The Truth About the North American Free Trade Agreement (NAFTA)

[marmar]

from Economy in Crisis:



The Truth About the North American Free Trade Agreement (NAFTA)
January 09, 2012 Thomas Heffner


Few are aware that NAFTA (North American Free Trade Agreement) has rendered us uncompetitive in the world economy, has destroyed our industrial base, caused us to outsource most of our production, and killed most of our manufacturing jobs.

Imagine if Congress decided that a single state, such as California or Michigan, was in desperate need of jobs and investment and made dramatic changes to boost that state’s economy.

Imagine Congress did the following for only one American state:

[div class="excerpt"* Dropped the minimum wage to $3 per hour
* Exempted them from child labor laws
* Expanded the work week
* Reduced health and work place safety laws
* Banned unions
* Reduced protection for the environment

On top of this, the companies residing in this state would still have free duty-free access to all of the others states. In other words, companies in this state could produce at a fraction of the cost of other states, yet would be able to sell directly to all other 49 states and compete at no additional cost. ................(more)

The complete piece is at: http://economyincrisis.org/content/truth-about-nafta-north-american-free-trade-agreement

[Thaddeus Kosciuszko]

1. As the article indicates, the problems with NAFTA are related to our trade partner to the south.

But to the north, NAFTA has been a success, as the relationship between the United States and Canada has become the largest trade relationship in the world.

[bhikkhu]

5. ...and to the South, Mexico has been transformed into a middle class country with full employment

http://johnpaulus.com/blog/2011/08/03/mexico-unemployment-at-4-9-compared-to-9-2-in-the-us/

I'd link to some other article, but it seems most of the coverage of the changes comes from hateful right wing blogs.

In any case, as you say, trade is hardly evil in itself, and perhaps it had done more to level the playing field in North America than anything else. If the trade agreement has lifted Mexico out of a long and crushing poverty at our expense, I have to wonder if our prosperity should require a neighbor to live on scraps again, and how many would like to turn back time and put them back in that position? How much of our wealth was built on a fixed structure of inequality, and advantage gained from exploiting a weak neighbor?

[Romulox]

6. notsureifserious! You've heard of the severed heads, millions of impoverished expats in el Norte?

Um, right?

[bhikkhu]

14. There's more to Mexico that the drug wars along the border.

In spite of what the media says (or doesn't say).

[Romulox]

15. OK. But you claimed that Mexico has been "transformed". Why so many millions fleeing, then?

[bhikkhu]

18. Mexico's emigration rate is effectively zero

http://www.ilw.com/articles/2010,0921-terrazas1.gif

Not that there are no problems, but "the data speaks", as they say.

Huffington has a decent article about it too: http://www.huffingtonpost.com/2011/11/15/new-data-indicates-mexican-immigration-decline_n_1095382.html

[Romulox]

20. Over what period of time? The last year or two? There are over 10 million *illegal* Mexican

immigrants in the US, many (perhaps even most) of whom would likely prefer a middle class job in a prosperous Mexico to living on the fringes of the US economy.

Either these 10 million plus haven't heard about your alleged "transformation", or your data is cherry-picked (not the least of which is because your employment figures omit the very economic refugees that the Mexican system can not/will not support..

[marmar]

8. Huh?

nt

[FredStembottom]

9. Why can't Mexico (China etc.) manufacture for and sell to millions within their borders?

...because these trade agreements allow the merchandise to be dumped into the USA.

Higher wages need never be paid to Meican workers because the demand for the goods lies outside their borders.

If cut off from the foreign demand, wages would need to be drastically increased to create internal demand for the merchandise.

And what keeps this from happening in soooo many countries is oligarchical political control and manipulation. Trade pacts don't address these things.

[PETRUS]

10. The Mexican story

There is little evidence that NAFTA has had a positive impact on Mexico's growth. Further, since the pact's implementation in 1994, wage growth in Mexico has been low, and at least several hundred thousand families have been displaced from their farms.

You're right to suspect that a certain amount of US prosperity has been dependent on exploitation outside of our Borders. It's also true that trade can be good, but these agreements are structured to benefit certain segments of society. It would be quite possible to structure trade and immigration agreements with other nations that distribute the benefits across the population, instead of handing all the gains to the top strata and protecting the professional classes at the expense of the majority.

[bhikkhu]

13. while millions have become "middle class" -

"The ranks of that middle class, or those making between $7,200 and $50,000 a year, have swelled to record levels of around 10 million families. That's equal to nearly 40% of all Mexican households, vs. 30% just a few years ago. It helps that for almost a decade now, wages have been rising faster than inflation. In addition, women are having fewer children, and more of them are joining the workforce, giving households more money to spend and save."

http://www.businessweek.com/magazine/content/06_11/b3975071.htm

...not to push the story too much as there is inevitably more to it, and it isn't so easy to find raw data, but it does seem like a real change. As one side-effect, the immigration rate has effectively dropped to zero for the last couple of years. ( http://immigrationpolicy.org/just-facts/mexican-migration-patterns-signal-new-immigration-reality )

[PETRUS]

19. Those statistics are true

But do not tell the whole story, as the gains are not evenly distributed. Inequality is increasing in Mexico. This is what you'd expect, NAFTA benefits owners at the expense of workers.

