THREE YEARS OF NAFTA:
ENOUGH IS ENOUGH !

by Scott Cooper

On July 10, 1997, Bill Clinton released his Administration's report on three years of the North American Free Trade Agreement ( NAFTA).

By law, Clinton was required to release the report by July 1. But he missed the deadline-no doubt to ensure that the report would vindicate NAFTA, which has been under constant scrutiny and criticism since well before its ratification. As InterPress Service (IPS) reported on July 3, 'The delay appears reminiscent of the Administration's handling of a recent investigation of plant closings and labor practices under NAFTA, observers say. Release of that report was delayed for months, during which time the Administration repeatedly disputed allegations it was seeking to suppress and sanitize the document."

And what did the Clinton Administration conclude?

NAFTA had a modest positive effect," says the report's executive summary, i'on U.S. net exports, income, investment and jobs supported by exports."

In his cover letter to the report, Clinton wrote: "The Congress and the administration are right to be proud of this historic agreement. This report provides solid evidence that NAFTA has already proved its worth to the United States during the three years it has been in effect. We can look forward to realizing NAFTA's full benefits in the years ahead."

Why has the Administration been so keen on ensuring a positive assessment of NAFTA? Clinton is seeking Congressional support in the fall for so-called "fast track" authority to negotiate new trade accords, including the expansion of NAFTA to include Chile as well as the planned establishment of a hemispheric Free Trade Area of the Americas (FTAA). This means legislators would agree either to approve or reject-but not amend-trade accords the president negotiates. Administration officials believe they need this authority to signal other countries that they can negotiate without fear that U.S. Iawmakers will amend deals beyond recognition.

But, as trade officials have acknowledged in recent weeks there is concern that whatever public and political support for tree trade might have existed is waning. Given the stakes. the IPS report continued, the pressure has grown for officials to portray NAFTA as an engine of economic growth."

As London's Financial Times reported on July 9: "President Clinton believes he will need to expend a significant amount of capital on Capitol Hill to get fast-track authority. He does not want to spend it at least until the autumn, when the battle over the balanced budget is over."

Devastating effects

The run-up to the release of Clinton's report touched off a flurry of activity. The week before Clinton's report was released, six research groups-the Economic Policy Institute, the Institute for Policy Studies, the International Labor Rights Fund. Public Citizen's Global Trade Watch campaign, the Sierra Club. and the U.S. Business and Industrial Council Educational Foundation- issued a counter-report. titled '-The Failed Experiment: NAFTA at Three Years," the report is a scathing indictment of the treaty.

Here are some of the highlights regarding the United States.

For nearly two decades, the real wages of American blue-collar workers have been declining. Imports from low-wage countries are an especially important cause of increasing wage inequality, and Mexico is one of America's most important low-wage trading partners."

Many firms have used the threat of moving to Mexico as a weapon against wage increases and union organization. In a survey commissioned by the NAFTA Labor Secretariat, Professor Kate Bronfenbrenner of Cornell found that over half of the firms used threats to shut down operations to fight union organizing drives When forced to bargain with a union, 15% of firms actually closed part or all of a plant-triple the rate found in the late 1980s, before NAFTA."

Based on standard employment multipliers, the increase in the U.S. trade deficit [resulting from NAFTA] with Mexico and Canada has cost the U.S. 420,000 jobs since 1993 ('50,710 associated with changes in the trade balance with Mexico, and 169,498 with Canada). NAFTA was responsible for 38% of the decline in manufacturing employment since 1989. NAFTA and globalization generally have changed the composition of employment in America, stimulating the growth of lower paying services industries and accelerating the deindustrialization of our economy."

The Clinton report claims that U.S. exports to Canada and Mexico supported an estimated 2.3 million U.S. jobs in 1996, "an increase of 311,000 jobs since 1993." But Lori Wallach, director of the Global Trade Watch program at Public Citizen, had a different assessment: The administration's NAFTA report must be from Mars, which would explain both the delay and the amazing whoppers and omissions."

The "Failed Experiment" report illustrates how the 1995 peso crisis in Mexico, "commonly used to excuse the sharp deterioration of the U.S. trade balance with Mexico," in fact resulted from an engineered effort to support an aggressive export-led growth strategy in Mexico. The artificially high peso "held down inflation in Mexico" and "helped to win votes" in Congress for passage of NAFTA.

