NAFTA: 20 years of screwing North Americans

Today, January 1, is the 20th anniversary of the day the North American Free Trade Agreement (NAFTA) came into effect. This would seem to be a good time for a moment of silence in which to grieve. It arrived stillborn, and has not recovered in the two decades since.

Although NAFTA was not the first free-trade accord in North America, it was – and is – the most significant. Single-handedly, it has accomplished what its designers intended:

It has stripped the three North American governments of any pretense of democracy
It has destroyed the manufacturing base of the United States
It has destroyed the manufacturing base of Canada
It has created a modest uptick in manufacturing in Mexico
It has destroyed agriculture in Mexico and severely weakened it in Canada and the United States
It has gutted social services where there were any (Canada has taken the biggest beating here)
And – note this was the biggest goal of the pact – it has transferred responsibility for governance of the three nations to extra-national corporations who are utterly out of reach of governmental and, therefore, citizen oversight.

As this 20th anniversary has approached, there has been the expected spate of articles about NAFTA, including this one. Some crow about what a wonderful ride it has been; but most of them try to put a brave face on this abortion and find the bright spots. To be sure, there are some. But even for those folks who bought into the thick layer of BS spread by the forgers of the Agreement in the years leading up to its signing, that this was going to be an economic boon for us all, it is hard to believe they would have been so eager to agree if they had realized they were surrendering all citizen rights to foreign corporations.

As the 10th anniversary of the Agreement approached, a November 2003 report released by the Carnegie Endowment in the United States pointed out that Mexico lost a lot due to NAFTA. Yet an article by Canadian Press in December 2013 is comfortable stating the opposite:

The North American Free Trade Agreement was an important step for all three members, but the evidence points to Mexico — at the time the weak sister in the group that included two G7 economies, the United States and Canada — as by far the biggest winner.

On the 20th anniversary of the pact, Mexico — in 1994, an insular, economic basket case — has in two decades emerged as a forward looking country with expanding global reach, a handful of world-class corporations and a ballooning middle class.

Referring to Mexico as “a forward looking country with expanding global reach, a handful of world-class corporations and a ballooning middle class” almost made me laugh out loud. Seriously? Have you been to Mexico? Well, I have several times and while I like the country a lot, there is no way I can reconcile what I’ve seen with that description.

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. But 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. So Mexico has gained a little in manufacturing, but has been crushed in agriculture. 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 2,000,000 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.

As much as anything, the failure of Mexico to realize any sustainable gains from NAFTA explains the recent decision by the Mexican government to sell off its most prized possession – Pemex, the state-owned petroleum enterprise. They surely hope to be able to accumulate funds that they are not gaining as a result of NAFTA.

Canada’s increased market integration with the United States actually began in 1989 with the advent of the Free Trade Agreement (FTA) that 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 income in both countries (adjusted for inflation) have declined year after year. And, like Mexicans and Americans, Canadians have seen an upward redistribution of income to the richest 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.

I’m not an expert in financial matters, but it seems to me that the Agreement was 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 dollar might benefit some industries, trying to make this work without having the currencies all pegged to the same standard was insane.

It is questionable to what extent NAFTA alone can be blamed for our current situation. For the past three 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 that 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 that 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

Corporations and their government lickspittles have been diligently beavering away at further destructive agreements with South America, the Pacific Rim, and Europe. Unless we as people finally say enough is enough and retake control of our governments, the best we can hope for is that they will at least be gentle with us and use condoms.

Paul Richard Harris is an Axis of Logic editor and columnist, based in Canada. He can be reached at paul@axisoflogic.com.

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