NAFTA — And Beyond
More than any other issue, the North American Free Trade Agreement (NAFTA) has galvanized broad public awareness of the importance of international economic policy. At this writing, meanwhile, the focus of the debate is rapidly broadening to a series of initiatives that seek to extend NAFTA-style policies throughout the Americas and, in some cases, the globe.
For groups on both sides of the issue, NAFTA has served a prime example of the promise—or the threat—of global economic integration. While the U.S. government argues that NAFTA has enhanced the U.S. economy and “contributed to the prosperity and stability of our closest neighbors,” others cite evidence that NAFTA has contributed to economic dislocation and environmental degradation.
NAFTA supporters have argued that such ill effects can rarely be traced to the agreement itself with any certainty. Opponents, for their part, respond that NAFTA is part of an overall approach to economic policy, and that it is more meaningful to look at the agreement in its broader context than to attempt to attribute individual phenomena to specific policy measures.
This chapter offers an introductory overview of the issues that have been raised in the debate over NAFTA and similar measures. The directory at the end of this book lists publications and organizations offering more in-depth analysis.
NAFTA and the Maquiladoras
During the campaign to secure the adoption of NAFTA, its proponents frequently predicted that it would decrease the concentration of maquiladoras at the border. Since tariff reductions were to be extended throughout Mexico, according to this view, the border area would become less attractive to the maquiladora industry. A 1993 statement by the Clinton Administration argued that “[M]aquiladora development will tend to be dispersed away from the border area, to other parts of Mexico . . . If NAFTA is not implemented, incentives will continue for the maquiladoras to locate facilities in the border areas, thus exacerbating environmental pressures.”
Belying such expectations, the maquiladora industry has expanded dramatically since NAFTA went into effect. According to a study by the Economic Policy Institute and other research groups, the maquiladoras employed an estimated 811,000 workers in 1997, up from 689,420 in October 1995. The result has been a continuing intensification of the range of environmental problems discussed in chapter 3, including uncontrolled industrial pollution, inadequate disposal of hazardous wastes, and rapid urban growth without the provision of resources for the development of public services.
Although such effects have not yet been documented in published literature, maquiladora workers report a significant intensification of the labor process through speed-ups and similar measures. Unfortunately, little research has been conducted on the specific impacts of NAFTA on the maquiladora industry. For the first time in 1999, the annual report on the continuing effects of NAFTA issued by the Red Mexicana de Acción Frente al Libre Comercio (RMALC—Mexican Free Trade Action Network) will include a chapter on the maquiladoras, presenting the results of the joint RMALC/CFO/AFSC monitoring project described in chapter 5.
Regionally, according to the UN International Labor Organization (ILO), NAFTA created significant advantages for border-based firms relative to export-processing plants in the Caribbean (which enjoy more limited tariff preferences under the Caribbean Basin Initiative). A 1998 report from the ILO notes that “since the introduction of NAFTA, over 150 companies and 123,000 jobs have been lost in the apparel industry in the Caribbean, and . . . many of those firms have relocated to Mexico.” The report went on to project that “Asian apparel-exporting countries may be next to suffer from the residual NAFTA effect,” since siting assembly plants at the border permits U.S. textile firms to supply “the bulk of the fabric” for garment manufacture. Notes the ILO, “with the vertically integrated operations some U.S. companies are now establishing in Mexico, we can expect to see the same trend towards competition based on the combined factors of speed, cost, and quality rather than simply on labor costs.”
NAFTA and Labor Rights
When introduced, NAFTA made no mention of labor or environmental protections, prompting a major outcry against the agreement by unions and other labor advocates, environmental groups, and human rights organizations. In response, the Clinton Administration proposed the adoption of labor and environmental “side agreements,” which accompany NAFTA without actually being included within it. These side agreements were instrumental in muting opposition to the pact and securing its ratification by the U.S. Congress. Advocates, however, have been sharply critical of the implementation of both of these measures.
The North American Agreement on Labor Cooperation (NAALC), as it is formally known, includes measures to ensure the enforcement of national labor codes by each NAFTA country. NAALC established a Ministerial Council made up of National Administrative Offices (NAOs) from each country. Each NAO is mandated to investigate charges of “failure to enforce” industrial relations laws—the right to freedom of association, collective bargaining, and the right to strike, in addition to laws relating to health and safety, child labor, and the minimum wages set by each nation.
Sanctions, however, cannot be levied against those governments that fail to enforce freedom of association. The most fundamental of all labor rights is thus protected only by the threat of public exposure. As one analysis comments, “NAALC, then, was an agreement based upon a hope and a prayer in a situation where there was . . . a demonstrable record of labor abuses.”
