NAFTA’s proponents promised benefits for the U.S., Canada and Mexico.
Benefits such as new U.S. jobs, higher wages in Mexico, a growing U.S. trade surplus
with Mexico, environmental clean-up and improved health along the borderall have failed to take form.
It is commonly believed that free trade between nations is a mutually beneficial arrangement for all parties involved; indeed, this is held to be an absolute truth. Though free trade is undoubtedly the most effective form of commerce between countries from a purely economic standpoint, increasingly we find that our so-called “free trade agreements” are horribly unbalanced. Indicative of these fiascoes is the North American Free Trade Agreement (NAFTA). NAFTA is a lopsided and detrimental deal, hastily hammered out by an inexperienced group of American negotiators under constant pressure from the Bush Administration. I will outline several primary concerns about NAFTA, looking at the effects and circumstances surrounding the development of this deal.
In June 1990, president Salinas of Mexico met with president George Bush to discuss a proposal to expand Mexico’s maquiladoras program (named for the Maquiladoras Act of 1972: a law designed to exempt international companies from certain environmental and labor laws) by establishing a free trade agreement between Mexico and America, and possibly Canada; anxious to find something to make him look favorable in the upcoming election, Bush jumped at the idea, and immediately began lobbying Congress for “fast-track” authority to bypass Congressional involvement in the subsequent trade negotiations. That hurdle overcome, President Bush hastily assembled a group of ad-hoc trade negotiators and threw them pell-mell at the professional Canadian negotiators and the high-priced Washington insiders and ex-government employees that had been hired by Mexico. On August 12, 1992, President Bush announced completion of the treaty and hailed it a major U.S. victory; by November, it had been signed into law.
What emerged from these back-room dealings was a monumentally flawed agreement. On the issue of job creation, the central focus of pro-NAFTA campaigning, it is fair to measure NAFTA’s real-life results against its supporters’ expansive promises of hundreds of thousands of new, high paying U.S. jobs. However, even measured against more lenient “do no harm” standard, NAFTA has been a failure. Consider this recent opinion poll of Americans on NAFTA’s performance:
66% of Americans believe that free trade agreements between the U.S. and other countries cost the U.S. jobs.
66% of Americans believe that NAFTA has helped large corporations.
73% of Americans believe that NAFTA has not helped small business in the U.S.
58% of Americans agree that foreign trade has been bad for the U.S. economy because cheap imports have cost wages and jobs here.
81% of Americans say that Congress should not accept trade agreements that give other countries the power to overturn U.S. laws on consumer safety, labor or the environment.
Clearly NAFTA has led to widespread job loss, with more than 200,000 U.S. workers certified as NAFTA casualties under just one narrow government program. Since the 1970’s, there has been a steady trickle of manufacturing jobs heading south of the border; American companies found that moving their factories to Mexico, where the minimum wage is 58 per hour and environmental laws are rarely enforced, lowered their production costs even though the U.S. maintained tariffs on the import of those items. Mexico began to actively seek out U.S. manufacturers in 1972 after the passage of the Maquiladoras Act.
Notwithstanding the fact that job growth totally unrelated to NAFTA has produced a net gain in the U.S. employment picture during this period, it in no way changes the reality that NAFTA has cost many individual workers their jobsmost of whom are now unemployed or working at jobs that pay less than the ones they lost.
Economic surveys of dislocated workers show that the jobs lost to NAFTA, often high-paying manufacturing jobs, are, in the majority of cases, replaced by lower-paid employment.
NAFTA has transformed the U.S.’s $1.7 billion trade surplus with Mexico in 1993 into a projected $14.7 billion deficit for 1998.
According to the U.S. Department of Labor, approximately 214,902 American workers have been certified under one narrow program as having been laid off due to NAFTA.
U.S. counties on the U.S.-Mexico border have borne a disproportionate burden of NAFTA job losses. In El Paso, TX alone, more than 10,000 jobs have been lost due to NAFTA. Indeed, Texas counties have the highest poverty rates in the country, as well as the highest percentage of adults who have not received a high school diploma. The 10.4% unemployment rate in all U.S. counties bordering Mexico in 1993 has grown to 13.5%. This joblessness may have a direct impact of the nation’s crime posture as well.
