NAFTA at 10 | The Nation


NAFTA at 10

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Ten years ago, the North American Free Trade Agreement was sold to the people of the United States, Mexico and Canada as a simple treaty eliminating tariffs on goods crossing the three countries' borders. But NAFTA is much more: It is the constitution of an emerging continental economy that recognizes one citizen--the business corporation. It gives corporations extraordinary protections from government policies that might limit future profits, and extraordinary rights to force the privatization of virtually all civilian public services. Disputes are settled by secret tribunals of experts, many of whom are employed privately as corporate lawyers and consultants. At the same time, NAFTA excludes protections for workers, the environment and the public that are part of the social contract established through long political struggle in each of the countries.

About the Author

Jeff Faux
Jeff Faux is the founder and now Distinguished Fellow at the Economic Policy Institute. His latest book is The...

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Mexico's troubles illustrate the destructive effects of NAFTA's neoliberal economics.

As Jorge Castañeda, Mexico's recent foreign secretary, observed, NAFTA was "an accord among magnates and potentates: an agreement for the rich and powerful...effectively excluding ordinary people in all three societies." Thus was NAFTA a model for the neoliberal governance of the global economy.

The business-backed politicians who pushed the agreement through the three legislatures promised that NAFTA would generate prosperity that would more than compensate "ordinary" people for its lack of social protections. Foreign investors would make Mexico an economic tiger, turning its poor workers into middle-class consumers who would then buy US and Canadian goods, creating more jobs in the high-wage countries.

But as soon as the ink was dry on NAFTA, US factories began to shift production to maquiladora factories along the border, where the Mexican government assures a docile labor force and virtually no environmental restrictions. The US trade surplus with Mexico quickly turned into a deficit, and since then at least a half-million jobs have been lost, many of them in small towns and rural areas where there are no job alternatives.

Meanwhile, Mexico's overall growth rate has been half of what it needs to be just to generate enough jobs for its growing labor force. The NAFTA-inspired strategy of export-led growth undermined Mexican industries that sold to the domestic market as well as the sixty-year-old social bargain in which workers and peasant farmers shared the benefits of growth in exchange for their support for a privileged oligarchy. NAFTA provided the oligarchs with new partners--the multinational corporations--allowing them to abandon their obligations to their fellow Mexicans. Average real wages in Mexican manufacturing are actually lower than they were ten years ago. Two and a half million farmers and their families have been driven out of their local markets and off their land by heavily subsidized US and Canadian agribusiness. For most Mexicans, half of whom live in poverty, basic food has gotten even more expensive: Today the Mexican minimum wage buys less than half the tortillas it bought in 1994. As a result, hundreds of thousands of Mexicans continue to risk their lives crossing the border to get low-wage jobs in the United States.

Canada, which since 1989 has had a similar trade agreement with the United States, and which does much less business with Mexico, was less directly affected. But NAFTA strengthened Canadian corporations' ability to threaten workers and governments with moving south, helping undermine the country's traditionally strong labor and social standards.

In all three countries NAFTA has worsened the distribution of income and wealth. While ordinary people paid the costs, the benefits went to the continent's "rich and powerful." Canadian and US corporate investors got guaranteed access to Mexico's cheap labor as well as its privatized public assets. Mexican elites brokered the deals. In one example, well-connected Mexicans bought the country's second-largest commercial bank from the government for $3.3 billion and sold it to Citigroup for $12.5 billion.

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