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NAFTA's Broken Promises: Failure to Create U.S. Jobs

NAFTA's Broken Promises: Failure to Create U.S. Jobs



January 1997

Public Citizen's Global Trade Watch

Table: Job Promises and Reality, by Individual Company

 

In November of 1993, the National Association of Manufacturers (NAM) released NAFTA We Need It, a collection of anecdotes from more than 250 companies describing how they would create U.S. jobs and face improved business prospects if Congress passed the North American Free Trade Agreement (NAFTA).

As NAM President Jerry Jasinowski proclaimed in the report's forward: "U.S. companies are publicly sharing information on their market prospects in Mexico -- information normally considered 'company proprietary' and jealously guarded from the competition...They are doing so to convince Congress to approve the pact. These anecdotes...clearly illustrate how important the Mexican and other foreign markets are to U.S. companies and U.S. jobs."(1)

Three years after NAFTA went into effect, Public Citizen's Global Trade Watch examined the specific promises contained in the NAM's report and other pro-NAFTA business and government reports and congressional testimony to determine whether NAFTA has actually created the U.S. jobs that its proponents promised. By tracking the performance outcomes of specific job creation and export expansion promises of businesses and industry organizations, this report documents a broad sample of NAFTAs real life results.

As leading promoters of NAFTA, the firms surveyed for this report were the most likely to embody the promised benefits of NAFTA. This report reveals how the real life experiences of these pro-NAFTA companies three years into NAFTA now embody a very different story -- one which shows that NAFTA is not working. New U.S. jobs are not being created by NAFTA and NAFTA is causing major U.S. job loss.

Despite NAFTA's three year record, many of NAFTA's original industry and political boosters are now urging an immediate expansion of NAFTA to additional countries in the Americas. Any prudent consideration of NAFTA's future must be based on the real life evidence of NAFTA's actual performance.

With this study, Public Citizen demands: "Show Us the New NAFTA Jobs!" Recently, NAFTA's proponents have made weak attempts to use new statistical models to demonstrate NAFTA job creation. However, repeated inquiries to the Department of Commerce and our own studies have failed to uncover more than a few hundred actual new jobs attributable to NAFTA. These jobs stand in stark contrast to the NAFTA job loss reported by the NAFTA TAA program, which itself is a fraction of the actual NAFTA job loss. This study attempts to get past the phantom jobs NAFTA's defenders claim (using their economic models) and to look for the specific jobs created by NAFTA.

In three years, NAFTA has already cost more than 600,000 U.S. jobs. The evidence of NAFTA's job losses is described in detail below. Among the total NAFTA job loss are over 109,000 specific jobs certified by the U.S. Department of Labor under one narrow NAFTA job loss assistance and retraining program called NAFTA Trade Adjustment Assistance (NAFTA TAA.)

In order to examine NAFTA's impact on job creation, Public Citizen attempted to contact every company for which we were able to locate a specific NAFTA jobs or exports promise. We conducted an extensive investigation of the following sources to locate specific promises: the state-by-state NAFTA reports of USA*NAFTA and the National Association of Manufacturers (NAFTAs biggest industry promoters); the U.S. Department of Commerces state-by-state reports; and reams of congressional testimony on NAFTA over several years.

From November 1996 to February 1997, we conducted interviews with representatives from the identified companies in conjunction with The Multinational Monitor, an international news magazine published by Essential Information, Inc.

These interviews document that the vast majority of specific company promises to create U.S. jobs under NAFTA have not come close to fulfillment and are not heading in a direction to do so in the future. Interviewers found that company after company conceded that they are no where close to realizing their job creation assurances.

Public Citizen's Global Trade Watch first issued a report on NAFTA job creation in September 1995, twenty months into NAFTA. The findings in the 1995 report, which used a similar methodology, were staggering: 59 of 66 company-specific promises made by NAFTA advocates had been broken -- the promises did not even come close to being fulfilled. That is, 89 percent of the companies contacted in 1995 had not made any significant steps towards fulfilling their promises of U.S. job creation or export expansion. Despite an arduous search, we were unable to find more than a handful of specific new U.S. jobs created that companies attributed to NAFTA. At that time, the Department of Labor had already certified over 60,000 workers for special assistance under NAFTA Trade Adjustment Assistance.