When considering a country's (or the world's) economic circumstances, one person's happy story is far less compelling if it takes place in a context where someone else is doing worse.

Again, this is not an inevitability - it would be quite possible to structure trade policies that spread the gains around better.

[PETRUS]

7. I wouldn't use the single metric of trading volume with Canada to measure success

The gains from NAFTA have been captured almost completely by what we are now calling "the 1%." Meanwhile, net job losses in the US are estimated to be between 700,000 and 1,000,000. Those job losses, plus the downward pressure on pay produced by the pact, are responsible for several billion dollars in lost wages annually for US workers.

From the point of view of ultra-high net worth investors, NAFTA and similar agreements are indeed successful. But they are tragic from the point of view of the average citizen who relies on salary and wages.

These agreements are also mislabeled - NAFTA and other pacts do not allow for "free" trade. They are full of protectionist measures for industries like finance and pharmaceuticals.

[bhikkhu]

17. In the US that is true, but not so much true elsewhere

http://en.wikipedia.org/wiki/File:Gini_since_WWII.svg

Canada hasn't notably increased its gini coefficient (a common measure of inequality). It still compares well with Sweden, which is often given as the world's best.

[PETRUS]

22. The data for Canada in that graph ends in the 1990's

NAFTA was implemented in 1994. I read a study late last year that shows Canadian inequality on the rise.

Canada has good social insurance programs which helps with their GINI coefficient, but those programs because less defensible politically if pretax income distribution is heavily weighted towards the top. And various policies, like NAFTA, have significant impact on pretax income distribution.

[think]

2. The American people need to know and understand this. This is crucial to understanding the current

economic problems America is facing.

[Romulox]

3. Who do we vote for if we want to see NAFTA renegotiated??? Obama gave us "free trade" with Korea

after breaking his campaign promise to renegotiate NAFTA.

[AnotherMcIntosh]

26. Maybe he'll give us a second chance by promising that again. It worked the first time.

[Snotcicles]

4. A big shout-out to Bill Clinton on that one. nt

[AnotherMcIntosh]

27. And to William Daley who helped Clinton get a sufficient number of Democratic votes to approve it.

William Daley, Obama's retiring chief of staff, was Clinton's go-to guy for getting the Democratic votes which Bush I was not able to get for the approval of NAFTA.

[Snotcicles]

29. +1

[bhikkhu]

11. How the three main trade partners applied the profits of expanded trade might be instructive:

Canada prospers overall, strengthening its high standard of living and strong social programs.

Mexico lifted itself out of third-world poverty and transformed itself into a full-employment prosperous economy, with a newly-dominant well-educated middle class.

The US took the profits of trade and concentrated it in the hands of a few guys who were filthy rich already, and then blamed all the problems and inequality that caused on "trade" itself.

...of course that's grossly oversimplified, but much truer than it should be. The point being - if we need to fix things, we need to fix things right here in this country, rather than by robbing another. Too much of the narrative about NAFTA harkens back to the good old days when we could exploit our southern neighbor with abandon,

[Romulox]

12. Care to answer questions re: your outrageous assertions, upthread? You don't sound more

convincing through repetition.

[bhikkhu]

21. I didn't think they were outrageous, though I know its not a conventional viewpoint

Mexico and Canada did well by the NAFTA agreement, and used the increases in trade wisely. I don't think that's a very controversial statement, and would be supported by the data.

On the other hand - the US in the same period seems to have enjoyed nothing but increased concentrations of larger and larger amounts of wealth in the hands of the top 1%. A good question would be: is that the fault of trade, or is that the fault of something else?

[Romulox]

23. You are ignoring issues like: massive violence, corruption, inequality, and millions of economic

refugees.

That's why you're not getting much traction here. You have a "yes, but..." sort of argument but most of us aren't willing to concede the points you try to downplay.

[AnotherMcIntosh]

28. Good points.

[PETRUS]

16. The reality is far less rosy than you seem to think.

I already talked about Mexico upthread, and the truth is that even in Canada inequality is on the rise.

Some of the principle problems with these not-at-all-"free"-but-let's-call-them-that-because-it-sounds-good trade agreements can be found in their origins. Key investors and industries - like Pfizer, GE, and Goldman Sachs - are designing and negotiating these agreements. Their demands and desires are what we get.

Meanwhile, you have other things happening, like the AMA successfully lobbying congress to prevent too many foreign born physicians from entering the US and practicing medicine.

These combinations create internal imbalances, where some wages are subject to competition and go down, and other wages are artificially propped up. This is not "free trade," this is crony capitalism and it's entirely predictable that some people are enriched while others are impoverished.

[Zalatix]

24. Your argument misses one very important fact

Canada and Mexico run big trade surpluses with the US. The US is the only one that runs a trade deficit.

THAT is why we are losing jobs.

[Heywood J]

25. Here's another thread on a similar issue:

http://www.democraticunderground.com/1002133474

The near-standstill in wage growth for American workers hasn't just been good for their employers. It's turning out to be a potential bargaining chip for Canadian companies, too -- at least the ones looking to leverage their employees into accepting smaller paychecks.