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NAFTA at 10

Opinion pieces and speeches by EPI staff and associates.


NAFTA at 10

By  Jeff Faux

Ten years ago, the North American Free Trade Agreement was sold to the people of the United States, Mexico and Canada as a simple treaty eliminating tariffs on goods crossing the three countries’ borders. But NAFTA is much more: It is the constitution of an emerging continental economy that recognizes one citizen — the business corporation. It gives corporations extraordinary protections from government policies that might limit future profits, and extraordinary rights to force the privatization of virtually all civilian public services. Disputes are settled by secret tribunals of experts, many of whom are employed privately as corporate lawyers and consultants. At the same time, NAFTA excludes protections for workers, the environment and the public that are part of the social contract established through long political struggle in each of the countries.

As Jorge Castañeda, Mexico’s recent foreign secretary, observed, NAFTA was “an accord among magnates and potentates: an agreement for the rich and powerful…effectively excluding ordinary people in all three societies.” Thus was NAFTA a model for the neoliberal governance of the global economy.

The business-backed politicians who pushed the agreement through the three legislatures promised that NAFTA would generate prosperity that would more than compensate “ordinary” people for its lack of social protections. Foreign investors would make Mexico an economic tiger, turning its poor workers into middle-class consumers who would then buy US and Canadian goods, creating more jobs in the high-wage countries.

But as soon as the ink was dry on NAFTA, US factories began to shift production to maquiladora factories along the border, where the Mexican government assures a docile labor force and virtually no environmental restrictions. The US trade surplus with Mexico quickly turned into a deficit, and since then at least a half-million jobs have been lost, many of them in small towns and rural areas where there are no job alternatives.

Meanwhile, Mexico’s overall growth rate has been half of what it needs to be just to generate enough jobs for its growing labor force. The NAFTA-inspired strategy of export-led growth undermined Mexican industries that sold to the domestic market as well as the sixty-year-old social bargain in which workers and peasant farmers shared the benefits of growth in exchange for their support for a privileged oligarchy. NAFTA provided the oligarchs with new partners — the multinational corporations — allowing them to abandon their obligations to their fellow Mexicans. Average real wages in Mexican manufacturing are actually lower than they were ten years ago. Two and a half million farmers and their families have been driven out of their local markets and off their land by heavily subsidized US and Canadian agribusiness. For most Mexicans, half of whom live in poverty, basic food has gotten even more expensive: Today the Mexican minimum wage buys less than half the tortillas it bought in 1994. As a result, hundreds of thousands of Mexicans continue to risk their lives crossing the border to get low-wage jobs in the United States.

Canada, which since 1989 has had a similar trade agreement with the United States, and which does much less business with Mexico, was less directly affected. But NAFTA strengthened Canadian corporations’ ability to threaten workers and governments with moving south, helping undermine the country’s traditionally strong labor and social standards.

In all three countries NAFTA has worsened the distribution of income and wealth. While ordinary people paid the costs, the benefits went to the continent’s “rich and powerful.” Canadian and US corporate investors got guaranteed access to Mexico’s cheap labor as well as its privatized public assets. Mexican elites brokered the deals. In one example, well-connected Mexicans bought the country’s second-largest commercial bank from the government for $3.3 billion and sold it to Citigroup for $12.5 billion.

Yet despite its failures, NAFTA set in motion the economic integration of Canada, Mexico and the United States, which cannot now be stopped. Every day, more intracontinental connections in finance, marketing, production and other business networks are being hard-wired for a consolidated North American market. Ford pickup trucks are assembled in Mexico with engines from Ontario and transmissions from Ohio and Michigan. Canadian, Mexican and US investors have created a labyrinth of interconnected corporate assets. After a temporary post-9/11 slowdown, the cross-border movement of people — unskilled workers, educated professionals, retirees — continued.

Expanded markets require expanded rules. Out of public sight, the rulebooks are being filled in by NAFTA tribunals, trigovernmental commissions, administrative judges. Business-supported academic centers are humming with new proposals, ranging from guestworker programs, to the privatization of Canadian water and Mexican oil, to continental business tax policies. As a former Canadian ambassador to the United States recently commented, “Few days go by without new ideas for deepening NAFTA.”

But while corporate business and its political clients are organized continentally, progressives are not. One reason is that the opposition to NAFTA in all three countries was in large part rooted in economic and political nationalism. The political heat that almost defeated the agreement in the US Congress was fueled by the specter of American jobs moving to Mexico. The Canadian opposition painted NAFTA as a threat to Americanize Canadian culture. In Mexico, opposition was rooted in its people’s historic mistrust of Yankee imperialism.

Once the fight over NAFTA was settled, opposition groups moved back to domestic issues or moved on to defend against neoliberalism in other global settings, such as the proposed Free Trade Area of the Americas and the new round of World Trade Organization negotiations. These are important battles, but the capacity of North American activists to influence these negotiations is marginal. For example, if the FTAA is permanently derailed, it will not be over a lack of social protections but because Latin American and US business interests cannot make a deal.

Back home, however, North American opponents of neoliberalism — because they can be a force in the domestic politics of all three nations — have more leverage to develop a socially responsive model of economic integration between rich and poor economies. Indeed, given the influence of the United States in setting the rules for the global economy, a visible, sustained challenge to the NAFTA model here may be the most important contribution progressives on this continent can make to the building of a more just global economic system.

A continental progressive movement would build on its existing infrastructure in each nation — labor, environmentalists, human rights activists, progressive churches and populist legislators — and the fact that the majority of ordinary citizens in all three nations want a market system with social protections.

One initial organizing step might be to connect existing demands to rewrite NAFTA. For example, over the past year Mexican farmers demonstrated throughout the country — including breaking down the door to the Mexican Congress — demanding that NAFTA’s agricultural provisions be changed. Had US and Canadian small farmers, labor unions and environmentalists joined them with their own demands, the Mexican government would not have been able to isolate the farmers with the argument that changing NAFTA is politically impossible.

A new continental ag
reement could include financial assistance from the United States and Canada to Mexico for building the economic and social infrastructure it needs for growth, just as the European community has redistributed funds to its poorest members in order to create a stronger and more balanced economy. Continentwide enforceable labor, human rights and environmental protections ought to be established to prevent the erosion of living standards in Canada and the United States, and to insure that Mexican workers share in the benefits of rising productivity. Provisions of NAFTA that erode the ability of the local public sectors in all three countries to promote the welfare of their citizens should be stricken.

Progressive legislators in all three countries could begin working out proposals covering issues such as corporate governance, public health and safety, and investment in education that could be simultaneously introduced in all three capitals. A continental labor organizing campaign against a single employer could have an electrifying effect — demonstrating that workers in Canada, Mexico and the United States have more in common with one another than with the CEOs who may share their formal nationality.

Creating a continental political consciousness does not mean forming one nation. Few are ready for that — particularly the majority of Mexicans and Canadians appalled by the US governing class’s current imperial obsessions. But despite all the obvious difficulties, if progressives do not want to see a continental society built on NAFTA’s reactionary template, they have little choice but to grasp hands across the borders and work together to build an economy that serves the continent’s “ordinary” people.

Jeff Faux is distinguished fellow and former president of the Economic Policy Institute in Washington, D.C.


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