(The following was posted on the Green Party Shadow Cabinet website by RIchard McIntyre.)
Next month the North American Free Trade Agreement (NAFTA) will be twenty years old. NAFTA is perhaps best remembered for the remarkable televised debate between Ross Perot and the then new Vice-President Al Gore and Perot’s assertion that there would be a “giant sucking sound” as U.S. jobs moved to Mexico.
While Perot’s rhetoric was overheated, some of what the critics thought would happen did occur. There was significant job loss in some regional labor markets in the U.S.A, small Mexican farmers went out of business in large numbers, spurring emigration to the North, and corporate management gained power over workers. In one manufacturing plant in upstate New York where workers were trying to organize the human resources manager simply posted maps of North America in the cafeteria with an arrow pointing from the current plant site to Mexico. Nothing else needed to be said.
Economics is not a laboratory science so we really can’t tell precisely how many jobs were lost, how much immigration increased, or how much worker disempowerment was due to NAFTA. The treaty is best seen as part of a general policy shift towards property and away from labor’s interests, under both Democratic and Republican administrations. This included much more than trade, and so did NAFTA.
NAFTA set the precedent for future agreements including the WTO and the forthcoming Trans Pacific Partnership (TPP) by going well beyond trade. Securing the rights of foreign investors, establishing intellectual property rights across borders, and limiting governments’ ability to favor local sources in their purchasing were also explicit goals of NAFTA and have become standard in later agreements. NAFTA also established dispute resolution mechanisms outside the normal court system.
Labor and environmental standards were set in the so-called side agreements. But no mechanism was created to enforce these standards. The results have been generally disappointing to labor and environmental leaders on both sides of the border.
Mexico’s hope to be the low wage export platform to the U.S. succeeded in some areas, like autos, but by the early 2000s the Mexicans were facing competition from China that they could not meet. So while trade and foreign investment definitely increased in Mexico, the employment gains have been disappointing. And of course as auto related employment rose in Mexico it declined in the U.S. especially in the upper Midwest. It is a cruel irony that retired municipal employees in Detroit will observe NAFTA’s 20th anniversary as they lose their pensions.
China entered the WTO in 2001 and is a much bigger threat to employment and incomes in the U.S. than Mexico ever was. Unemployment has risen considerably in labor-intensive manufacturing – apparel and footwear, luggage, furniture, household consumables, computer assembly, etc. These losses were mostly not in the mid-west but in urban areas in west, southeast and northeast. According to a study by David Autor of MIT the two metropolitan areas most negatively affected by the China trade are San José California and Providence Rhode Island. And when these kinds of manufacturing jobs are lost there is a ripple effect on services employment and social spending increases.
Even the defenders of NAFTA and similar treaties agree that the trade adjustment assistance program is woefully inadequate to deal with the negative fallout. But things are worse than that. Autor estimates that the rise in disability payments due to the China trade is thirty times greater than the increase in trade adjustment spending. These social costs are generally not included in the modeling of those supporting the NAFTA, the WTO, and the TPP.
Nor do these models account for loss of social relationships due to plant closings or the transition difficulties of laid-off workers. Increased trade may raise GDP, but it makes some people much worse off. In fact the very term “free trade” is part of the problem. If we called it “deregulated international commerce” instead we would have a more awkward but more accurate description of what these agreements do. They lead to destructive competition in which bad standards drive out good ones.
More generally they promote greater corporate control of the lives of people in all the signatory countries. These are elite-driven agreements. Working people did not suddenly believe that more trade with Mexico would be a good idea, or that we ought to make it easier to outsource production to China. There is no clamor today for “free trade” with Vietnam. But as these agreements have eroded the power of organized labor it has become easier for organized capital to promote even worse treaties, like TPP, as if they were good for everyone.
Still, that TPP has been negotiated almost entirely in secret shows that its proponents know that most people would oppose it if they knew what was in it. The Seattle protests of 1999 showed that when activists and developing country governments make common cause they can scuttle anti-social treaties.
Much has changed in the world since 1994 besides the rise of China. One of the effects of NAFTA and the WTO is that “trade within companies” has replaced “trade between countries.” Forty percent of the value of U.S. imports from Mexico is actually due to parts made in the U.S.. We now need to worry as much about how these “global supply chains” are governed as about inter-governmental trade rules.
What has not changed is that corporations and their political allies continue to pursue international agreements to increase their profitability at the expense of labor and environmental standards that protect people everywhere.