Nafta 5 Years Of Failure NAFTA Five Years of Failure In December of 1992, Presidents Salinas (Mexico), Bush (U.S.) and Prime Minister Brian Mulroney of Canada signed the North American Free Trade Agreement (NAFTA). The Mexican legislature ratified NAFTA in 1993 and the treaty went into effect on January 1, 1994, creating the largest free-trade zone in the world. NAFTAs promoters promised 200,000 new jobs per year for the U.S., higher wages in Mexico and a growing U.S. trade surplus with Mexico, environmental clean-up and improved health along the border. The reality of the post-NAFTA surge in imports from Mexico has resulted in an $14.7 billion trade deficit with Mexico for 1998.
By adding the Mexican trade deficit to the deficit with Canada, the overall U.S. NAFTA trade deficit for the year 1998 is $33.2 billion dollars. In the last five years we have gone from a pre-NAFTA trade surplus of $4.6 billion with Mexico to a $14.7 billion deficit. Using the Department of Commerce trade data in the formula used by NAFTA proponents to predict job gains, the real accumulated NAFTA trade deficit would translate into over four hundred thousand U.S. jobs lost. A number of companies that specifically promised to create new jobs actually laid workers off because of the agreement.
Allied Signal, General Electric, Mattel, Proctor and Gamble, Scott Paper and Zenith all made specific promises to create jobs, and all have laid workers off because of NAFTA as certified by the U.S. Department of Labors special NAFTA unemployment assistance program (NAFTA TAA). (1) These are not the only companies who broke their promise of new jobs. In February 1997, Public Citizens Global Trade Watch conducted an investigation of companies that had specifically promised that they would create jobs if NAFTA were enacted in 1993. Of the 67 companies studied, 60 had not created jobs or even increased their exports to Mexico. When we look at the goods exported from the U.S. to Mexico, we must understand that the figures used do not mean goods to be sold in Mexico. Most of the figures released by the government include what is termed as industrial tourism. This means we send goods to Mexico to be assembled in their low wage plants and then re-imported into the U.S. as finished products.
(2) A significant portion of the jobs lost to Mexico due to NAFTA are in the higher wage sectors of manufacturing. Many of these are in the automobile and electronics industries. The latest government data shows that 70% of the jobs lost were in manufacturing. The U.S. has gone from a pre-NAFTA manufacturing trade surplus of $4.6 billion with Mexico in 1993 to a $8.9 billion deficit in 1998.
Imports from Mexico have increased 129% since NAFTA went in to effect. (3) According to the U.S. Department of Labor, approximately 214,902 American workers have been certified as having been laid off due to NAFTA. These numbers do not take into account the workers displaced out side of the factories. When a plant closes and moves to Mexico it is not only the line worked who is affected but also the entire community. One must look at the retailers who have to layoff works due to decreased sales; restaurants and all service industries tied to the consumer are affected. These workers are not considered by the government as being displaced by NAFTA.
The wages paid in the new high tech plants being built in Mexico, are so low there is not a single U.S. worker who could take enough of a pay adjustment to compete. The average hourly compensation for a U.S. manufacturing job is approximately $18.74/hour,) and the average wage in Mexico is $1.51 per hour. (4) NAFTA is directly responsible for the wage stagnation being experienced in the U.S., this is largely due o the threat of closing the business and moving to Mexico every time workers try to organize and negotiate a wage increase.
Kate Bronfrenbrenner of the Cornell University School of Industrial Relations found that the percentage of U.S. companies following through on threats to close in response to union drive tripled under NAFTA. NAFTA was supposed to raise the standards of living in Mexico so that the Mexican citizens would be able to buy U.S. goods and stem the flow of illegal immigration into the U.S. Unfortunately since NAFTAs enactment; 7,771,607 Mexican workers in 1997 were documented as earning less than Mexicos legal minimum wage of $3.40 a day, a 20% increase from pre-NAFTA figures taken in 1993. By 1997 Mexicos working class was earning 40% less than they were in 1994.
(5) Manufacturing jobs are not the only jobs lost to NAFTA, the American farmer has suffered greatly under the program. American exports to Canada and Mexico have risen 35%, but net farm incomes have remained the same. In fact, 45% of small and medium farms in the U.S. have had dramatic decreases in income. American farmers are finding it difficult to compete with the cheap labor cost across the Mexican border.
The average wage paid to migrant workers in the U.S. is $6 hour, while across the border farmers pay $6/day. There is no way a U.S. farmer can cut production cost enough to compete against such cheap labor. Tomatoes are a prime example of produce being imported from Mexico and costing American jobs. Under NAFTA, Mexican tomato imports have increased 63%.) Between 1993 and 1998, over 100 Florida tomato farmers have closed up shop and 24 packing houses have closed. The loss of the tomato farms has cost Florida agriculture $1 billion. During this same period prices for tomatoes have risen 16%, this shows there has been no savings passed on to the consumer only higher margins for the retailers.
(6) How safe the food is we are importing is as big a concern as the jobs lost to imports. Agricultural imports from Canada and Mexico have risen 57% since 1993. 52% of the imported fruit and vegetables coming to the U.S. are from Mexico. Since NAFTA went into effect Food and Drug Administration inspections of imported food has declined from 8% to less than 2%. NAFTA has no requirements for member countries to maintain a minimum standard for food safety.
The flood of fruit and vegetables from Mexico coincides with cuts in Mexicos food inspection budget. Mexico spent US$25 million, in 1992 on food inspections; this had declined to US$5 million by 1995 under NAFTA. With the decreased inspections, U.S. children participating in the federal school lunch program have been exposed to Hepatitis A. Frozen strawberries imported from Mexico in 1997 caused an outbreak of the deadly Hepatitis A.
More than 250 people in five U.S. states were exposed, 130 of them were children in Michigan. The children had received the strawberries through the federal school lunch program. As early as 1993 imported strawberries from Mexico were found to contain harmful and potentially fatal strands of bacteria. There have also been documented cases of the deadly e-coli being found on lettuce and other produce imported from Mexico. Cases of illness caused by contaminated Mexican produce have risen 23% since 1993.
(7) It is clear that NAFTA has been a dismal failure on all counts. There is not a single example of NAFTA producing positive results since it inception in 1993. END NOTES 1. Briones,J.,(1995,September 4) . NAFTAs Broken Promises. Public Citizen Publication, p.10 2. International Trade Commission, Production Sharing : The Use of U.S.
Components and Materials in Foreign Assembly Operations, April 1997. 3. Louis Uchitelle, The Economy Grows. The Smokestacks Shrink, New York Times, 11/29/98 4. U.S.
Bureau of Labor Statistics, Division of Foreign Labor Statics, Comparative Hourly Compensation Cost for Production Workers in Manufacturing Industries, Selected Countries: 1997.) 5. Bronfenbrenner, Kate. Final Report : The Effects of Plant Closing or Threat of Plant Closing on the Right of Workers to Organize, Submitted to the North American Commission for Labor Cooperation, September 30, 1996. 6. USDA Foreign Agricultural Service, US Agricultural Consumption Imports, January 1993 to December 1997.
7. New Dangers Make Way to US Tables, Boston Globe, September 20, 1998. Economics Essays.