Behind The Eight Ball

A November 2003 report released by the Carnegie Endowment in the United States points out that Mexico lost a lot due to NAFTA. Unfortunately, no matter where the blame lies, we all got snookered. Even the US, who surely thought the deck was stacked in its favour, bought a pig in a poke. Each year since the implementation of NAFTA, officials in Mexico, Canada, and the United States have regularly declared it to be an unqualified success. It’s the economic equivalent of a free lunch, a ‘win-win-win’ for all three countries. The evidence shows exactly the opposite and it is hard to credit that the officials of the three countries don’t know that. The reality is that it has been a success only for the very narrow group of parties for whom (and by whom) it was designed — investors and financiers. For the average working person in North America, who ultimately is paying for all of this, it has been a dismal failure. But the governments and business interests who caused all this to happen are not concerned, they don’t care. Most of the citizens of North America work for a living and the overwhelming majority require a certain degree of job security. NAFTA extended protection for investors while explicitly excluding any protections for working people in the form of labour standards, worker rights, or maintenance of social investments. This imbalance inevitably undercut whatever level of social contract each nation had achieved for its citizens. Given their respective sizes, the impact of economic integration has been inevitably greater in Mexico and Canada than in the United States. But by most measurements that matter to people, nobody has come out a winner. In the United States, NAFTA is credited with eliminating something on the order of 800,000 jobs since 1994. Contrary to the promises of the American promoters of NAFTA, the agreement did not result in an increased trade surplus with Mexico, but rather the reverse. Manufacturing jobs disappeared and workers were downscaled into lower paying and less secure services jobs. Within manufacturing, the relentless threat by employers to move production to Mexico has become a crucial bargaining chip in their relations with their employees. Production jobs did move to Mexico so you might expect that Mexico has seen a net gain from this agreement. But it has not. Primarily, the jobs moved to the maquiladora areas along the US-Mexico border where wages, benefits and worker rights are deliberately suppressed. These economic areas are mostly isolated from the rest of Mexico’s economy and contribute almost nothing to the development of Mexican industry or its internal markets. This had been the promise of the Mexican NAFTA negotiators and the basis on which they had promoted this deal to their citizens. In reality, compensation and working conditions for most Mexican workers have deteriorated and the share of stable full-time employment has shrunk. Canada’s increased market integration with the United States actually began in 1989 with the advent of the Free Trade Agreement (FTA) which was the precursor to NAFTA. Since the FTA, trade and investment flows between Canada and the United States have increased dramatically. But since FTA, and even more so since NAFTA, per capita incomes have declined year after year. And like Mexicans and Americans, Canadians have seen an upward redistribution of income to the richest 20% of Canadians, a decline in stable full-time employment, and the ripping of ever-widening holes in Canada’s once proud social safety net. There has been a continent-wide pattern of stagnant worker income, increased insecurity, and rising inequality even though the climate should have been right for a successful continental integration. But this document was never intended to deliver what its advocates claimed it would deliver. It was meant to enrich banks, investment companies, and corporations and it is inconceivable that the very bright people who finagled the agreement didn’t know this. This was a deliberate plot to break unions, to roll back the costs of production on the backs of the average working person, to further line the pockets of the already wealthy. It was a deliberate plot to distil and relocate the centres of power, to put corporations beyond the reach of national or local governments and clearly in the grasp of NAFTA, which had been designed by and for those corporations. Unfortunately, this disaster has been masked by an extraordinary consumer boom in North America, particularly in the United States. The boom has been fuelled by a huge expansion of consumer credit and speculative stock market bubble. The economies of all three countries now hang precariously on the capacity of American consumers to continue spending in excess of their incomes. I’m not an expert in financial matters but it seems to me that the agreement would have been doomed from the start because there was never a level economic playing field. The Mexican peso and the Canadian dollar cannot withstand any comparison with the US dollar. While a lower valued peso and Canadian currency might benefit some industries, trying to make this work without having the currencies all pegged to the same standard was insane. In each of the three countries, vigorous campaigns against NAFTA were launched but, in the end, governments do whatever business tells them to do. Trade unionists in particular, while certainly looking out for the interests of their particular members, seemed to have had a much clearer vision of what we would be getting into than the rest of us. They knew that our governments were cheerfully encouraging us to step off the gang plank. It is questionable to what extent NAFTA alone can be blamed for our current situation. For the past two decades there has been a broad anti-government and pro-deregulation agenda that has been transforming our national economies and restructuring the relationships between citizens, governments, markets. This agenda has led to policies which have had an adverse impact on the employment and working conditions of people in all three nations. This was an intended result, however, as the corporations which have been behind this push have worked hard to transfer power from workers to management and investors, from wages to profits, and from the public sector to the private market. NAFTA prevents even well-intentioned governments from regulating trade with their partners or even within their own borders. The bad news is that this is far from over. Negotiations are currently underway for a new travesty known as the Free Trade Agreement of the Americas (FTAA). This one is designed to link all the countries of North, Central, and South America to the same yoke that has currently shackled North America. Although it was largely defeated in Miami, there are certain to be nw negotiations and new agreements. Those who think that incoming Prime Minister Paul Martin will do anything to address these problems is sadly deluded; he is very much in favour of the various trade deals and international bodies who have as their sole purpose the deterioration of income for working people. ---- Paul Harris is self-employed as a consultant providing businesses with the tools and expertise to reintegrate their sick or injured employees into the workplace. Canadian businesses can reach him at paul@working-solutions.ca. He has traveled extensively in what is usually known as "the Third World" and has an abiding interest in history, social justice, morality and, well, just about everything. Paul is also a freelance writer and can be reached at paul@escritoire.ca. He lives in Canada.