THERE ARE ONLY A FEW DAYS LEFT in the countdown to the Congressional vote on the supragovernmental trade agreement with Mexicoand Canada, known as NAFTA. Big business forces that are pro-NAFTA are launching a multimillion dollar television campaign on your screens. NAFTA means jobs, they say. Organized labor, which knows a little about job losses in the past decade to runaway plants which use serf-workers and sell back to the United States, is also televising its anti-NAFTA viewpoints, though with less frequency.
My concerns about NAFTA are that it will further weaken our internal democratic sovereignty. It will erode the rights of citizens to determine health, safety and worker standards in our country without being compelled to deal with the external, autocratic tribunals of NAFTA and the 120-nation General Agreement on Tariffs and Trade (GATT).
NAFTA proponents in Congress, the Clinton Administration and business associations and among narrow-gauged economists have several common characteristics. One is that just about none of them have read the bulky two volume NAFTA agreement. Second is that they view NAFTA in purely economic terms, within narrow trade model assumptions, and ignore the political and non-law enforcement provisions that embody its corporatist ideology.
As a result, proponents make the most falsely decisive predictions about NAFTA's impact on the U.S., Mexican and Canadian economies - predictions that avoid the known empirical records of Mexico's dictatorial, repressive regime and the current behavior of new U.S. factories operating just across the border in Mexico in awful polluting and workplace conditions.
NAFTA has not been subject to grassroots discussion and debate by the American people. They have been shut out by the very secretive and autocratic methods that NAFTA-critics have charged this supragovernmental agreement with promoting in the future. Negotiated in secrecy by Bush functionaries and corporate lobbyists, NAFTA moves to Congress under an autocratic "Fast Track" law that limits debate to 20 hours and prohibits any amendments to this 2000-page deal. This alone should put up a yellow light to citizens who believe in deliberative democracy and legislative judgments on what is wrong and what is right in these pages.
A year ago, President Bill Clinton delivered a long address on NAFTA and listed about a dozen areas which he said needed to be fixed - such as food safety, truck safety, worker retraining, more democratic dispute-resolution procedures, etc. His recently approved side-agreements did not fix them. So, Clinton's own words, that enforceability of the laws by all signatory countries is essential, have remained just that - words.
The core question is whether our modest democracy can enter into an economic union with a repressive dictatorial regime, composed of a few very wealthy ruling families, government officials and their police power.
Opponents of the Bush NAFTA say no, because worker, consumer and environmental laws in Mexico won't be enforced since the ruling oligarchy profits from their non-enforcement. And the oppressed Mexican people do not have the democratic rights, remedies and free elections to do anything about it.
As many a small U.S. business person can sadly narrate, Mexico is not a place where the rule of law reigns. The rule of power, the rule of the bribe (mordida) are what counts. In business dealings, U.S. citizens have been thrown in jail without due process, had their contracts broken, their assets stolen and some of their stories reported on page one of the Wall Street Journal.
These businesspeople got a taste of what the ordinary Mexican worker, consumer, citizen or brutalized peaceful protestors receive regularly. The 60-year long ruling party, known as PRI, routinely steals elections, including the 1988 election that put President Salinas in power. There are no independent courts, no civil rights, no civil liberties, no enforcement for minimum wage or worker health and safety laws, no freedom of speech, no pollution controls for the masses in Mexico. Typical of a dictatorial plutocracy, if you are rich, powerful or otherwise well-connected, the paper laws can be invoked to support your position.
Laws that are not enforced under NAFTA become unfair competitive advantages. For example, a U.S. factory closes down in Missouri and goes to Mexico where even weak worker, environmental, tax and other laws go unenforced. This transplanted factory can then sell its products back into the United States in competition with a factory that stayed in the United States and followed the rules.
Under NAFTA, the U.S. government can complain before a secret commission that is structurally unable to make a decision for many months, much less enforce it. Our courts have no role in these matters.
What's more, NAFTA, contrary to its proponents' false claims, exposes our federal, state and local laws on health and safety, for instance, to challenge by foreign countries before these commissions.
Trade matters subordinate health and safety values under NAFTA and proposed revisions to GATT. It's already happening. Under the U.S.-Canada trade agreement of 1988, Canada is suing the United States, saying that our asbestos phaseout is really a trade barrier keeping out Canadian asbestos. The asbestos phaseout is to protect workers and consumers from a very hazardous substance that has taken tens of thousands of U.S. lives.
When you want a local, state and federal safety law to protect your families, the workplace or the environment, do you think secret tribunals in Mexico City, Rome and Geneva should contradict what our nation decides is best for its people? That issue and economic unions that entrench dictatorial regimes are the two topics you won't find the national media paying much attention to in the coming days.