Agriculture is another area of American life that is now in crisis. The “free market-free trade” farm policies of the 1990’s have eviscerated U.S. wheat, winter fruit and vegetable, and tomato producers. And they have tied the hands of policy makers, preventing them safeguarding U.S. farmers from the dumping that has resulted from recent shocks like the currency depreciation in Canada and the suppression of worldwide demand for commodities caused by the Asian financial crisis. In addition, because of NAFTA, U.S. producers are now forced to compete with products from Mexico, where agribusinessthough not farm workers or consumersbenefit from lower wages and less rigorous standards on pesticide residues, bacterial contamination and other potential public health threats.
In theory, tariff cuts and new competition under NAFTA are supposed to benefit consumers by reducing costs. These savings are supposed to trickle down from producers to packing plants to retailers and ultimately to consumers. In several prominent instances under NAFTA, consumer prices have actually risen.
The 62% decline in hot dog prices in the U.S. has failed to reach the nation’s consumers, who pay more for a pound of pork now than they did five years ago, even after adjusting for inflation.
The price of tomatoes have risen 16% in real terms since NAFTA went into effect in 1993.
In Canada, producers receive $60 per pig. It costs $3,200 for that same pig in the supermarket.
Before the 1998 Canada-U.S. Free Trade Agreement and NAFTA, Canadian wheat imports to the U.S.-a major wheat producer and exporter-were virtually zero. Five years after NAFTA, the U.S. is Canada’s number two export market for wheat. U.S. imports of Canadian spring wheat increased 2,000% to 1.45 million tons, from 1990 to 1997. The Canadian wheat flood has taken its toll on U.S. wheat farmers, who are prevented by NAFTA from imposing new quotas, imposed on Canadian wheat in 1994, have been lifted.
The environment too continues to suffer through increased industrialized activity. NAFTA has exacerbated preexisting environmental and public health problems caused by a high concentration of export manufacturing plants in the free trade zone along the U.S.-Mexico border. The Clinton Administration echoed these sentiments, and went so far as to claim without NAFTA, the growth of the maquiladora sector would cause an environmentally devastating spiral of industrial and population growth and resulting air and water pollution.
Yet rather than reversing, this trend has accelerated. During NAFTA’s first five years the maquiladora zone along the U.S.-Mexico border has undergone explosive growth, compounding preexisting environmental and health problems; the promised clean-up and new environmental infrastructure never materialized. In three cases, U.S.-based companies are suing Mexico for the right to open hazardous waste disposal facilities. Hazardous waste imports into the United States in 1997 (the last year for which data is available) are higher than in 1993 – or than in any time in the 1990’s – and have increased 50% since 1996 alone. This increase heightens the risk of contamination due to spills during transport. Indeed, Mexican trucks are almost twice as likely as U.S. trucks to be forced out of service for failing inspections.
Beginning in early 1999, each day twenty-five million gallons of “treated,” but still toxic Mexican sewage was scheduled to be discharged off Imperial Beach, California. With “treated” sewage dumped into 100′ deep water only a few miles from the shore, testing conducted by the U.S. EPA has determined that it will fail to meet acute toxicity limits of the U.S. Clean Water Act.
Besides clean water, clean air continues to pose serious problems. The U.S.-Mexico border is clogged with record levels of truck traffic as imports surge into the U.S. from Mexico. Traffic through Texas has increased 19% since 1994, to a level of 17,582 trucks per day. Since NAFTA was enacted, the number of trucks crossing California’s San Diego Otay Mesa border has more than doubled, from 450,000 to 1,000,000. The EPA has suggested that border-area residents are exposed to health-threatening levels of air pollutants, including carbon monoxide particulate, and now the following border areas exceed ambient air quality standards: El Paso, TX; Dona Ana County, NM; Imperial County, CA; San Diego, CA; Douglas, AZ; and Yuma, AZ.
