NAFTA's Broken Promises: The Cost to California of Our Failed Experiment With NAFTA
The office of the US Trade Representative, as required by law, must send to Congress by July 1 a report on the effects of the North American Free Trade Agreement (NAFTA). The Administration was required to do an assessment of NAFTA's actual three year performance. Instead, the Clinton Administration has announced that it will launch a public relations campaign to promote expanding NAFTA to additional countries. Since NAFTA -- 500 pages of investment, trade, environmental, food safety and other laws -- was a controversial experiment, it is only prudent to assess NAFTA's effects before suggesting this model of investment and trade rules be extended to additional countries. The burden of proof rests on NAFTA's original proponents to demonstrate that the pact has met their promises. Instead of undertaking such a review, the USTR report will continue the Administration's campaign for expanding NAFTA while minimizing the real, documented damage that NAFTA has caused to employment, job security, wages and the environment.
To obtain congressional approval in 1993, NAFTA's corporate proponents and their political allies(1) promised Americans specific benefits from NAFTA. They promised
200,000 new NAFTA jobs,(2)
- higher wages,
- increasing middle class consumer demand in Mexico,
- an increasing U.S. trade surplus with Mexico,
- greater economic and social stability in Mexico,
- improved environmental and health conditions in the U.S.-Mexico border region,
- thorough border inspection, as trade volumes increased, inhibiting shipments of unsafe food or contraband such as illegal drugs, and
- better relations with Mexico on issues from immigration to promotion of democratic elections.
Three and a half years into NAFTA, the evidence shows that NAFTA's promised benefits are not materializing. Indeed, in many areas for which benefits were promised, conditions are worse in these areas than before NAFTA went into effect on January 1, 1994.
The California Fair Trade Campaign would welcome a fair, full report by USTR about NAFTA's actual outcomes. Such an accounting would make clear that the NAFTA approach is not the one we should use for trade and investment in the hemisphere. Indeed, an unbiased assessment of NAFTA's actual effects would suggest that NAFTA itself should be replaced by new regional trade rules. NAFTA is simply one model of how to arrange trade and investment terms between countries, a model that in more than three years of actual use has proved to benefit multinational corporations and large investors at the expense of workers, communities, the environment and health in all three NAFTA countries.
This report documents that the NAFTA experiment has not worked for the benefit of most people in California or the majority of the populations in the U.S., Canada or Mexico.
1. NAFTA Threatens Health and Safety of California Families
Issues relating to NAFTA's negative impact on jobs and wages are most often discussed in Washington. Meanwhile NAFTA's passage has greatly increased the volume of tainted food and illegal drugs coming into the United States, to which California families are exposed. Increased shipping volume, NAFTA requirements that limit inspections, and inadequate funding have combined to overwhelm government inspection systems charged with guaranteeing the safety of imported food. Reduced inspections under NAFTA have also had the tragic effect of increasing imports such as drugs.
- Between 1993 and 1995, imports of fresh and frozen fruits from Mexico increased 45.2%; vegetables rose 31.4%. In May 1997, the Government Accounting Office[GAO] released a study of efforts by the U.S. Animal and Plant Health Inspection Service [APHIS] to minimize the risks to agriculture from pests and diseases entering the United States.(3) Specifically, the GAO reported that:
fewer than 1 percent of the 3.3 million trucks entering the U.S. each year are inspected,
at "the Mexican border crossing with the heaviest passenger vehicle volume in the country, a supervisory inspector said the staff were inspecting less than 0.1 percent of the passenger vehicular traffic because of the high volume of traffic,"
- at most of the ports studied, the APHIS inspection program could not keep up with the increasing demands. Due to heavy workloads, APHIS inspectors do not conduct complete inspections, allowing possibly unsafe products into the U.S., and
- "Because of staffing shortages, one work unit along the U.S.-Mexican border can provide inspector coverage of a busy pedestrian crossing for only 8 out of the 18 hours of port operations."
- NAFTA importers "have put pressure on APHIS to carry out its increased inspection responsibilities more quickly,"
- The inspection system's failure allows a greatly increased amount of produce contaminated with illegal pesticides to enter the United States from Mexico. Mexico has had a troubling record of violations of U.S. pesticide residue tolerances. A study by the non-government Environmental Working Group(4) analyzed 14,923 computerized records from the U.S. Food and Drug Administration [FDA] routine pesticide monitoring program for 1992-1993. It focused on 42 fruits and vegetables that comprise 96 and 83 percent of domestic fruit and vegetable consumption, respectively. EWG found that:
- Imported crops from Mexico contained very high rates of illegal pesticides. Strawberries, head lettuce and carrots have violation rates of 18.4%, 15.6% and 12.3%, respectively; and
- Illegal pesticides were underreported by FDA on crops from Mexico. The FDA publicly reports that 4 percent of crop imports from Mexico contained illegal pesticides; its internal records indicate that the rate was actually 7.4 percent. Worse, the FDA-reported rate for strawberries was 10%; EWG found the actual rate to be 19%.