'The peso collapse has devastated Mexico's economy. The number of unemployed workers doubled between mid-1993 and mid-1995, to nearly 1.7 million. Additionally, there were 2.7 million workers employed in precarious conditions in 1996. To make ends meet, many families are forced to send their children-as many as 10 million-to work, violating Mexico's own child labor law. An estimated ~8.000 small businesses in Mexico have been destroyed by competition with huge foreign multinationals and their Mexican partners. Real hourly wages in 1996 were 7% lower than in 1994 and 37% below 1980 levels. Of the 1995 working population of 33.6 million, 19% worked for less than the minimum wage, 66% lacked any benefits, and 30% worked fewer than 35 hours per week. During three years of NAFTA, the portion of Mexican citizens who are 'extremely poor' has risen from 31 to 51%, and 8 million people have fallen from the middle class into poverty.'

NAFTA has also contributed to the rapid expansion of the maquiladora sector of Mexico's economy-foreign assembly plants that account for some 40% of Mexico's exports.

According to a report released in late 1996 by the international rights watchdog Human Rights Watch/Americas, profits in the maquiladoras are earned at the expense of the physical and mental health of hundreds of thousands of women"-who comprise the majority of workers. Workers sit or stand in one place for eight to 10 hours a day, repeating the same task, such as attaching buttons or screws. assembling one part of a television or applying stickers.... [B]efore women are hired by the plants, they are asked about their sexual preference. the birth control they use, the date of their last menstrual period and whether or not they're pregnant"-discrimination and exploitation tolerated by the Mexican government.

Canada has also suffered as noted in The Failed Experiment" report.

Canada has been mired in recession since shortly after entering into the U.S.-Canada Free Trade Agreement in 1989. Unemployment increased from 7.5% in 1989 to 11.3% in 1992. Joblessness fell back to 9.4%, but has risen slightly in 1997 to 9.6%. Canada's policies and practices are being harmonized with those of the rest of North America-downward. Between 1989 and 1995, Canada's real interest rate was 2.9% higher than in the U.S. As a result, Canada is cutting government outlays sharply and dismantling its social safety net, while increasing its unemployment rate."

Those conclusions should be enough to convince every trade unionist and activist for social change from the Hudson Bay to Tierra del Fuego that the fight to stop NAFTA's expansion throughout the hemisphere should be a top priority. But if not. consider the scandalous report released on June 1 by the three nation North American Commission on Labor Cooperation on "Plant Closings and Labor Rights" under NAFTA. It had also been delayed-by some eight months-while commission officials sanitized the findings (not surprisingly, a charge they deny). IPS picks up the story. ' The study not only white-washes data, it also under-reports it.' Kate Bronfenbrenner, director of Labor Education Research at Cornell University. was quoted as saying at the time.

"In research undertaken for the commission's report, Bronfenbrenner found a marked increase in U.S. employers threatening to move jobs to Mexico under NAFTA as a way of dissuading their workers from joining unions. When this effort failed. some 15 percent of employers actually closed their plants.

"These findings were expunged from the commission's report, " Bronfenbrenner told IPS. Even worse, the final conclusion of the [commission's] report basically states that labor law is working effectively to deal with these problems and their only recommendation for the future is that there be more research.''

The job displacement effects and downward pressure on wages in the United States due to NAFTA is well documented. Here are a few examples.

In Pocohantas, Arkansas-with a population of only 6151- some 400 workers were laid off at the Brown Croup's shoe manufacturing plant due to "increased imports from Canada'' resulting from NAFTA, according to the report of the U.S. Department of Labor's NAFTA Transitional Adjustment Assistance Program. (Dec. 16, 1996)

Under NAFTA, JVC shifted production of television sets from its Elmwood Park, New Jersey plant to Tijuana, Mexico. laying off 198 workers in the process-according to the Labor Department. The New Jersey workers averaged $360 in weekly earnings, while the Tijuana workers get $50 on average. Some 24,600 workers in Tijuana are employed in the television manufacturing industry. (Miami Herald. May '4, 1996)

According to an Institute of Policy Studies report, an estimated 69,048 U.S. jobs in motor vehicle-related industries were lost in 1995 due to trade with Mexico. Meanwhile, an internal memo revealed that Chrysler invested $300 million in facilities in Coahuila, Mexico between 1994 and late 1996.