These health concerns and new issues related to food safety raised during the 1993 NAFTA debate were dismissed with promises of improved practices in Mexico and better border inspection. Yet NAFTA and its implementing bill weakened existing food safety standards, for instance allowing meat and poultry imports that did not meet U.S. safety standards, and specifically limited border inspection. Under NAFTA, the U.S. has experienced a major upswing in produce imports from Mexico. At the same time, the USFDA now inspects far less imported food than it did before NAFTA. The results with volume up and inspections down: Americans in every state now face a substantially greater risk of exposure to unsafe food as a direct result of NAFTA. Moreover, serious public health problems in border communities linked to high levels of environmental contamination generated by maquiladora production have worsened under NAFTA. In particular, certain types of fatal birth defects and sanitation-related diseases are on the rise. Consider these issues related to food safety and environmentally-linked health threats:
Since 1993, FDA inspections of imported food declined from 8% of total imports to less than 2%.
NAFTA does not require member countries to maintain a minimum level of food safety standards. The flood of fruit and vegetable imports from Mexico coincides with severe cuts to Mexico’s domestic food inspection budget. In 1992, Mexico’s spending on food safety was $25 million (U.S.), but by 1995 had been slashed to $5 million (U.S.).
In 1993, imported strawberries from Mexico were found to have an 18.4% violation rate for illegal levels of pesticides. Five years later, Mexican strawberry imports into the U.S. have increased 31% under NAFTA, and comprise 96% of total U.S. strawberry imports.
Environmentally Linked Health Threats
Contamination of the Rio Grande River during NAFTA has been well documented. Extensive testing has reveled that extreme fecal contamination leaves border residents at risk for Hepatitis A. According to the Texas Department of Health, since NAFTA went into effect the Hepatitis A rate for Cameron County rose form 17.8/100,000 residents to 87.4/100,000 residents, an increase of almost 400%. The Hepatitis A rate for Maverick County increased by 122% since 1993, from 82.5/100,000 to 183/100,000. And in Webb County the increase was 78% from 59.6/100,000 in 1993 to 105.9/100,000 in 1997.
By 1998, the neural tube defect rate for babies born in Cameron County, TX climbed to 19/10,000 babies, almost twice the national average. The public health crisis plaguing the U.S.-Mexico border attracted intense media scrutiny in 1991 after three babies were born with a rare condition called anencephaly (born brainless) during a 36-hour period at the same Cameron County (Brownsville) Hospital. The Texas Department of Health Neural Tube Defect Surveillance Project reported a new cluster of defects in 1995. The Department recently declared that “The entire border area remains a high-risk area for neural tube defects compared to the rest of the U.S.”
As the health crisis looms overhead, so too does the disparity in wage levels between U.S. workers and Mexican workers. Production workers engaged in manufacturing in the U.S., where the average hourly compensation is approximately $18.74/hr, must, because of NAFTA, compete directly with maquila workers now in new foreign-owned high-tech plants who are paid $1.51/hr.
In the 1990’s U.S. workers have experienced wage stagnation followed by a couple of years of weak wage growth, notwithstanding sustained and much-herald economic expansion. Many economists attribute this wage stagnation to trade. NAFTA makes it easier to suppress workers’ wages and to discourage unionization with threats of job relocation. According to a study undertaken under NAFTA’s labor side agreement, employers use the threat of relocation under NAFTA as a means of leverage against organizing efforts and salary demands or workers. Kate Brofrenbrenner of the Cornell University School of Industrial Relations found that the percentage of U.S. companies following through on threats to close in response to union drives tripled under NAFTA.
NAFTA was engineered to raise living standards in Mexico so that Mexican citizens could develop into a consumer society, thus creating a relationship between two mature trading partners. Yet the earnings of Mexicans have declined precipitously since NAFTA’s enactment: In 1997, 7,771,607 Mexicans were documented as earning less than Mexico’s legal minimum wage of $3.40/day, 20% more than in 1993. Among Mexico’s working class, salaries at the end of 1997 had fallen to 60% of their 1994 value.