Critics of our 1995 study charged that it was too soon to judge whether or not NAFTA was working. They also claimed that Mexico's December 1994 peso devaluation was responsible for the fact that companies were not performing as promised. "It's time to stop playing the 'blame NAFTA' game every time there is a shock felt in the international financial markets," said the late Commerce Secretary Ronald H. Brown. Of course, the United States had already begun a new monthly trade deficit with Mexico under NAFTA in the fall of 1994, four months before the December peso crash.

Therefore, we decided to let time pass and revisit the NAFTA job situation three years into the Agreement. The results of our recent survey of U.S. companies' promises to increase U.S. jobs and exports because of NAFTA reveal that NAFTA job creation performance in 1997 is statistically almost identical to the unfortunate findings of our earlier survey in 1995. However, what has changed is the scope of NAFTA-related job loss. Since 1995, NAFTA job losses have increased dramatically.

Findings

Companies responses fell into three categories: (i) 7 companies that have kept their pre-NAFTA promises; (ii) 60 companies that have broken their promises; and (iii) 16 companies that made significant promises, but were unwilling or unable to provide current data to our interviewers. Our latest survey research reveals:



Three years into NAFTA, 60 of 67 company-specific promises made by NAFTA advocates have been broken: the promises did not even come close to being fulfilled. That is, 89 percent of the companies that we contacted had not made any significant steps towards fulfilling their promises of U.S. job creation or export expansion. The broken promises pervade American business and cut across regional and industrial sectoral lines.



Three years into NAFTA, 90 percent of the NAFTA advocates promises to increase U.S. jobs (46 of 51) have been broken; 87 percent of the promises to increase U.S. exports (14 of 16) have been broken.



According to data available under one narrow Department of Labor NAFTA re-training program, NAFTA TAA, the NAFTA-related job loss for the collection of companies in this report has increased 276% since our first edition in September 1995; the number of jobs lost due to a "shift in production to Mexico" for this group has increased by 480%. This does not even count more than 600 jobs lost due to a "shift in production to Mexico" from Lucent Technologies (formerly AT&T) and Siemens whose 1993 job creation promises had been found since the previous report, and thus are not included in this comparison.



Allied Signal, General Electric, Johnson and Johnson, Kimberly-Clark (formerly Scott Paper), Lucent Technologies (formerly AT&T), Mattel, Proctor and Gamble, Siemens, Whirlpool, Xerox and Zenith all made specific promises to create or maintain jobs, and all have laid off workers because of NAFTA as certified by the U.S. Department of Labors NAFTA TAA program.



Five companies claim to have kept their specific promises to create new jobs at certain locations through NAFTA. Yet, while Zenith created some new jobs at a plant it had cited, its relocations to Mexico of other plants under NAFTA has resulted in Zenith having a net NAFTA job loss of more than 290 jobs. Net job creation numbers of other firms were not impressive.

Zenith promised that "all of their production facilities" would not move to Mexico and that "NAFTA offers the prospect of more jobs for Zenith workers at the company's Melrose Park (Illinois) facility. In December of 1996, Zenith announced that it was laying off 27% of the workers at the Melrose Park facility as part of a company wide downsizing. Zenith claims to have created three hundred new jobs at Melrose Park. However, according to the Department of Labor, 510 other Zenith workers were laid off due to a "shift in production to Mexico" (430 workers in Zenith's Springfield, Missouri facility and 80 workers at their Chicago, Illinois facility.

The other firms' NAFTA job creation numbers were not impressive. TRANSMEX/USA, Inc., a transportation logistics management service in Hickory Hills, Illinois, claims to have created 10 new U.S. jobs due to their increased business with Mexico. It is worth noting that the company adamantly maintains that their increased business with Mexico would have occurred with or without NAFTA. Kronos, a producer of titanium dioxide in Highstown New Jersey, claims to have created "about twenty" new U.S. jobs due to their increased business with Mexico since NAFTA.

