20 Years Later, NAFTA is Nightmare Model for Trade Deals
Thousands of Teamsters have contacted their congressional members since the beginning of the year to let them know fast track trade promotion authority is the wrong track for America. And one need not look any further than the enactment of the North American Free Trade Agreement (NAFTA) 20 years ago to understand why.
Due to the pact between the U.S., Mexico and Canada that was approved using fast track, America lost 1 million jobs. Those employment opportunities have been shipped across borders, gutting the American middle class. Many who have continued to work have seen their pay slashed and families who used to have a shot at the American dream are now living in a nightmare.
Corporate America loves to tout the growth in trade, especially between the U.S. and Mexico due to NAFTA. But those dollars have largely gone into the pockets of top executives. Meanwhile, in Texas alone, workers and union affiliates of some 2,500 companies have filed petitions with the U.S. Department of Labor for training or temporary assistance due to job loss.
That help, however, doesn't come close to matching the good-paying jobs that left.
“NAFTA is the model that all these job-killing trade pacts now follow,” said Jim Hoffa, Teamsters General President. “We’ve seen the damage it’s done, yet some want to push forward with even more bad trade deals. We don’t need another NAFTA. It’s time to stand up for the American worker.”
Why has the deal caused a drain in U.S. employment? This country’s soaring trade deficit with its North American neighbors sums it up nicely. A report by the Economic Policy Institute (EPI) shows that between 1993 and 2010, America’s trade deficit with Mexico grew from $1.6 billion to $97.2 billion. Meanwhile, a Public Citizen report released in January placed the combined U.S. trade deficit with both Mexico and Canada at $181 billion.
The Public Citizen study finds that since NAFTA, trade deficit growth with Mexico and Canada has been 45 percent higher than with countries not party to a U.S. free trade agreement. Also, U.S. manufacturing and services exports to Canada and Mexico have grown at less than half the pre-NAFTA rate.
Additionally, it shows how post-NAFTA trade and investment trends have contributed to middle-class pay cuts, which in turn contributed to growing income inequality.
According to the U.S. Bureau of Labor Statistics, two out of every three displaced industrial workers who were rehired in 2012 experienced wage reductions. As increasing numbers of workers displaced from manufacturing jobs joined the glut of workers competing for non-offshoreable jobs in sectors such as hospitality and food service, real wages have also fallen in these sectors since NAFTA.
“NAFTA’s actual outcomes prove how damaging this type of agreement is for most people, that it should be renegotiated and why we cannot have any more such deals that include job-offshoring incentives, requirements that we import food that doesn’t meet our safety standards or new rights for firms to get taxpayer compensation before foreign tribunals over laws they don’t like,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.
A December blog written by Jeff Faux, EPI’s founding president, raised similar sentiments. “By establishing the principle that U.S. corporations could relocate production elsewhere and sell back into the United States, NAFTA undercut the bargaining power of American workers, which had driven the expansion of the middle class since the end of World War II,” he wrote. “The result has been 20 years of stagnant wages and the upward redistribution of income, wealth and political power.”
NAFTA Has Not Delivered
NAFTA was sold to lawmakers and the American public as a way to create more jobs in this country. Passed through Congress with bipartisan support, the pact was signed into law by President Bill Clinton after being negotiated under the presidency of George H.W. Bush. But rather than creating the 170,000 jobs per year as promised, job losses resulted, Public Citizen notes.
Manufacturing jobs fled the U.S. as companies here took advantage of NAFTA’s foreign investor privileges to relocate production to Mexico to rake in more profits by paying Mexican workers less and exploiting weaker environmental rules. As a result, 845,000 Americans have qualified for trade adjustment assistance since NAFTA because they lost their jobs due to the agreement.
Many of the trade deal’s environmental and health mandates have been challenged in foreign courts due to NAFTA’s faulty investor-state dispute resolution system.
Those appeals have caused the U.S., Canadian and Mexican governments to dole out upwards of $360 million in compensation to investors. And an additional $12.4 billion in claims is currently pending.