The disappearance of American Icons has begun. The following casualties have evidenced this:
Huffy Bicycles closed the world’s largest bicycle plant in Celina, OH-laying off 650 workers and shifting its production to Mexico.
Bass Shoes shifted production to Mexico after being located in Maine for 122 years, laying off 350.
Thompson Consumer Electronics, successor to RCS-Victor, moved what was once the world’s largest TV factory located in Bloomington, IN to Mexico laying off 1,200 workers. Only 8% found jobs that match or better their previous pay scale.
The mutually beneficial proposition of NAFTA was to provide economic development and a better life for Mexicans and Americans. NAFTA was to make Mexico, in economic and social terms, more like the United Statesa more prosperous society with a middle class. Realistically, what has happened is that Mexico’s level of development has regressed under NAFTA. Poverty is greater, the middle class is smaller, wages are lower, and maquiladora employment offering substandard living wage jobs and a diminished quality of life along the border has flourished. When asked, 67% of Mexicans say that Mexico has had almost no success with NAFTA.
Proponents of NAFTA said the pact would place Mexico on a new development path, away from low-paying, oppressive, pollution-choked border maquiladora zones and toward the sort of development necessary for genuine and substantial growth. The day NAFTA went into effect, maquila employment along the U.S.-Mexico border stood at 546,433. As of April 1998, 983,272 Mexicans were employed in maquiladoras; the maquila sector is the top generator of employment in Mexico.
While Mexican economic development has failed miserably, so too has standard of living for many Mexicans. Between 1984 and 1994, and through several currency devaluations, the Mexican poverty rate remained constant at 34% of the population. As of 1997, 60% of the Mexican labor force now lives below the poverty line. Some other startling facts include:
Under NAFTA, eight million Mexicans have been pushed into poverty and out of the middle class.
Salaried workers in Mexico lost 34% of their purchasing power since 1994, the year NAFTA went into effect.
One important, but little-known component of NAFTA is the new power it grants to private corporations to directly attack laws and policies they deem harmful to profitability. Under NAFTA’s new investment protections (Chapter 11), the decisions made by local and national governments in all three NAFTA countries are now subject to challenge before NAFTA tribunals by corporate plaintiffs. This provision of NAFTA, which only took effect in 1996, has already produced seven challenges, demanding damage payments in excess of a billion dollars. Remarkably, in every instance these challenges have had little or nothing at all to do with international trade. Rather, public health, environmental zoning and state court civil procedures have been attacked. One such challenge has already led to the repeal of a major public health law in Canada. Knowledgeable observers believe that this initial spate of suits may be the harbinger of a far larger legal onslaught in the coming years as more corporations discover the potential uses of the new tool NAFTA provides. Law and policies can be challengedwhether or not they have anything to do with international tradeas long as an investor or corporation in one country has some actual or potential business interest in the country it wishes to sue.
On September 22, 1998, Mexico formally requested formal dispute resolution ( a binding arbitration panel) under NAFTA to force the U.S. to open its border to Mexican trucks with destinations anywhere in the U.S. (presently, Mexican trucks are limited to destinations within a certain distance from the U.S.-Mexico border). The border had been scheduled to open on December 17, 1995, but the U.S. Department of transportation denied full access to the U.S. market to Mexican truckers because of safety concerns. If the arbitration panel decides in Mexico’s favor, the U.S. will be forced either to open its border to Mexican truckers or pay compensation to Mexico. A 1997 U.S. government report highlighted many environmental reasons for not opening the U.S. border to Mexican trucks. Since NAFTA was enacted, none of the concerns regularly voiced by the U.S. government and public safety advocateslike the existing problems of gun and drug smuggling across the borderhave been addressed.
There are many frightening facts to confirm the fears associated with complete open borders to be fed by Mexican truckers. Issues such as truck safety:
According to the Government Accounting Office, fewer than 1% of the 3.3 million trucks crossing the border into the U.S. every year are inspected. Nearly half of those checked are put out of service because of safety concerns. In 1998, at least 5,000 trucks per day were crossing into the U.S. through Texas, but only five (5) inspectors are on duty during week days. In El Paso, only one (1) inspector is on duty to inspect 1,300 trucks that pass through per day. The number actually inspected: 10-14 per day!