But you can make sure your members of Congress do.
NAFTA IS A HIGH-RISK GAMBLE WITH AMERICA'S FUTURE that cannot be justified on the basis of the evidence.
Reasonable people agree that NAFTA will cost jobs, reduce incomes, and undercut environmental standards. NAFTA lobbyists have spent millions of dollars promoting predictions that other economic benefits will outweigh these costs. But the lobbyists have failed. Both the facts and the common sense tell us that the benefits will go primarily to the small number of Americans who invest in Mexico and - for a time - a tiny part of the labor force in a few sectors of agribusiness and some capital goods industries.
In the short run, the much larger costs will be job losses for U.S. manufacturing workers. In the long run, a majority of the U.S. work force will suffer loss of income. Most important, by encouraging U.S. producers to respond to competition by seeking out cheaper labor, NAFTA will undercut any hope for the U.S. economy to find a high- wage, high-skill path in the global economy.
The central economic problem with NAFTA is that it will permanently lock in the huge distortion between wages and productivity in the Mexican export manufacturing sector. Today, labor productivity in Mexico's export industries is typically 80 to 100 percent of U.S. levels, while wages and benefits are 10 to 15 percent of what U.S. workers earn. In a growing number of factories in Mexico owned by multinationals, labor productivity is even higher than in comparable U.S. factories because the Mexican plants are newer and the workers often get more training. Where labor is cheap to hire it is cheap to train.
The disparity between wages and labor productivity is a result of the policies of the authoritarian Mexican government. Through a variety of measures, including government wage controls, physical intimidation of workers and official encouragement of employer associations that collude in fixing wage rates, workers' pay in Mexico is kept down in order to attract more foreign capital.
Environmental degradation is permitted for the same reason. Because Mexico is ruled by one political party, which in turn is dominated by an entrenched oligarchy, the country lacks effective political opposition, independent trade unions, an independent judiciary, strong environmental groups and similar institutions that in a democracy keep a check on government power.
No amount of rhetoric about having "confidence" in U.S. workers' ability to compete can change the fact that Mexican wages and environmental policies put U.S. workers at a brutal disadvantage. Hundreds of thousands of U.S. jobs have already been lost. NAFTA will make things worse. It is designed to protect U.S. investors in Mexico from policy changes of future Mexican governments, freeing them to expand production in Mexico to sell goods in the U.S. market.
Claims that NAFTA's purpose is to give U.S. firms access to the Mexican market are disingenuous. Although the Mexican labor force is large, the Mexican market is minuscule because incomes are low, and it will remain so until the political structure is changed. The theory of free trade, which supporters of NAFTA invoke, implicitly assumes that wages are commensurate with productivity. Since in this case they are not, the free trade argument is irrelevant. It is perfectly consistent to favor free trade and oppose NAFTA.
NAFTA supporters point to the two-year-old U.S. trade surplus with Mexico as "proof" that the agreement will generate a net gain of jobs. But that surplus is already shrinking, not rising as proponents have been predicting. In the first six months of 1993, the surplus with Mexico has shrunk by half. And the evidence indicates that it will soon disappear.
First, the primary cause of the two-year-old surplus with Mexico is the overvalued peso, which has raised the relative price of Mexican exports to the United States and lowered the price of U.S. exports to Mexico. When the peso drops, probably next year, the current surplus will evaporate.
Second, the United States is only running a surplus in capital goods and components, which are being shipped to Mexican producers in order to increase their capacity for future production of consumer goods destined for the United States. Since the consumer goods market is much larger and will grow more rapidly than capital goods markets, the overall trade surplus is bound to shift to Mexico, especially if NAFTA is passed.
NAFTA backers - and the so-called "studies" they cite -conveniently ignore the loss of jobs in the U.S. due to shifting investments to Mexico. This enables them to keep a straight face when arguing that investment in Mexico will generate demand for U.S. exports. The idea that a billion dollars invested in Mexico creates greater benefits in the U.S. than a billion dollars invested in, say, California defies common sense. When investment shifts are taken fully into account, the impact of NAFTA proves to be a loss of at least another 500,000 jobs over the next 10 years.
Job loss and the threat of job loss from NAFTA will undercut incomes in the rest of the economy. Even employers who want to produce in the United States will be driven by competition to lower the wages they pay here. By encouraging U.S. management to compete on the basis of low labor costs in the short term, NAFTA will drastically reduce the incentive for them to invest in the creation of high-performance workplaces in the long term.
