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 countries' 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 we'd better adjust to it. That's 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 Canada's 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 country's 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 [can] push wages and no limit on how badly you [can] 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 doesn't matter if you pay 60 cents an hour, because you know that person isn't going to buy the automobile or refrigerator or bra that you're producing. You've ruptured the connection between production and consumption."

 Bond agrees that NAFTA will only further the maltreatment of Mexican workers. "The agreement doesn't 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."

Lee says that U.S. corporations have already begun to pursue a policy of "low wage" manufacturing by moving production out of the United States to countries where wages are lower. "It has been happening for a decade or more," she says. "NAFTA takes us several steps further down the path than we've already traveled." She and Faux argue that in addition to its devastating effect on U.S. workers and communities, this strategy will ultimately prove less competitive than one in which industry produces higher quality goods more efficiently by investing in the work force.

Lowering standards

 Low wages are not the only incentive for U.S. and Canadian corporations to move south, charge environmental critics of NAFTA. Pointing out that Mexico is also notorious for its lack of enforcement of environmental, health and safety regulations, Larry Williams, a spokesperson for the Sierra Club, says, "We do not wish Mexico to become a haven for polluters. We do not wish to set up a situation where it becomes attractive to move to Mexico" in order to evade U.S. and Canadian environmental regulations.

 Nader argues that the existing United States-Canada free trade agreement has dragged down both countries' health, safety and environmental standards, enabling corporations to play the two nations off one another. All three countries will suffer far more, he says, from an agreement with Mexico, where industry conditions are far worse. "The differences between standards in General Motors plants in Michigan and General Motors plants south of the border are staggering," he says.

 The USTR refuses to comment on criticisms of NAFTA, but the Canadian government is satisfied with NAFTA's environmental provisions. "Our environment minister says [NAFTA] is an advance because it upholds the principle that environmental laws should not be lowered to attract investment," McKechnie says. However, he does acknowledge that the Canadian administration had hoped to include language in the agreement which would allow lax enforcement of environmental laws to be brought before a dispute resolution panel. "The problem in Mexico is not standards, it's enforcement. We're working with Mexico to improve enforcement," McKechnie says.

Antonio Ocaranza, press attache at the Mexican Embassy in Washington, defends his government's record on environmental enforcement. "We have a new law that sets very tough environmental standards," he says.

Critics also fear that under NAFTA, Mexico could challenge stricter U.S. and Canadian environmental, health, worker safety and food purity standards as unfair barriers to trade. Williams explains that Canada and Mexico could attack U.S. environmental or consumer safety standards as not scientifically justified and unfairly discriminating against their products. Unelected panels of trade representatives would resolve disputes over this sort of issue. "DDT is still in use in Mexico. Mexico could challenge our complete ban on DDT use," says Williams.

 The proposed NAFTA raises another important environmental issue: the state of the U.S.-Mexico border. The maquiladora-dotted border region is an environmental wasteland, where corporations dump toxic waste, contaminate the water and pollute the air with little inhibition. Environmentalists fear NAFTA will exacerbate the problem by bringing more companies intent on polluting to Mexico. "We do not wish Mexico to become a haven for polluters," says Williams.

 The Mexican government claims that its recently stepped-up commitment to environmental enforcement is sufficient to address the border problem."We have ... increased the number of inspectors in the border region to 200, a four-fold increase since 1989," Ocaranza says. He also notes that Mexico has appropriated $460 million over three years to clean up the area along the U.S.-Mexican border, pointing out that a proportional fraction of U.S. Gross National Product would be $12 billion.

 However, Lori Wallach, an attorney for the Washington, D.C.-based public interest group Public Citizen, estimates that the cost of a complete clean up is $5 billion, far more than the allocated $460 million. Williams says the border will only be cleaned up if NAFTA requires it, and perhaps even imposes a tax to fund the clean-up. "We are not happy that the administration has insisted that the border clean-up be independent of the trade agreement," he says. "Even before the ink was dry [on the agreement], the House of Representatives cut 40 percent out of the EPA [Environmental Protection Agency] budget to clean up the border. What's going to happen three or four years from now?"

Citizen power

 Linking together the concerns of NAFTA's many critics is a fear that multinational corporations will use the agreement to usurp power from citizens and undercut their standard of living. For Lee, the issue comes down to who will make the decisions that guide the U.S. economy and ensure the health and safety of its citizens: "I think the question really is, ęCan we take back control of the economy and manage the economy in some way to basically put a leash on the behavior of multinational corporations?'" she says. "I think it's possible and desirable to do so. The one thing we have to control is access to our market. If we tell multinational corporations they can't sell here if they don't respect basic principles, they'll have no choice."