One of the two companies which kept its promise to increase exports to Mexico, Springs Industries, a textile manufacturer based in Fort Mill, South Carolina, was certified by the Department of Labor as having laid off 200 workers at their City of Industry, California plant due to a "shift in production to Mexico."

This report examines every promise of a pro-NAFTA company made in published materials that we could locate. The study covers large companies and associations, including Eastman-Kodak, Zenith, Polaroid, Sara Lee, Whirlpool, Honeywell, Johnson & Johnson, Mattel, General Electric, and Xerox; medium size companies like Air-Hydraulics of Jackson, Mississippi and Pacer Corporation of Custer, South Dakota; and small companies like Canchola Foods of Nogales, Arizona and Labatt Food Distributors in San Antonio Texas.

It is especially revealing to discover the names of companies that stood to gain the most from NAFTA, the ones that were the NAFTA "poster firms," on the NAFTA-TAA list of firms that laid off workers due to NAFTA. Allied Signal, General Electric, Johnson and Johnson, Kimberly-Clark (formerly Scott Paper), Lucent Technologies (formerly AT&T), Mattel, Proctor and Gamble, Siemens, Whirlpool, Xerox and Zenith all promised to create jobs, and all have laid off workers because of NAFTA.

General Electric (GE) is a good example. A representative from GE had testified before the House Foreign Affairs Committee in October of 1993 that sales to Mexico "could support 10,000 jobs for General Electric and its suppliers. We fervently believe that these jobs depend on the success of this agreement." In 1997, a GE spokesperson was unable to cite any job gains due to trade with Mexico. Meanwhile, the Department of Labor's NAFTA Trade Adjustment Assistance program (NAFTA TAA) has certified that General Electric has laid off 2,304 workers due to NAFTA -- 2,254 of those due to a "shift in production to Mexico."

According to GE Spokesperson David Warshaw, GE has had "positive success in Mexico related to growth in the Mexican economy."

Another example of this practice is Mattel, a toy manufacturer from El Segundo, California. In 1993 Mattel Vice-President Fermin Cuza testified before the House Ways and Means Subcommittee on Trade that NAFTA would create jobs and have "a very positive effect on more than 2,000 [Mattel] U.S. employees." Company spokesperson Glenn Bozarth now says that Mattel has not created any new U.S. jobs due to NAFTA. "Little, if any, of our products are exported to Mexico," he said. The Labor Departments NAFTA Trade Adjustment Assistance program (NAFTA TAA) has certified that 520 workers at Mattels Fisher Price facility in Medina, New York were laid off due to "increased company imports from Mexico."

In this study, we did not focus on the more than 1,400 firms in 48 states where workers have filed petitions under one narrow NAFTA assistance program with the Department of Labor as having lost their jobs due to NAFTA. However, to the extent that one of the companies making a specific job creation promise is now listed on the Labor Departments NAFTA Trade Adjustment Assistance job loss list, we have noted it.

NAFTA Trade Adjustment Assistance:

Some Names and Faces of NAFTA's Job Loss

As of February 19, 1997, the U.S. Department of Labor had certified 109,384 workers as having lost their jobs due to NAFTA under the narrow terms of NAFTA TAA. These numbers represent only the tip of the iceberg of NAFTA job losses because the NAFTA-TAA program is only available to some workers in some industries, and many workers file for assistance under other, better known and less complicated trade unemployment assistance programs. Indeed, only workers who know about and choose to apply for the new NAFTA TAA program are even considered, and only certain types of workers in certain types of companies can qualify. For instance, only workers involved in the production of an actual product -- such as assembling a car -- damaged by NAFTA trade can qualify. Workers producing auto parts used by that NAFTA TAA certifiable assembly plant would not qualify.

A vivid example of how the NAFTA TAA job loss data understates actual NAFTA job loss involves the case of jeans maker Guess Inc. According to the Wall Street Journal, Guess has cut the percentage of its clothes sewn in Los Angeles from 97% prior to NAFTA to 35% as of February 1997 as it sent work to five sewing factories in Mexico, and to plants in Peru and Chile.(2) More than 1,000 Los Angeles Guess workers lost their jobs in August and September 1996 alone. None of these Guess jobs that shifted to Mexico -- either directly with Guess or with its U.S. contractors -- show up as having even applied to NAFTA TAA, much less as being certified for assistance. The Department of Labor's TAA program lists only one clothing manufacturer in Los Angeles as having laid off workers because of a shift in production to Mexico. That company, Lee Thomas, is not and has not been a Guess contractor.