Several complaints have been filed under the NAALC since the signing of NAFTA. One of the first major cases involved Mexican workers from a maquiladora in Nuevo Laredo owned by Sony Electronics Corp. This complaint was filed by the International Labor Rights Research and Education Fund, the Coalition for Justice in the Maquiladoras, and Mexico’s Association of Democratic Lawyers, along with AFSC and other groups. The workers accused Sony and the Mexican government of thwarting their attempts to form an independent union. The NAO ruled in favor of the workers and recommended formal cabinet-level consultations between then-U.S. Secretary of Labor Robert Reich and his Mexican counterpart at that time, Santiago Oñate.
Although workers have yet to see a significant change in abusive practices, the participants in the ground-breaking Sony hearings feel they were able to demonstrate the institutional strengths and limitations inherent to NAFTA’s labor side agreement. According to Pharis Harvey of the International Labor Rights Research and Education Fund, “we continue to file these complaints because they demonstrate two things: one, what the problems are, and two, why we need a stronger agreement.”
The Economic Impact of NAFTA
NAFTA’s economic impact on the United States has been controversial and difficult to gauge. A study by the U.S. Trade Representative, issued during the 1997 congressional debate over renewing “fast track” negotiating authority for the executive branch, stresses the creation of U.S. jobs supported by exports. On the other side, Public Citizen, a Washington-based group inspired by consumer advocate Ralph Nader, argues that NAFTA has already caused the loss of more than 600,000 U.S. jobs.
Economists on both sides of the debate have criticized the methods used to compute these figures as overly facile, and some analysts have questioned the usefulness of emphasizing the creation or loss of U.S. jobs. Border activist Tom Barry, writing in an on-line journal, The Progressive Response, argues that progressives need to “leave behind many of the usual measures of impact, such as job loss and trade balance, and construct a new framework to evaluate globalization” that “recognizes the fundamental asymmetries between the United States and other economies.” In arguing for a more internationalist approach, Barry states that successful opposition to the “corporate agenda of economic globalization . . . will require enlightened cooperation across borders. Ultranationalist positions that demand that the U.S. government protect all sectors of the economy against foreign competition undermine such alliances.”
Some more narrowly focused studies have documented NAFTA’s negative impact on particular groups in the United States, such as unionized workers, women, or people of color. In 1996, the trinational Labor Secretariat established under NAALC commissioned a study to evaluate the merits of charges by the Communications Workers of America and their Mexican counterpart that U.S. employers were undermining freedom of association and collective bargaining rights by selectively closing plants that were undergoing organizing drives. The study found that 50 percent of private sector employers have threatened to close down or move in response to union organizing campaigns, and, when the unions win the election, a “substantial minority” have followed through on their threats. Such threats, in addition, “were found to be unrelated to the financial condition of the company” and were frequently accompanied by other, largely illegal, attempts to suppress union activity.
The “Latino Review of NAFTA,” another of the studies produced to influence the “fast-track” debate in 1997, found that Latinos, women, and African Americans “are overrepresented in jobs lost due to NAFTA.” At a news conference announcing the study, thirteen members of the congressional Hispanic Caucus, including several who had voted for NAFTA, also released a letter to President Clinton charging that Latino and other low-wage workers were not receiving a proportionate share of trade adjustment assistance and that promised pollution abatement and economic development programs for the border region had also failed to materialize.
In Mexico, meanwhile, the debate over the impact of NAFTA has taken place in the context of a devastating economic crisis. In 1996, estimated real hourly wages for Mexican workers were 27 percent lower than in 1994 and 37 percent below 1980 levels. At the same time, many workers reported a significant erosion of working conditions, including speed-ups, an increase in arbitrary and illegal dismissals, and major cutbacks in workplace-related health services.
The U.S. government and other NAFTA supporters are quick to point out that NAFTA had nothing to do with Mexico’s economic crisis. In fact, they say, NAFTA “helped to ensure a speedy recovery from the 1995 recession and position Mexico for strong growth in the years ahead.”
According to critics, however, a series of disastrous economic decisions made by the government of Carlos Salinas de Gortari between 1991 and 1994 were geared towards ensuring the passage and success of NAFTA. For example, the “maintenance of an overvalued peso, in essence subsidizing U.S. exporters and helping bolster the image of a huge Mexican market for U.S. goods, was a key component of the Salinas economic strategy. Ensuring extremely high interest rates to attract large amounts of short-term foreign capital was also essential to convincing foreigners of the value of doing business with Mexico.”