Unsafe Trucks Enter the U.S.
NAFTA has placed similar downward pressure on U.S. highway safety. Truck traffic from Mexico has increased dramatically due to the boom in imports from Mexico. Two years after NAFTA's passage, more than a quarter of the approximately 5,000 Mexican trucks that crossed into Texas each day carried corrosives, chemicals, explosives, jet fuel, poisons, toxic waste and pesticides.(5) Unsafe trucks may eventually gain access to U.S. highways under NAFTA rules that subordinate public health and safety concerns to trade expansion.(6)
Mexican truck safety standards are dangerously weaker than in the U.S. For example, Mexico does not require front brakes on tractor-trailers; they are required in the U.S. NAFTA has provided neither the financial support nor regulatory incentives to bring Mexican standards up to U.S. levels. The U.S. inspects only 1 in 200 trucks crossing the border from Mexico; half of these fail the safety check.(7) Just as worrisome are the weak Mexican standards for truck drivers. For instance, the U.S. limits drivers to 10 consecutive hours behind the wheel; Mexico permits 13.(8)
In December 1995, the Clinton Administration postponed a NAFTA requirement to allow Mexican trucks to travel freely throughout the border states. It is now considering lifting the temporary freeze, despite the lack of inspection capacity or adequate inspection funding. Foreign trucks are to be allowed unimpeded access to the entire United States by the year 2000. The Department of Transportation delegates most inspection duties to the states. Yet the GAO characterized the efforts of Texas and Arizona, where 75 percent of Mexican trucks enter this country, as "less than comprehensive."(9)
2. Real Wages Have Declined in the U.S. Since NAFTA
Real wages for the majority of workers are declining in all three NAFTA countries.(10) Real median wages in the U.S. fell from $10.78 an hour in 1993 to $10.35 an hour in 1996, a 4.1% decline. Real median wages in California fell from $11.70 an hour in 1993 to $11.34 an hour in 1996, a 3.1% decline.(11)
NAFTA is undermining the quality of U.S. jobs and exerting downward pressure on wages as NAFTA's Chapter 11 investment rules provide new, no-cost guarantees for U.S. investors to move jobs to the other two NAFTA countries.(12)
In direct contradiction to the promises of NAFTA's boosters, it has been high-wage, high-tech jobs that have led U.S. NAFTA job losses. Almost all of the massive, $16 billion NAFTA trade deficit with Mexico in 1996 was accounted for by the deficit in autos, auto parts and engines ($15.057 billion). Similarly, those high wage employment categories accounted for $11.6 billion of the 1995 trade deficit with Mexico. U.S. data shows a majority of U.S. workers losing high-wage manufacturing jobs find new employment in lower-paying jobs without benefits in the service sector.(13)
While NAFTA boosters now claim that the pact can't be harming U.S. workers because the economy is creating new jobs, the U.S. Labor Department predicts that the top four categories of jobs for growth over the next decade are in order: cashiers, janitors, retail sales clerks, and waiters and waitresses.(14)
Wage data in the United States show the purchasing power of median hourly wages falling over NAFTA's first three years. In NAFTA's first year, U.S. workers saw a 2% drop of real median hourly wages. Wages continued to decline in 1995. (15)
A report commissioned by the Labor Secretariat of the Commission for Labor Cooperation, which was created by NAFTA's labor accord, concluded that under NAFTA, threats by companies against workers trying to organize a union that the company will close the U.S. plant and move to Mexico have significantly increased. The study, which tracked actual cases nationwide, also found that the rate at which such threats were carried out had tripled under NAFTA. The Clinton Administration tried to suppress the study, which was featured in the January 27, 1997 Business Week and finally released directly by its author.(16)
3. NAFTA Has Cost California Good Jobs
NAFTA's proponents said in 1993 that NAFTA would create 200,000 new jobs in its first two years. They based this prediction on their expectation of an increased U.S. trade surplus with Mexico and used a U.S. Commerce Department formula that estimates jobs per billions dollars of net exports. In NAFTA's first year, months before the December 1995 Mexican peso devaluation, the pre-NAFTA trade surplus the U.S. had with Mexico became a trade deficit. This new NAFTA trade deficit with Mexico ballooned to $15.4 billion dollars in 1995 and $16.2 billions dollars in 1996. At the same time, under NAFTA, the deficit the U.S. had with Canada mushroomed. The total NAFTA trade deficit in 1996 was $39 billion.