Another example of NAFTA TAA's gross understatement of NAFTA job loss involves Florida tomatoes. According to a June 14, 1996 University of Florida Institute of Food and Agricultural Sciences press release, "...before NAFTA, tomatoes were a $700 million industry for Florida with more than 200 growers. By 1995, with the NAFTA provisions in place and a peso devaluation of more than 50 percent, revenues shrank to $400 million and growers numbered less than 100." Yet, with 100 Florida tomato firms wiped out, only one company associated with Florida tomatoes, Regency Packing Company of Naples, has been certified by the Department of Labor's TAA program. That one firm's closing resulted in over 1,000 workers being certified under NAFTA TAA.

The NAFTA TAA program also does not apply to U.S. retail workers harmed by the peso devaluation. For instance, as reported in a January 1996 Miami Herald story on the impact of the devaluation on U.S. border retail outlets, in Calexico, California, 1,322 jobs were lost due to the December, 1994 peso devaluation. The loss of cross border retail business by newly impoverished Mexicans gave the town of 18,600 the highest unemployment rate in the state (40.6%). Not a single NAFTA TAA petition was filed from the town of Calexico and Calexico's newly unemployed would not qualify for NAFTA TAA if they did file.

NAFTA Job Losses: The Big Picture

A full three years have passed since NAFTA was implemented in January 1994 and over two years have passed since the December 1994 peso devaluation. Since mid-1996, the Clinton Administration and the Mexican government have been declaring that the Mexican economic crisis is over, a point most Mexican citizens living in economic despair would strongly contest.

However, the Mexican peso's value remains at nearly a third of its pre-NAFTA value. This exchange rate, which makes the US $5 per day pre-NAFTA wages of Mexico's border assembly plants worth less than $3 U.S. dollars. Some economists in the United States and Mexico connect the drastic December 1994 Mexican peso devaluation to NAFTA. Others claim there is absolutely no connection. Regardless of one's opinion on the cause of the peso devaluation, one thing is clear: the drastically lower peso value is an economic reality under which NAFTA trade will be conducted in the future. Indeed, in a 1993 House Small Business Committee hearing, proponents and opponents of NAFTA predicted that a massive peso devaluation would occur shortly after NAFTA's passage and that such a devaluation would have serious impacts on how NAFTA operated. In the rush to pass NAFTA, however, recommendations to add measures to counter major currency fluctuations under NAFTA were ignored.

Thus, now the combination of NAFTA and the new post-devaluation peso value has spurred relocation of high-paying U.S. jobs into the Mexican border maquiladora factory sector. Employment in the Mexican border plants has increased 48% since NAFTA's start.(3)

Since NAFTA, companies relocating U.S. jobs to Mexico are now also equipping their border plants with state-of-the-art equipment, guaranteeing productivity rates comparable to those in U.S. plants. Thanks in part to NAFTA's built-in investment insurance, guaranteed by the U.S. Treasury, businesses can now obtain $3 per day wages without risk. Indeed, under NAFTA's Chapter 11 investment rules, any investor from a NAFTA country will be reimbursed in a currency of choice if a NAFTA country "directly or indirectly nationalizes or expropriates" the investor's property or assets.(4) This incredible investment risk insurance is provided cost free to investors under NAFTA terms.

The effects of NAFTA's investment guarantees and Mexico's low wages have been dramatic. Before NAFTA, Mexico was the only major trading partner with whom the United States did not have a trade deficit. In NAFTA's first three years, the $1.7 billion U.S. trade surplus with Mexico that existed in 1993 has been transformed into a record new NAFTA trade deficit. The 1996 U.S. trade deficit with Mexico is the largest ever at $16.3 billion, breaking the record $15 billion deficit of 1995. If the U.S. trade deficit with Canada is added, the overall NAFTA trade deficit from January 1994 to January 1997 is over $85 billion, according to U.S. Department of Commerce data.

