Clinton's Problem Child: NAFTA at Three
Minneapolis Star Tribune, July 18, 1997
You know there's trouble when the President is required by law to make a report to Congress, and it's delayed and then released on a Friday. It means they want the press to bury it.
Such is the case with President Clinton's report on NAFTA, which was released last Friday. When he squeezed NAFTA through Congress, unable to get even a majority of his own party to vote for it, a lot of promises were made. NAFTA was supposed to create jobs, raise living standards on both sides of the border, reduce pressures for illegal immigration, and improve the natural environment.
After three and a half years it is clear that none of these rosy predictions have come to pass. On the contrary, the agreement seems to have worsened the situation on all fronts, and the public has soured on trade agreements in general. A recent poll by Bank of Boston showed Americans believe, by a large margin, that they result in fewer jobs and a worsening trade balance.
President Clinton did his best to put a happy face on the record, emphasizing that US exports increased by 37% from 1993 to 1996, to a record high. But US imports from Mexico have increased more than twice as fast as exports-- so fast that we went from a $1.7 billion trade surplus before NAFTA, to a $17.5 billion deficit with Mexico today.
When our imports grow faster than our exports, it drains demand and therefore jobs out of our economy. It's the difference between exports and imports that matters, not just the volume of exports. Our trade deficit with Mexico, as well as with Canada has cost the US economy hundreds of thousands of jobs since NAFTA went into effect. For the Clinton administration to focus on exports alone is very misleading, to put it politely. It is like saying that the Orioles had a very successful game against the Yankees, because they scored seven runs-- without mentioning that the Yankees had nine.
Of course it's not too difficult to find economists who will praise NAFTA. For most of the profession, "free trade" is a religious dogma, and any agreement that increases it must be a good thing.
Four years ago some of our most prominent international economists told us that NAFTA would boost employment in the US, by increasing our trade surplus with Mexico. Now that the surplus has been transformed in to a large deficit, they say that NAFTA's effect on jobs is not important anyway. Other leading economists, including those hired by the Clinton administration to do the estimates for yesterday's report, claim to separate the effects of NAFTA from those caused by the collapse of the peso in 1994. According to them, the US trade deficit with Mexico and the eight million Mexicans that have been thrown into poverty since NAFTA's enactment are all a result of the peso's collapse. They maintain that this had nothing to do with NAFTA.
But the peso crisis had everything to do with NAFTA. The agreement was designed to lock in the policies that deliberately increased trade and investment flows between the US and Mexico over the last 15 years. The economic instability that caused the peso crash, as well as the Mexican depression that followed it, stemmed from this reckless and destructive opening up of the Mexican economy.
NAFTA never was primarily about trade. The main point of the agreement was to make it easier, more profitable, and more secure for US corporations to produce in Mexico for the US market. No conspiracy theories or giant sucking sounds are necessary to arrive at this conclusion. All you have to do is look it the agreement itself. It has five chapters detailing the rights and privileges of foreign investors, and not a word for the rights of employees, or consumers, or the rights of citizens to a clean environment. It's a bill of rights for transnational corporations, and the lowering of trade barriers is just one of these "rights"-- and by no means the most important one.
So from the standpoint of the people who brought us NAFTA-- those who reside in the corporate executive suites-- it has been a resounding success. Mexican workers are earning less today than they did 20 years ago. And wages for the majority of US employees have been held down, too, despite six full years of economic recovery.
It's easy to see how such a lopsided agreement might contribute to this result. In fact, the NAFTA Labor Secretariat commissioned a study by Kate Bronfenbrenner of Cornell University that tells most of the story. In a survey of firms who faced union organizing drives since NAFTA was passed, she found that the majority of them threatened to shut down operations if the union won. And 15% of the firms actually did close all or part of a plant when they had to bargain with a union-- which is three times the rate that existed before NAFTA.
So it looks like the "uneducated" public understands this agreement better than the experts and policy-makers who preach to them about the virtues of free trade. This will probably remain true until the jobs of economists and pundits are outsourced to Mexico.