Using actual trade data for the US, Mexico and Canada in the Commerce Department's 1993 formula ?-- the one they used to promise creation of 200,000 new NAFTA jobs --? would indicate that the U.S. lost at least 400,000 jobs due to trade with NAFTA countries since 1993.(17)
The new NAFTA trade deficit directly contradicts NAFTA backers' promises. Thus, many NAFTA backers have tried to focus public attention on exports only, ignoring the effect of imports, or suggesting that we are better off because overall trade has increased. The current approach of the NAFTA backers recalls the joke about the businessman who thought he could make money selling below cost because he would make it up in volume.
Focusing on exports alone is a standard deception used by NAFTA backers trying to show NAFTA job benefits at the state level. This deception is facilitated by the fact that no data is kept systematically for imports at the state level.
However, it is possible to estimate the job impacts of NAFTA trade deficits on California. To do so we estimated California's share(18) of increased U.S. imports from Canada and Mexico by assuming that California's share of U.S. NAFTA imports was equal to California's share of total U.S. GDP.(19) We then subtracted the increase in California's exports from its share of increased imports to get a trade deficit for California. By this method, we estimate that California has lost 50,000 jobs(20) due to increased trade deficits with NAFTA countries since the implementation of NAFTA.
The use of multipliers to estimate the job impacts of trade deficits has been criticized by some analysts. No doubt some critics of this method are motivated by the fact that its use no longer serves the interests of the advocates of expanding NAFTA. But we do not need to rely on estimates to understand the impact of NAFTA on American workers. Three years of NAFTA have produced more than 100,000 government-documented stories of lost jobs.
As of June 2, 1997, the number of U.S. workers certified by the U.S. Department of Labor as having lost their jobs because of NAFTA under the narrowly defined NAFTA Trade Adjustment Assistance [TAA] program had reached 128,253, representing 1,904 firms in 48 states, while only a few thousand specific NAFTA-created jobs have been identified. 8793 applications of workers have been denied because they "did not produce an article" -- that is, they were service workers. Of course most such workers would not be likely to apply since they are officially excluded from the program. The NAFTA TAA data is most useful when viewed as a cross-section of the actual workers harmed by NAFTA and the sorts of jobs they lost.
In California, the Department of Labor has certified 7211 workers as having lost their jobs due to NAFTA. In addition, 703 Californian workers had their applications denied on the grounds that they "did not produce an article," i.e. were service workers. This included, for example, aircraft repair workers. In the following table, we reproduce the NAFTA TAA certifications for California and those for which the Department of Labor has not yet made a decision.
|A & W Brands, Inc.||beverage flavor concentrates||MOVED TO||30||Modesto|
|A-1 Broom & Supply Inc.||brooms and mops||MEXICAN||3||Los Angeles|
|Alde, Inc.||women's apparel||MOVED TO||130||San Francisco|
|Alps Electric USA, Inc.||computer peripheral device||MOVED TO||360||Garden Grove|
|American Magnetics||magnetic card reader systems||no decision||?||Carson|
|American Metal Products||sheet metal products: heating, air||MOVED TO||57||City of|
|Amphenol Corporation||electronic connectors||MOVED TO||109||Torrance|
|Anchor Glass||glass containers||MOVED TO||360||Antioch|
|Anchor Glass Container||glass containers||CANADIAN||?||Huntington|
|Avery Dennison||three ring binders and sheet protectors||MOVED TO||30||Torrance|
|Baltimore Aircoil Co.||fiberglass cooling tower parts||MOVED TO||4||Merced|
|Bluestone Farming, Inc.||table grapes||MEXICAN||43||San Diego|
|Boskovich Farms Inc.||onion fields||MOVED TO||170||Oxnard|
|Branson Ultrasonic Corp.||ultrasonic cleaning equipment||MOVED TO||33||Paramount|
|Cal-Style Furniture Mfg. Co.||dinette sets||MOVED TO||110||Compton|