Mexican exports in automobiles and electronics are almost entirely responsible for this U.S. trade deficit. In 1996, the United States had a $27.7 billion trade deficit in automobiles, light trucks and parts with Mexico and Canada -- $15 billion with Mexico, $12.7 billion with Canada. The composition of the NAFTA trade flow is particularly damaging to U.S. jobs in another way. According to unpublished Census Bureau Data, only 11.7% of U.S. goods exported to Mexico consisted of consumer goods for the first eleven months of 1996. U.S. exports to Mexico are overwhelming "outsourcing"-- assembly which used to be done in the United States.

NAFTA boosters argue that without NAFTA the damage to the United States from Mexico's economic crisis would have been even worse. Yet, when Mexico's economy last crumbled in 1982, the U.S. trade deficit at its worst was less than half of the current deficit the U.S. has suffered in each of two of NAFTA's three years.(5) What's more, while the United States has been walloped with a new NAFTA trade deficit (about which Business Week reported under the headline "Singing the NAFTA Blues"). Mexico's other major trade partners, including the European Union, Japan and China, have maintained trade surpluses with Mexico throughout this latest economic crisis.

In May 1993, then U.S. Trade representative Mickey Kantor predicted "Export jobs related to Mexico" will reach 200,000 "by 1995 if NAFTA with the supplemental agreements is implemented."(6) However, the economic models used by the Administration and the pro-NAFTA lobby to create the 200,000 new-jobs-per-year promise to sell NAFTA to the American public, including the so-called "Hufbauer-Schott model," were methodologically flawed. These flawed predictions have no relation to the present reality. For instance, these models -- used by NAFTA's promoters both in and outside the Administration -- predicted that by the end of 1995 the United States would enjoy a $9 billion trade surplus with Mexico. The reality, of course, is that the post-NAFTA surge in imports from Mexico resulted in a $15-plus billion trade deficit with Mexico for 1995 and an even larger deficit in 1996.

If the U.S. trade deficit is plugged into the job creation formulas created by NAFTA advocates, approximately half a million U.S. jobs have been lost under NAFTA. Most of the U.S. jobs lost are high paying jobs in automobiles, trucks and auto parts. The Washington D.C. based think tank found that the U.S. trade deficit with Mexico in these areas has quadrupled since 1993.

Confronted with such data, NAFTA's boosters scramble towards general U.S. job creation figures, arguing that if the U.S. economy is creating jobs, then NAFTA cannot be doing any real damage. Of course, the vast majority of new jobs now being created in the United States are in low paying sectors of the economy. According to the Labor Department's Bureau of Labor Statistics, the top four occupations having the largest numerical increase over the next decade are, in order, cashiers, janitors, retail sale clerks and waiters and waitresses. As well, studies show that the chances are 2 to 1 that a laid off U.S. worker will not find an equal or higher paying job. The median annual pay drop of a worker who was hired after being laid off in the early 1990's was $4,420.(7) As ugly as the NAFTA job loss data is, NAFTA's downward pressure on wages may be even more damaging.

In NAFTA's three years, real wages have continued to drop. The lack of real wage growth during a period of economic recovery is unique in over one hundred years of U.S. wage data. Now, a Cornell University report commissioned -- and then suppressed for over four months -- by the U.S. Labor Department shows that NAFTA is being used to bust unions and thwart labor organizing.(8) "NAFTA created a climate that has emboldened employers," says the study's author, Cornell Professor Kate Bronfenbrenner, in a January 27, 1997 Business Week story entitled, "NAFTA: A New Union-Busting Weapon?".