Farmers alone have been hit especially hard. The American agricultural trade deficit with Mexico and Canada is now about $800 million, double where it stood before NAFTA. Beef imports have risen 130 percent during that time. Farmers and ranchers were promised more profits due to access to new markets, but that hasn’t materialized. Meanwhile food imports from our North American neighbors have grown 188 percent and U.S. prices have soared 65 percent.
U.S. farmers aren’t the only ones who have been hurt under the deal. Approximately 1 million Mexican “campesino” farmers have been decimated by increased exports of subsidized U.S. corn. It has also hurt the livelihoods of an additional 1.4 million Mexican workers whose work depended on agriculture.
EPI’s Faux wrote in the Huffington Post that NAFTA “has not delivered the promised benefits because it was designed not to. The agreements traded away the interest of American workers in favor of the interests of American corporations eager to produce for the U.S. market in countries where labor is cheap, environment and public health regulations are weak, and government officials are easily bribed. NAFTA’s fundamental purpose was not to free trade, it was to free multinational corporations from public regulation.”
Middle Class Hollowed Out
NAFTA’s ill effects, however, stretch far beyond the deal itself. It opened the door to a generation of trade liberalization with nations such as China, Colombia, Korea, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, just to name a few. The result is millions of lost U.S. jobs and a hollowing out of the U.S. middle class that has left many communities increasingly shuttered.
“Given NAFTA’s devastating outcomes, few of the corporations or think tanks that sold it as a boon for all of us in the 1990s like to talk about it, but the reality is that their promises failed, the opposite occurred and millions of people were severely harmed,” said Wallach.
The trade agreement laid the groundwork for the great gulf in income we have today between the haves and have nots in U.S. society. Hardworking Americans who had always played by the rules just to put food on the table for their families became the victim of corporate greed. Those lucky enough to hold onto their jobs saw their salaries slashed.
So what are workers left with? Not much. The income gap continues to widen in many places, even in states that have rebounded from the last recession.
While stockbrokers and their clients may be counting their additional riches from a booming Wall Street, the average middleclass family isn’t seeing much.
The Toll of Free Trade
The percent of American wealth held by the nation’s richest citizens is growing. In 1976, the top 1 percent held 19.9 percent of U.S. wealth. Today that stands at 35.4 percent.
Taken together, the stock market can keep climbing, but it’s not going to mean much to those working hard to put food on the table. But big business, through deals like NAFTA and the pending 12-nation trade deal known as the Trans-Pacific Partnership (TPP), is laughing all the way to the bank.
More U.S. residents should be sharing in this country’s economic bounty, but they clearly are not. Fewer union workers and the shipping of jobs overseas through lousy trade deals like NAFTA and TPP are to thank for this mess.
Lawmakers Waking Up?
Luckily, it seems some on Capitol Hill are beginning to get the message that America doesn’t need any more NAFTAs.
Despite the efforts of supporters to ram through legislation that would allow a quick up-or-down vote on the TPP, a bipartisan collection of more than 200 lawmakers have announced their opposition to fast track. That in turn led Senate Majority Leader Harry Reid (D-Nev.) to state in January he has no plans to take up the measure.
This is not a time for union members to lower their guard, however. The Teamsters are taking a proactive approach and are joining with like-minded allies to oppose fast track because of the damage it will cause to rank-and-file workers.
Members must continue to voice their opposition to fast track if they want to ensure there won’t be any more bum trade deals that move thousands of jobs offshore and jeopardize the food and products Americans bring into their homes.
“Lawmakers need to hear from our members that they have real concerns that TPP could turn into another NAFTA,” Hoffa said. “Corporations are spending all their time trying to get elected officials to see it their way. We’ve got to let Congress know that regular workers can see we will be repeating history if fast track is approved and job-killing trade deals are allowed to proceed.”
The Teamsters Union is not against trade, just unfair trade. America has seen enough lost jobs, shuttered plants and abandoned communities. It's time to make things in America again. When is the U.S. going to approve an agreement that actually helps its own workers? Following the NAFTA model is not the way to go about it.