|California Fashion Industries||ladies garments||NAFTA IMPORTS||105||Los Angeles|
|Canon Business Machines.||assembly of word processors &||MOVED TO||15||Costa Mesa|
|Capri Lighting||household lighting equipment||MOVED TO||150||Los Angeles|
|Casablanca Fan Company||ceiling fans||MEXICAN||50||City of Industry|
|Clothes Connection||women's clothing||MOVED TO||500||Santa Ana|
|Corcom, Inc.||radio frequency inter. facility filters||MOVED TO||34||Torrance|
|Dean Foods Vegetable||vegetable manufacturing||IMPORTS FROM||600||Watsonville|
|Deckers Outdoor||sport sandals and boots||MOVED TO||51||Carpenteria|
|Deckers Outdoor||sport sandals and boots||MOVED TO||5||Ventura|
|Deckers Outdoors||sport sandals and boots||MOVED TO||5||Goleta|
|Diesel Recon Company||remanufacturing of diesel engines||MOVED TO||270||Sante Fe|
|Dive N Surf, Inc.||neoprene diving suits (wet suits)||MOVED TO||112||Torrance|
|Dynamic Axle Company||front wheel drive axles||MOVED TO||32||Rancho|
|Formglas, Inc.||pre-cast fiberglass columns||MOVED TO||42||San Jose|
|Georgia Pacific||lumber||NAFTA IMPORTS||400||Martell|
|H. Grabell and Sons, Inc.||lamp shades||NAFTA IMPORTS||?||Commerce|
|Harvard Sports, Inc.||dartboard cabinets||MOVED TO||14||Compton|
|Hudson RCI||disposable medical devices||MOVED TO||21||Temecula|
|Hughes Aircraft||hybrid microelectronic circuits||MOVED TO||90||Newport Beach|
|International Rectifiers||assembly operation of semi-conductor||MOVED TO||130||Temecula|
|ITT Cannon||electro-mechanical connectors||MOVED TO||30||Santa Ana|
|Joe Manufacturing||women's apparel||MEXICAN||15||San Francisco|
|Karen Tang Sewing||women's apparel||MEXICAN||15||San Francisco|
|Kellogg Company||ready to eat cereal||MOVED TO||325||San Leandro|
|Koring Brothers, Inc.||netting and twine||MOVED TO||11||Long Beach|
|Kyocera International, Inc.||ceramic packages||MOVED TO||200||San Diego|
|Lanz, L.L.C.||ladies apparel||MOVED TO||100||Culver City|
|Laurel Engineering||heavy duty mining equipment||MOVED TO||30||San Diego|
|Lee Thomas, Inc.||women's sportswear||MOVED TO||102||Los Angeles|
|Mabex Universal Corp.||PE foam packaging for the electronics||MOVED TO||30||San Diego|
|Maclin Company||garden hose||MOVED TO||30||Industry|
|Mallory and Church Corp.||men's neckwear||MOVED TO||56||Chula Vista|
|Micom Communication||data communication devices||MOVED TO||100||Simi Valley|
|Mitsubishi Consumer||projection televisions||MOVED TO||420||Santa Ana|
|Modular Devices||AC/DC converters||MOVED TO||30||Torrance|
|Newell Home Hardware||metal and steel brackets, clips and||MOVED TO||120||City of|
|OZ's Apparel, Inc.||pants, skirts and blouses||MEXICAN||210||Pacoima|
|Pacific Power||electricity||CANADIAN||?||All locations|
|Palm Springs Golf||golf clubs||MOVED TO||20||Cathedral City|
|Plantronics||telephone headsets||MOVED TO||60||Santa Cruz|
|Price Pfister||water faucets and parts||MOVED TO||300||Pacoima|
|Printpack||print labels on foil packaging||MOVED TO||220||San Leandro|
|Rip Curl||wetsuits||no decision||?||Oceanside|
|Robertshaw Controls Co||gas controls valves||MOVED TO||145||Long Beach|
|Sau Mee Sewing||sewing of women's apparel||MEXICAN||15||San Francisco|
|Siecor Corporation||telephone modules||MOVED TO||4||Otay Mesa|
|SMK Manufacturing||electro-mechanical parts||MOVED TO||21||Placentia|
|Springs Industries||horizontal wood blinds, vertical blinds||MOVED TO||200||City of Industry|
|Sunny Company||women's apparel||MEXICAN||20||San Francisco|
|The Olga Company||sewing of women's intimate apparel||MOVED TO||?||Commerce|
|The Olga Company||sewing of women's intimate apparel||MOVED TO||?||Fillmore|
|The Olga Company||sewing of women's intimate apparel||MOVED TO||260||Sanda Paula|
|Union Oil Company||oil||no decision||?||Arroyo Grande|
|William Wrigley, Jr. Co.||gum||no decision||?||Santa Cruz|
|Xentek, Inc.||electric transformers manufacturing||MOVED TO||30||San Marcos|
|Yakima Products, Inc.||components for car roof racks||MOVED TO||27||Arcata|
Public Citizen tried to compile a list of specific NAFTA jobs created in a February 1997 NAFTA jobs report.(21) They interviewed companies that in 1993 had projected specific job gains because of NAFTA(22) to determine their actual performance. Fully 89% of these companies were not meeting their NAFTA job creation promises.