10 Sample Broken Jobs/Exports Promises of NAFTA Proponents

I. Allied-Signal

Aerospace Manufacturer

Morristown, New Jersey

Promise: When asked by CNN anchor Lou Dobbs if Allied-Signal would move U.S. jobs to Mexico if NAFTA passed, company Chairman Lawrence Bossidy responded, "I think quite the contrary...I think the jobs that were to move to Mexico have already moved there."(9)

Reality: The Department of Labor's NAFTA Trade Adjustment Assistance program (NAFTA TAA) certified that 798 Allied Signal workers were laid off due to a "shift in production to Mexico" (525 workers at their Greenville, Alabama facility; 180 workers their Greenville, Ohio facility; and 3 workers at their El Paso Texas facility). The TAA program also certified that 77 workers at their Orangeburg, South Carolina facility were laid off due to a "shift in production to Canada" and 137 workers at their South Montrose, Pennsylvania facility due to "customer imports increased; not identified Canada/Mexico".

On January 21, 1997, workers at Allied's Charlotte, North Carolina facility filed a petition with the Department of Labor's NAFTA Trade Adjustment Assistance program (NAFTA TAA) stating they had lost their jobs due to NAFTA. The Department of Labor has not released a ruling yet on that petition.

When asked about Allied Signal's experience under NAFTA, Vice President of Corporate Affairs Mark Greenberg said, "We decline to comment on NAFTA."

II. APC Equipment

Construction and Excavation Equipment Purchasing, Sales and Service

Tucson, Arizona

Promise: "The company currently does 80 percent of its business with Mexico...APC would be able to hire more people to transport goods, more salesmen, and more machinists".(10)

Reality: According to APC Equipment Owner Terry French, the company has not created jobs due to business with Mexico. "We thought it [NAFTA] would help but it hasn't."

III. Labatt Food Services

Food Distributor

San Antonio, Texas

Promise: "The company anticipates the creation of a large number of jobs in the United States as a result of rapid growth in its Mexican operations."(11)

Reality: According to company representative Michelle Whinery, the company hasn't done business with Mexico "for a few years".

IV. IBP Equipment, Inc.

Industrial Equipment

Wabasha, Minnesota

Promise: "With the implementation of NAFTA, IBP expects to double or triple its exports to Mexico, increasing employment by 25%."(12)

Reality: According to company spokesperson Todd Smith, NAFTA "hasn't made a difference at all" in his company's exports to Mexico. Rather than increasing exports, Smith said the firm actually sold more to Mexico prior to NAFTA. "I don't think we've sold anything [to Mexico] last year [1996]," he said.

V. Mallinckrodt Vetinary Inc.

(Formerly Sterwin Laboratories Inc)

Poultry Health Products

Millsboro, Delaware

Promise: "The company states the demand for poultry products in Mexico is growing rapidly and that it intends to be part of that growth. A rapidly growing poultry industry and reduced trade barriers have been important factors in the growth of Sterwin sales in Mexico. This business will continue to grow in the years ahead,"(13) said Fred Melchior, Jr. General Manager.

Reality: General Manager Melchior now says that the firm's exports to Mexico have not increased or decreased due to NAFTA. The Department of Labor's NAFTA Trade Adjustment Assistance program (NAFTA TAA) certified that 915 Mallinckrodt workers were laid off due to a "shift in production to Mexico": 850 in their Argyle, New York facility; 60 in their New Athens, Illinois facility; and 5 in their Earth City, Missouri facility.

VI. Johnson & Johnson

Pharmaceutical Products Manufacturer

New Brunswick, New Jersey

Promise: "An estimated 800 more U.S. positions will be created as a result of trade with Mexico, should NAFTA be approved."(14)

Reality: The Department of Labor's NAFTA Trade Adjustment Assistance Program (NAFTA TAA) certified that Johnson and Johnson laid off 512 workers due to NAFTA; 400 from a Little Rock, Arkansas plant due to a "shift in production to Canada" and 112 from an El Paso, Texas plant due to a "shift in production in Mexico."

When asked if Johnson and Johnson had increased jobs under NAFTA, spokesperson Jeffery Leebau said, "The company does not want to engage in an interview on its experiences with NAFTA at this point."

VII. Seaman Corporation

Industrial Fabric Manufacturer

Wooster, Ohio

Promise: "NAFTA will support Seaman's marketing efforts for its industrial fabrics and environmental products. The products that are sold in Mexico will provide employment opportunities and earning growth in Seaman's Ohio and Tennessee facilities."(15)

Reality: When asked if Seaman's exports to Mexico resulted in the company creating new jobs in Ohio and Tennessee, Director of Marketing Jim Krakowski asid, "No. Nor did we intend to."

