More Information on the North American Free Trade Agreement (NAFTA)

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After a year of NAFTA renegotiations, in the fall of 2018 a revised text was released. It revealed some improvements that progressives have long demanded, such as a major rollback of Investor-State Dispute Settlement. But NAFTA 2.0 also includes unacceptable new powers for pharmaceutical firms to keep medicine prices high. And critically, more work is needed to strengthen labor and environmental standards and ensure their swift and certain enforcement.

NAFTA went into effect on January 1, 1994 between the United States, Mexico and Canada. Negotiated behind closed doors with hundreds of official corporate advisors, NAFTA was radically different than past trade deals that focused on traditional trade matters, like cutting border taxes. Instead, most of NAFTA’s provisions grant new powers and privileges to multinational corporations.

These new powers make it easier for corporations to outsource jobs and attack the environmental and health laws on which we all rely. (Check out our list of the most egregious NAFTA investor-state dispute settlement cases here.) NAFTA’s “investor protections” create incentives for corporations to relocate production and jobs elsewhere. The U.S. government has certified more than 980,000 American jobs as lost due to NAFTA. This measure is a significant undercount, as it includes only those workers who qualify for the narrow Trade Adjustment Assistance (TAA) program. NAFTA has also lowered U.S. wages, increased inequality, and hurt U.S. manufacturing and wiped out small farmers in all 50 states. NAFTA also guts the Buy American policies that require the government to buy American-made goods when spending our tax dollars. This outsources our tax dollars rather than investing them to create jobs here. And, it rolled back food safety protections. Before NAFTA, we only imported meat and poultry hat satisfied U.S. safety standards. But NAFTA required us to accept imports of meat that satisfy Canadian and Mexican standards, which was declared equivalent to U.S. standards even though there are significant differences that threaten safety.

At the same time, U.S. agricultural dumping in Mexico has decimated Mexico’s rural economy, driving millions from their homes.

The NAFTA of 1994: a Vast Expansion of Corporate Power

At the heart of NAFTA were investment outsourcing protections and new rights for multinational corporations to sue the U.S. government in front of a tribunal of three corporate lawyers.

These lawyers can order U.S. taxpayers to pay the corporations unlimited sums of money, including for the loss of expected future profits.

The corporations only need to convince the lawyers that a law protecting public health or the environment violates their special NAFTA rights. The corporate lawyers’ decisions are not subject to appeal. This corporate power grab is formally called Investor-State Dispute Settlement (ISDS). Taxpayers have paid hundreds of millions of dollars under NAFTA to multinational corporations over toxic bans, environmental and public health policies, and more, with tens of billions pending in ongoing cases.

Rollbacks of Food Safety, Health and Environmental Protections

The dirty little secret of NAFTA is that most of its chapters had nothing to do with trade. One chapter set limits on food and product safety standards along with border inspections. It lets agribusiness firms sell food here that does not meet U.S. safety rules.

Another gives big pharmaceutical firms new protections against competition so they can raise medicine prices. Another limits consumer protections in the service sector. This limits what governments can do to keep big banks from causing another financial crisis and requires access to all U.S. roads for trucks from Mexico that do not meet U.S. safety or environmental standards.

The Consequences of NAFTA

Instead of the economic gains for people in all three countries promised by NAFTA’s supporters, the deal has resulted massive job loss and lower wages. There are more than 980,000 specific American jobs certified as lost to NAFTA outsourcing and imports under just one narrow government program that undercounts the damage.

The Labor Department reports that two in five of the manufacturing workers who lost jobs and were rehired in 2018 experienced a wage reduction, with one in six taking a cut of greater than 20 percent — an annual loss of at least $8,200. Entire communities have been devastated.

More than 2 million Mexicans engaged in farming and related work lost their livelihoods as NAFTA flooded Mexico with subsidized corn and other agricultural products. Tens of thousands of small retail and manufacturing firms were bankrupted as NAFTA opened the door to Walmart and other megaretailers.

Real average annual wages in Mexico are now lower than they were before NAFTA, and those making the least have been hurt the most, with the minimum wage declining 14 percent.

Scores of environmental, health and other public interest policies have been challenged in all three countries. Consumer safeguards, including key food safety protections, have been rolled back.

And NAFTA supporters’ warnings about the chaos that would engulf Mexico, and a new wave of migration from Mexico, if NAFTA was not implemented have indeed come to pass, but ironically because of the devastation of many Mexicans’ livelihoods occurring, in part, because NAFTA was implemented.