras as the country's top single source of foreign exchange.
NAFTA boasted that trade, not aid, would boost the lot of Mexico and Mexicans. But the only thing that has kept the wolf from Mexico's door is aid from Mexicans living in the United States, not trade.
It didn't have to be this way. The European Union approached economic integration from a very different philosophical orientation and has produced dramatically different results. "The EU realized from the beginning that you can't have a community unless you lift the poorest up," notes Robert Pastor, director of the Center for North American Studies at American University in Washington and President Jimmy Carter's former national security advisor.
Europeans realized that the flow of migrants increases when the income gap between countries widens. As it moved toward a common market, the European Union invested hundred of billions of dollars in its poorer countries to improve their economies, reduce intra-European tensions between farmers and workers, and decrease internal migration. This massive investment enabled the EU's four poorest members -- Greece, Ireland, Portugal and Spain -- to boost their per capita GDP from 65 percent of the overall EU average in l986 to 78 percent in l999 and even higher today.
Raul Hinojosa, director of the North American Immigration and Development Center at the University of California, Los Angeles, instructively notes that 40 years ago Mexico and Spain were at the same economic level. He estimates the EU's special funds added 2 percent to Spain's annual GDP growth.
Unlike Americans, Europeans knew that both trade and aid are needed to make economic integration work. I would add only one further ingredient to this recipe for success: internally generated development. Sustainable economic development comes from within, from expanding internal markets and internal production that can satisfy those markets. Sustainable economic development comes from strengthening, not weakening, local and regional trade networks. And this in turn depends on strengthening and not weakening, local and regional social networks. People don't leave their communities, their friends, their families and their cultures because they want to. They leave when they have to.
NAFTA's designers promised it would keep Mexicans at home. Yet its very objectives undermined that possibility. Now leaders in all three countries are trying to pick up the pieces. One hopes they will use this opportunity to revisit their original premise and model as well.
David Morris is co-founder and vice president of the Institute for Local Self Reliance in Minneapolis, Minn., and director of its New Rules project.
© 2006 Independent Media Institute. All rights reserved.
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