VIII. Hercules, Inc.

Chemical Manufacturer

Wilmington, Delaware

Promise: "Delaware's numerous chemical companies, including Hercules Inc., American Mirrex Corp., NVF Co., and ICI Americans Inc., do not expect to expand their Mexican-based operations, but do expect to increase their exports to Mexico." (16)

Reality: According to the January 30, 1997 Atlanta Journal and Constitution, Covington's "Wade Higgins, manager of product development, had said two weeks ago that Hercules was shutting down several high-cost production lines in Covington [Georgia] and shifting the work to a new plant in Tampico, Mexico." A different company spokesperson later claimed there was no connection between the layoffs and the new Mexican plant.

When asked if Hercules had increased their exports to Mexico, spokesperson Amy Bender said, "We can not participate in this survey."

IX. Pacer Corporation

Industrial Mineral Mining

Custer, South Dakota

Promise: "If NAFTA is implemented, we expect to make a major effort to dramatically increase our business in Mexico and this increase will result in more South Dakota jobs,"(17)

Reality: According to spokesman George Kruse, "NAFTA has hurt us severely; it has not been good for us.....We are scrambling to hold on to every job we have!"

X. Siemens

Electrical and Electronic Equipment Manufacturer

New York, New York

Promise: "Siemens believes NAFTA would remove some of the current motivation to locate in Mexico to gain access to that market...The demand for equipment will increase and the impact of maquiladora operations will decline. Overall, NAFTA would be a positive impact."(18)

Reality: The Department of Labor's NAFTA Trade Adjustment Assistance program (NAFTA TAA) has certified that 304 Siemens workers were laid off due to a "shift in production to Mexico": 274 in a Little Rock, Arkansas plant and 30 in an El Paso, Texas plant.

In December, 1997 workers at Siemens' Marion, Kentucky and Little Rock, Arkansas facilities filed petitions with the Department of Labor's NAFTA Trade Adjustment Assistance program (NAFTA TAA) stating they had lost their jobs due to NAFTA. The Department of Labor has not yet released a ruling on those petitions.

Recommendations

There are several important lessons to be learned from three years of real life experience with NAFTA concerning NAFTA's effects on U.S. jobs and the NAFTA trade balance. The data of NAFTA's actual record must serve to guide our decisions about how to proceed with our economic, environmental and political relations in North America. Despite NAFTA's three year record, many of NAFTA's original industry and political boosters are now urging an immediate expansion of NAFTA to additional countries in the Americas.

1. We must not expand NAFTA. NAFTA is an experiment that has failed.

NAFTA has already caused job loss and economic instability in the United States, Mexico and Canada. Why would we want to inflict NAFTA's problems on Chile, other South American nations or the 23 Caribbean and Central American Caribbean Basin Initiative countries? NAFTA is simply not the model for relations among the nations of this hemisphere.

2. Congress should pass legislation to apply a do-no-further-harm test to NAFTA. Despite NAFTA entering its fourth year, NAFTA proponents continue to argue that it may be too soon to judge NAFTA's benefits. However, it is certainly timely to make sure that NAFTA is not causing harm. Thus, for instance, the NAFTA Accountability Act, a bill that obtained 109 bipartisan House cosponsors in the 104th Congress, requires certification that conditions are at least as good as before NAFTA went into effect in 1994. The bill requires studies of the areas NAFTA was promised to improve, such as jobs, wages, the border environment, illegal drug flows and more. If NAFTA can be shown to be doing "no further harm," all that passage of the bill would require is reports on NAFTA's real life outcomes. The bill provides authority for renegotiation of NAFTA provisions if and only if NAFTA cannot be shown to at least "break even." If, after a certain number of years, NAFTA cannot be "fixed" to make it at least break even, its implementing legislation would sunset like normal legislation and require reauthorization.