According to the U.S. Labor Department report cited above, more than 100,000 U.S. workers had lost their jobs directly due to NAFTA by the end of last year. The Economic Policy Institute puts the real number at 600,000.

And what have been the results in Mexico. where so many U.S. jobs have gone? "Real wages for maquila and other workers throughout Mexico have fallen, even as the economy has recovered'." reports Working Together: Labor Report on the Americas.

Under NAFTA, wages have lost 32 percent of their purchasing power, according to the Mexican Action Network on Free Trade. In 1996. reports the Mexico City daily La Jornada, wages lost 70 percent of their purchasing power. The National Autonomous University's economics department says wages are now at the 1977 level and that it would take a '75 percent wage hike to bring them back in line with prices. Half of the economically active population earns no more than twice the minimum wage (the minimum is about $3.50 U.S. per day), leaving them in severe poverty." (March-April 1997)

Growing opposition in Congress

In a poll commissioned by BankBoston last November, some 52 percent of U.S. citizens said their views toward free trade were less favorable than one year ago as a result of what they knew about NAFTA and its international companion, the Ceneral Agreement on Tariffs and Trade (GATT). Only 7 percent said their opinions were more favorable. (BankBoston press release "Poll Shows Public Believes Trade Pacts Cost U.S. jobs " Nov. 7, 1996) Fueled by this growing public skepticism, more and more Democratic Party politicians-particularly in Congress-are criticizing NAFTA and calling for reform.

For example. the 17-member Congressional Hispanic Caucus issued a statement in the days immediately following the Clinton report's release that the Hispanic community has suffered most through the job losses and environmental degradation that has followed NAFTA's signing. According to IPS, the Caucus ' has declared that, unless the government enforces provisions adopted to mitigate the harmful effects of NAFTA. they will oppose any extension of the trade pact that links the United States, Canada and Mexico. This would include blocking President Bill Clinton's attempt to secure 'fast-track' authority ..."

The lawmakers also said 'they would oppose all efforts to expand free trade in the hemisphere if provisions to protect workers and the environment are not made integral parts of future treaty. The current failure to mitigate the negative impact of NAFTA stems from the fact that provisions aimed at doing this were relegated to side agreements, they argued." (July 17)

Rep. Dick Gephardt (Dem.-Missouri), the House minority leader and a likely candidate for president against Vice President Al Gore in 2000, has also intensified his criticisms. According to the Financial Times (July 9), he's concerned about "public perceptions: many Americans believe their jobs are insecure. badly paid. and under threat from cheap-labor states such as Mexico." Gephardt says 'people can match [U.S.] productivity for pennies."

And, as the Financial Times notes, Gore and Gephardt "have much at stake over fast track. Mr. Gore portrays himself as the Green candidate and Mr. Gephardt looks like the candidate of labor." Perhaps the most outspoken Democrat in Congress has been the minority whip David Bonior of Michigan. In an op-ed piece in the New York Times titled "I Told You So" (July 13) Bonior takes Clinton to task for his report. The most the Adminstration could say is that NAFTA had a modest positive effect' on the American economy. That's a far cry from the extravagant promises made by the accord's proponents during the 1993 debate: Hundreds of thousands of new jobs! Higher wages! A cleaner environment! Just you wait and see!"'

Bonior asks: 'So who does benefit from NAFTA?" His answer: Some of the big winners are the 28 core members of USA NAFTA, an industry group that lobbied for the agreement. Forty two percent of these multinationals shipped jobs abroad once NAFTA was adopted, an analysis of the Labor Department's trade adjustment assistance data shows. Their profits have increased by '96 percent, according to financial information published in Forbes. "

The Democratic minority whip goes on to cite examples of how NAFTA has also posed "real threats to our health and safety, "and how it is also encouraging the drug trade."

San Francisco Labor Council

1188 Franklin St. # 203

San Francisco, CA 94109

Tel (415) 681-5868, Fax (415) 440-9'97

Economics watch