Web Only / Features » January 14, 2014
NAFTA’s Trail of Destruction
Twenty years after NAFTA, income inequality and the trade deficit have skyrocketed.
'After two decades of NAFTA, the evidence is clear: the vaunted deal failed at its promises of job creation and better living standards while contributing to mass job losses, soaring income inequality, agricultural instability, corporate attacks on domestic health and environmental safeguards and mass displacement and volatility in Mexico.'
That giant sucking sound predicted by Ross Perot commenced 20 years ago last week. It is the North American Free Trade Agreement (NAFTA) vacuuming up U.S. jobs and depositing them in Mexico.
Independent presidential candidate Perot was right. NAFTA swept U.S. industry south of the border. It made Wall Street happy. It made multi-national corporations obscenely profitable. But it destroyed the lives of hundreds of thousands of American workers.
NAFTA’s backers promised it would create American jobs, just as promoters of the Korean and Chinese trade arrangements said they would and advocates of the proposed Trans-Pacific Partnership (TPP) deal contend it will. They were—and still are—brutally wrong. NAFTA, the Korean deal and China’s entry into the World Trade Organization killed American jobs. They lowered wages. They diminished what America cherishes: opportunity. They contributed to the very ill that President Obama is crusading against: income inequality. There is no evidence the TPP would be any different. American workers need a new trade philosophy, one that protects them and puts people first, not corporations.
After 20 years, Americans know in their guts the damage NAFTA did to them, the destruction it caused to American manufacturing. There’s also concrete proof. In a study titled “NAFTA at 20,” released this month, Public Citizen’s Global Trade Watch concludes:
“After two decades of NAFTA, the evidence is clear: the vaunted deal failed at its promises of job creation and better living standards while contributing to mass job losses, soaring income inequality, agricultural instability, corporate attacks on domestic health and environmental safeguards and mass displacement and volatility in Mexico.”
It points out that the NAFTA snake-oil salesmen at the Peterson Institute promised it would create 170,000 jobs a year. A year! Instead, it cost America at least 845,000 jobs. That is the number of manufacturing workers who were able to jump through all of the red-taped hoops necessary to receive Trade Adjustment Assistance (TAA) after corporations moved their jobs across the border. The study’s authors believe hundreds of thousands of additional workers lost their jobs because of NAFTA but did not qualify for the federal TAA aid.
The study also notes that the U.S. Bureau of Labor Statistics determined that two out of every three displaced manufacturing workers who secured new jobs in 2012 did so at slashed wages, the majority at a cut of more than 20 percent.
The result is rising income inequality. It happens like this: workers lose their good-paying factory jobs and take lower-paying positions. This increases competition for low-skill, low-pay jobs that can’t be offshored, such as hamburger flipping and shelf stocking. While a small number of corporate executives and wealthy shareholders profit from moving factories across borders, it forces increasing numbers of workers to vie for minimum-wage jobs. As a result, income inequality now matches the level it was during the robber baron days before the Great Depression.
A study last year by the non-partisan Economic Policy Institute (EPI) supports the Public Citizen findings. EPI determined that trade reduced wages for workers without college educations by 5.5 percent in 2011, costing the average worker $1,800. Meanwhile, trade with developing countries like China increased the wages of the smaller number of college-educated U.S. workers. The upshot is a widening gulf between Americans’ earnings, particularly as more and more Americans can’t afford the costs of higher education.
NAFTA actually encouraged corporations to abandon the United States. The Public Citizen report explains: “NAFTA created new privileges and protections for foreign investors that incentivized the offshoring of investment and jobs by eliminating many of the risks normally associated with moving production to low-wage countries.”
What that means is that U.S. corporations contribute to the trade deficit by manufacturing in Mexico and importing their products into America. Before NAFTA, the United States had a small trade surplus with Mexico. Now it’s a trade deficit. A huge one.
The Korean trade deal, which took effect nearly two years ago, is no better. Like NAFTA, its promoters said it would boost exports and create jobs. In its first year, U.S. exports to Korea fell 8.3 percent. Imports from Korea rose, increasing the trade deficit with Korea by nearly 40 percent. That cost Americans 40,000 jobs.
This is not what Americans want from trade. And yet, the United States is negotiating a NAFTA-style deal called the TPP with 11 Pacific Rim nations, including Brunei, Chile, Malaysia, Peru, Singapore and Vietnam. The negotiations are occurring in secret. Average citizens have no access to what’s going on. Without significant changes, TPP will just be another American factory shuttering, dream shattering trade deal.
Of course, the corporations that stand to profit and the U.S. Chamber of Commerce support the current TPP scheme, as they did the other job-destroying trade deals. And so do corporate politicians.
Three of them—U.S. Rep. Dave Camp and Senators Orrin Hatch and Max Baucus—introduced legislation last week to speed passage of TPP—put it on the fast track. Under fast track, Congress excuses itself from its Constitutional duty to supervise international trade.
The fast track bill empowers the President to sign a secretly devised trade pact before Congress votes on it. Fast track also limits Congressional debate to 20 hours and forbids amendments.
In addition to the anniversary of NAFTA, last week was the 50th anniversary of Lyndon B. Johnson’s call for a War on Poverty.
In that address to Congress, Johnson also appealed for more balanced trade, for foreign countries granted access to the American market to open their markets to American goods. That’s what Americans want from trade—fairness. They know they can compete when given a level playing field.
Americans want trade deals to ensure equity. They want trade policies that increase American innovation, American manufacturing and American jobs.
They want trade policies that help America win President Obama’s war on income inequality, not schemes that grant special favors to corporations at the expense of people.
Leo Gerard, United Steelworkers President
Leo Gerard is the president of the United Steelworkers International union, part of the AFL-CIO. Gerard, the second Canadian to lead the union, started working at Inco's nickel smelter in Sudbury, Ontario at age 18. For more information about Gerard, visit usw.org.