3. If NAFTA is causing harm, we need to replace it with a different agreement.

We need an agreement among the countries of the Americas that promotes the creation of good jobs and fosters labor rights; that facilitates higher wages and safe working conditions; that helps root investment in local communities and promotes stability in our currencies and financial markets; that protects the environment and human health as a priority; that guarantees democratic accountability of decision makers, due process, and human rights; and that supports rural society and small farmers in our hemisphere. To date, NAFTA has had the opposite results as demonstrated by three years of real life NAFTA outcomes.


4. We need to help those already hurt by the faulty NAFTA by:

a) Improving Trade Adjustment Assistance to be more user-friendly through mandatory posting and counseling about the program in state unemployment offices, and increased funding so the programs benefits can cover all NAFTA unemployed workers, and not only those who apply before the money runs out. Eligibility for the program needs to be expanded to all NAFTA job loss victims, not just certain workers in certain types of industries.

b) Increasing Monitoring as to which workers and communities are affected and providing aid to communities, such as El Paso, Texas, and to regions, such as the states of New York, Pennsylvania and Washington, hit particularly hard.

c) Increased Funding for Border Communities Hit with New Environmental and Health Problems

Thanks to the NAFTA boom of new production in the Mexican maquiladora factories. Under NAFTA, employment in the Maquiladora factories is up 48%. However, despite the increased worker population and the production of more toxic waste and greater air and water discharge from industry, the promised improvements in border civil and industrial health and environmental infrastructure have not occurred. Indeed, some water treatment plants started before NAFTA have been stopped because of U.S. congressional budget cuts and the Mexican economic crisis. New clean up and infrastructure projects promised under the new NAFTA environmental institutions have not materialized.



1. NAFTA: We Need It, National Association of Manufacturers, November 1993.

2. Wall Street Journal, January 14, 1997.

3. In December 1993 there were 546,588 Mexican maquiladora workers. In November of 1996 the Mexican maquiladora workforce had grown to 811,376 according to Mexico's National Statistics Institute, an increase of 48%.

4. North American Free Trade Agreement, Article 1110.

5. Prior to NAFTA, the worst trade deficit the U.S. suffered with Mexico was in 1983 when the deficit hit $8 billion. By 1984, the Mexico deficit eased to $6 billion and by 1986, the deficit with about $1 billion according to U.S. Department of Commerce data.

6. Statement of U.S. Trade Representative Mickey Kantor, National Press Club, May 1993.

7. "More Than 43 Million Jobs Lost, Reaching Every Walk of Life", New York Times, reprinted in the National Times, December, 1996.

8. Bronfenbrenner, Kate; Cornell University; "The Effects of Plant Closing of Threat of Plant Closing on the Right of Workers to Organize," September 30, 1996.

9. CNN "Moneyline" August 23, 1933 interview with Lou Dobbs, CNN anchorman.

10. The National Association of Manufacturers, "NAFTA, We Need It: How U.S. Companies View Their Business Prospects Under NAFTA," November 1993. Washington, DC, p. 1

11. NAFTA : We Need It: How U.S. Companies View Their Business Prospects Under NAFTA, National Association of Manufacturers, Washington, DC, November, 1993. p. 81

12. NAFTA: We Need It: How U.S. Companies View Their Business Prospects Under NAFTA, National Association of Manufacturers, Washington, DC, November, 1993. p. 50

13. "The State of Delaware and the NAFTA", Department of Commerce, Washington, DC, August 1993, p. 5

14. NAFTA: We Need It: How U.S. Companies View Their Business Prospects Under NAFTA, National Association of Manufacturers, Washington, DC, November, 1993. p. 54

15. The National Association of Manufacturers, "NAFTA, We Need It: How U.S. Companies View Their Business Prospects Under NAFTA," November 1993, Washington, D.C., p. 72

16. "The Impact of NAFTA on Delaware," Prepared for USA*NAFTA by the Trade Partnership, Washington DC, June, 1993. p. 4

17. NAFTA: We Need It: How U.S. Companies View Their Business Prospects Under NAFTA, National Association of Manufacturers, Washington, DC, November, 1993. p. 77

18. The National Association of Manufacturers, "NAFTA, We Need It: How U.S. Companies View Their Business Prospects Under NAFTA," November 1993. Washington, D.C., p. 69

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