In addition, as RMALC points out, when the financial crisis of December 1994 began, NAFTA made it impossible for the government to cushion its impact. Faced with an investor panic resulting in the outflow of billions in foreign capital, the Mexican government found its hands tied by NAFTA’s prohibition of government regulation of speculative capital flows.
RMALC and other critics argue that Mexico’s current crisis has been fueled over the long term by a string of policies imposed by international financial elites since 1982, of which NAFTA was only the culmination. For workers on the border who still cannot afford to feed their families, meanwhile, Mexico’s “speedy recovery” is little more than a mirage.
From NAFTA to the MAI
In 1997, in order to facilitate the expansion of NAFTA to Chile, the Clinton Administration sought a renewal of its “fast track” negotiating authority. Under “fast track” Congress can only accept or reject economic agreements negotiated by the executive branch, but cannot amend them. The granting of such authority has become routine in recent decades, and it is often defended as necessary to ensure the integrity of the international negotiating process. The 1997 version, however, placed unprecedented blanket restrictions on the inclusion of labor and environmental safeguards in trade agreements, limiting them to redressing negative impacts on the market for U.S.-made goods. Facing concerted opposition to this version of “fast track” from labor unions, consumer advocates, and congressional Democrats, the Administration withdrew the measure, in what many observers saw as a major defeat for advocates of trade and investment liberalization.
Such issues, however, will not long be absent from the U.S. government’s legislative and policy agenda, whether they come to the fore as a renewed version of “fast track” or through other measures. As noted in chapter 1, NAFTA represents a codification of “neoliberal” economic policies. Throughout the 1980s, such policies were aggressively promoted by international financial institutions such as the International Monetary Fund (IMF). Wracked by the international debt crisis, developing countries relied on IMF loans to maintain their fiscal and economic stability. The IMF used this leverage to institute economic reforms through to “structural adjustment” programs, which reduced the discretion of national governments to set economic policy and made economies in the developing world increasingly integrated with global markets and subordinated to the transnational corporations that dominate them.
Although the debate in the United States over “free trade” commonly assumes that NAFTA and similar agreements are dedicated to the promotion of commerce, they might better be described as attempts to rewrite the framework for international economic relations, in the process placing severe restrictions on the right of governments to regulate the activities of transnational corporations in order to protect the environment, safeguard labor rights, protect the standard of living or food security of their populations, or promote the development of their own economies. By some readings, even the ability of state governments in the United States to promote industrial redevelopment is seriously constrained by NAFTA and similar agreements.
In the wake of NAFTA, a series of measures have been introduced to further consolidate this framework for economic policy. At the “Summit of the Americas” in December 1994, the Clinton Administration proposed the establishment of a Free Trade Area of the Americas (FTAA), projected to go into effect in 2005. In the global scene, that same month saw the institution of the World Trade Organization (WTO), an outgrowth of the General Agreement on Trades and Tariffs. When a U.S. move to extend the WTO’s authority to international investment was defeated, meanwhile, the Organization for Economic Cooperation and Development, which groups together the advanced industrial economies, began negotiations for the Multilateral Agreement on Investment (MAI), which would require governments to treat international investors identically with national firms, thereby hamstringing attempts to protect local industries from transnational competition. At these writing, unfavorable publicity has stalled the OECD negotiations on the MAI; some observers are predicting that a similar initiative may resurface in the WTO.
A thorough discussion of these agreements and institutions is beyond the scope of this book. All of them, however, have been criticized on the same grounds as NAFTA: that they accelerate the deepening gulf between rich and poor on an international scale; that they abandon working people and communities to the vagaries of transnational capital; and that they prohibit social and economic policies that could mitigate the effects of impoverishment and economic dislocation. At this writing, moreover, persistent turmoil in global financial markets, sparked by the so-called “Asian flu,” has raised new questions about the wisdom of such policies, giving rise to calls from many quarters for some type of re-regulation of the international financial system. Certain voices within the international financial institutions (IFIs) themselves (that is, the World Bank and the IMF) have called for measures to cushion the social impact of global economic integration. At the same time, new channels have opened up in the IFIs for
input from civil society into both policy making and project development.
Although the outcome of such trends remains uncertain, they signal the existence of significant new opportunities to gain a hearing for alternative approaches. Currently, social movements throughout the world are seeking to strengthen their own international ties in order to develop common strategies and initiatives geared toward increasing popular input into policy making. In the Americas, an emergent network known as the Hemispheric Social Alliance is building on the experience of the fight against NAFTA in an attempt to promote a new agenda for international economic relationships, based on social equity, environmental sustainability, community stability, and labor and other human rights. The coming years will be crucial ones in determining the outcome of such initiatives — and with them, the framework within which the global economy will develop.
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