Supporters claim that NAFTA will reduce illegal immigration. A similar claim was made for the maquiladora program in which U.S. tariffs on Mexican goods are reduced to the extent they are made with American components. But the maquiladora program has drawn hundreds of thousands of Mexican workers to the U.S. border where, because of Mexico's low-wage strategy, they could not support a family. So they crossed the rivers to the U.S..
NAFTA will also increase illegal immigration by dislocating millions of Mexican farmers who will no be able to compete with U.S. grain exporters.
Unfortunately, the NAFTA side agreements do almost nothing to protect labor and the environment. There is no effort to set common standards. Countries are merely encouraged through a ponderous legal process to enforce whatever their own laws happen to be. Whereas NAFTA provides that a single violation of intellectual property rights is actionable, violations of labor and environmental rights cannot even be considered by the trinational commissions established in the side agreements unless the government has "persistently failed to effectively enforce" the laws. If the offending government argues that it has higher enforcement priorities and that in due time it will get around to it, the government is off the hook.
The larger issues of deliberate government policies that violate labor rights and hold wages down are specifically excluded from the enforcement provisions of the side agreement, and are therefore implicitly permitted. All mention of a common goal of striving for a high-wage economy that was in the original U.S. draft of the side agreements was deleted in the final version. On the environmental side, problems such as toxic wastes, air pollution and wildlife protection are also ignored.
In an obvious effort to placate U.S. public opinion, Mexican President Carlos Salinas de Gortari vaguely promised to consider linking the minimum wage with productivity. Only the hopelessly naive could take him seriously. In a statement revealing the contempt in which Mexican leaders hold the side agreements, that country's commerce secretary recently assured Mexican legislators that the side agreements are so cumbersome that it will be virtually impossible for any violation ever to result in trade sanctions.
Supporters say that if we do not pass NAFTA, Mexico will be in a crisis, the Salinas regime will be discredited, and the 50-year reign of his political party may come to an end. NAFTA or no, Mexico will have an economic political crisis when the peso is devalued and short-term capital flees. It is the price every country pays - including ours - for speculative excess.
There is no reason to put U.S workers at risk to save the Salinas regime from its own folly, especially when they are already facing years of slow job growth, real wage decline and inadequate investment here. The response that the unemployed will be taken care of with retraining programs is a cruel joke.
A continental economic development policy linking Mexico, Canada, and the U.S. makes sense. But its goals must be to raise the living standards of the majority of people in all countries, not to lower them. The condition for an integrated market should be democracy and common minimum labor and environmental protections. The first step down that more sensible North American path is to reject NAFTA so we can start with a clean slate.
- by Jeff Faux, president of the Economic Policy Institute.
This article appeared in Roll Call on September 27, 1993.
| NUMBER OF MEXICAN PEASANTS THAT ABANDONED FARMING AND MIGRATED TO MEXICAN CITIES AND THE U.S., 1960-1990 | 9 MILLION |
| ESTIMATE OF THE NUMBER OF MEXICAN PEASANTS THAT WILL BE FORCED TO ABANDON FARMING AND MIGRATE TO THE CITIES AND THE U.S. UNDER NAFTA | 9 MILLION |
| ESTIMATE OF THE NUMBER OF MEXICAN PEASANTS THAT WILL BE FORCED TO ABANDON FARMING AND MIGRATE TO THE CITIES AND THE U.S. UNDER NAFTA | 3 TO 14 MILLION |
| AVERAGE HOURLY FACTORY WAGE IN THE U.S. | $10.97 |
| AVERAGE HOURLY FACTORY WAGE IN MEXICO | $1.85 |
| APPROXIMATE AVERAGE HOURLY WAGE PAID TO MAQUILADORA FACTORY WORKERS | $0.75 |
| WORLD BANK ESTIMATE OF THE COST OF MEETING THE MINIMUM DAILY NUTRITIONAL REQUIREMENTS OF A MEXICAN FAMILY OF 5 | $15.00 |
| NUMBER OF TOP 100 U.S. CORPORATIONS THAT HAVE AT LEAST ONE PLANT IN MEXICO | 100 |
| LARGEST PRIVATE SECTOR EMPLOYER IN MEXICO | GENERAL MOTORS |
| LARGEST PRIVATE SECTOR EMPLOYER IN THE US | MANPOWER TEMPORARY SERVICES |
| NUMBER OF GOVERNMENT SUBSIDY PROGRAMS THAT WILL BE ALLOWED UNDER NAFTA | 2 (OIL AND GAS MEGA PROJECTS AND DEFENSE SPENDING) |