Most cocaine comes across the U.S.-Mexico border. The U.S. DEA estimates that 70% of the cocaine smuggled into the United States comes across the U.S.-Mexico border. U.S. Customs Service estimates that 300 tons of cocaine are smuggled into the U.S. from Mexico annually.
U.S. Customs reports that one of the hottest U.S. exports, stolen cars, are funneled through Mexico. Of the 200,000 stolen vehicles shipped from U.S. ports annually, at least 10% of these are simply driven across the California border; this does not include those smuggled across the California border by rail or truck or those driven or smuggled across Mexico through other border states.
Beyond smuggling vehicles, gun smuggling between the U.S. and Mexico is a problem that has only been exacerbated by the more permeable border between the two countries: 90% of illegally owned guns come across the U.S.-Mexico border.
Finally, if there is a hidden advantage to this dark cloud, it should come in the form of ameliorating harmed workers. NAFTA’s Trade Adjustment Assistance Program was designed to provide assistance to workers who lose jobs due to NAFTA. Unfortunately, the majority of workers clearly displaced by the agreement never receive benefits. Indeed, the program’s harsh eligibility restrictions virtually guaranteed this outcome: workers are only eligible if they produce a “product” that is “directly affected” by NAFTA. Thus, all service workers and all retail and agricultural workers are automatically excluded, as are small manufacturing workers who lose their jobs because their industry is indirectly affected by the agreement-for example, makers of inputs for manufacturers who have reelected to Mexico.
NAFTA’s so-called “side agreements” were supposed to be the saving grace-counterbalancing any NAFTA damage to the environment and the rights and interests of workers. The labor side agreement, the North American Agreement on Labor Cooperation (NAALC), added to NAFTA by the Clinton Administration to win Congressional votes crucial to the pact’s approval, has been a model of regulatory toothlessness. Despite repeated efforts by labor unions and others to use the labor side agreement for the purposes for which it was intendedto stop abuse of workersthe agreement has proven useless. The new NAFTA labor commission has identified major instances of abusive practices, yet, to date, not a single enforcement action has been leveled against an offending country nor a targeted practice abolished.
Nineteen (19) submissions have been brought forward under the NAALC: twelve against Mexico, six against the United States and one against Canada. None of these have resulted in fines against the offending country.
Although the right to organize is a universally recognized fundamental human right, under the NAALC, failure by Mexico, Canada and the U.S. to enforce the right to unionize is not a punishable offense.
It is widely recognized that the institutions established under NAFTA’s environmental side agreement have failed to ameliorate the infamous environmental degradation along the U.S.-Mexico border. Since NAFTA was enacted, Mexico still has not begun to collect data on environmental pollution, in violation of the North American Agreement on Environmental Cooperation, the environmental side deal. The problems of pollution, toxic waste and other public health threats cannot be identified and addressed until data is collected and analyzed.
Meanwhile, the explosion of the maquiladora employment has exacerbated public health crises along the border; 500,000 people on the U.S. side of the border live in colonias (unincorporated settlements), many of which lack running water and sewage systems.
Consequently, there is clear and convincing evidence that NAFTA is not in the best interest of the United States. Whether arguing on the economic front, public health or safety issues, or environmental impact, I opine that this lassize-faire trade arrangement was poorly constructed and implemented. Investment capital is leaving this country, and I assert that there has been and will continue to be an overall decline in our country’s standard of living. Something must be done about this situation now, before it develops into a disaster for all parties concerned. I firmly believe that NAFTA has the potential to damage our nation’s economy, drastically increase unemployment, and to stunt the pride and nationalism felt for our country. That is, of course, if it hasn’t done so already. Endnotes
Poll conducted by Peter D. Hart Research Associates, Inc. for the AFL-CIO, July 18-22, 1997.