Meanwhile, the 128,253 NAFTA casualties tracked by NAFTA TAA are only the tip of the NAFTA job loss iceberg.(23) Only workers who know about and choose to apply for the program are considered. Service workers and workers who lost their jobs indirectly due to NAFTA are excluded. Many workers who lose their jobs to NAFTA apply for other assistance programs that are more generous and less administratively complicated. For example, while over 100 Florida tomato processing and packing plants closed under NAFTA according to the Florida Department of Agriculture, only Regency Packing Company, with 1334 jobs lost in Naples, appears in NAFTA TAA. The clothing company Guess moved over 1000 jobs out of Los Angeles, mostly to Mexico, in December 1996, and those jobs do not appear in NAFTA TAA.
The Public Citizen study searching for NAFTA jobs created instead found that many of NAFTA's top corporate proponents who promised to create specific jobs because of NAFTA have in fact been certified as laying off thousands of U.S. workers to relocate to Mexico. 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 Labor's NAFTA TAA program. Indeed, Allied Signal has 1125 certified NAFTA job losses in eight states, and General Electric has 2608 certified job losses due to NAFTA in six states.(24) Many U.S. companies certified as having cut U.S. workers because of NAFTA have laid off over 1000 workers total. A sample of these companies shows the diversity in economic sector and geographic location of these large NAFTA job casualties.(25)
4. The Massive New NAFTA Trade Deficit
The U.S. trade surplus with Mexico of $1.7 billion in 1993 prior to NAFTA has collapsed into a major trade deficit of $16 billion. Supporters of NAFTA claim that the U.S. trade deficit with Mexico was due to the collapse of the peso and the ensuing Mexican economic crisis.
However, trade deficits with Mexico began in October 1994, well before the peso devaluation of December 26, 1994 and the economic crisis that followed. Moreover, China, Japan and the European Union, Mexico's other major trade partners, who also had trade surpluses with Mexico in 1993, have maintained their surpluses throughout Mexico's current economic crisis. Only the United States has suffered a massive and persistent new trade deficit.
With the exception of 1995, when they fell dramatically, U.S. exports to Mexico have continued to grow at a rate similar to before NAFTA, reflecting growth in the two countries' populations and economies. Between 1993 and 1996, exports to Mexico grew 36.3%, an annual growth rate of 10.9%. However, between 1991 and 1993, prior to NAFTA, U.S. exports to Mexico grew 25.1%, an annual growth rate of 11.9%. On the other hand, since NAFTA, the rate of growth of imports from Mexico to the U.S. has increased dramatically. Between 1993 and 1996, imports from Mexico grew 82.7%, more than twice as fast as the growth in exports. It is thus bizarre that NAFTA's diminishing league of defenders point to the increase in the volume of U.S.-Mexico trade as evidence that NAFTA is working when that increase is premised on the massive new U.S. trade deficit.
After the signing of the environmental side agreement, Administration officials claimed that NAFTA would lead to cleanup of serious environmental problems along the U.S.-Mexico border and improved environmental protection.(26) In all three countries, NAFTA supporters promised NAFTA would eliminate the incentive for factories to locate in the Mexican border free trade zone where 2000 companies have crowded without adequate facilities for treating toxic chemicals or residential sewage. Instead, the work force of the maquila sector is up 60% in NAFTA's first three and one half years.(27) Yet, none of the public health and toxic waste problems that predated NAFTA have been significantly remedied, much less new environmental protection or enforcement undertaken.
Public Citizen and its colleague Mexican citizen group, RMALC, have thoroughly documented the deterioration of U.S.-Mexico border environmental and health conditions under NAFTA in a January 1996 study.(28) Conditions have deteriorated under NAFTA as documented by specific, objective measures such as water quality, incidence of environment-related disease, toxic waste production and dumping rates.
On both sides of the border from Texas to California, tuberculosis and hepatitis rates have continued to soar since NAFTA.(29) Near Brownsville, Texas and Matamoros, Mexico, scores of babies have been born with deadly anencephaly, a defect resulting in an exposed or missing brain. Several new clusters of this tragic disease have started since NAFTA, including at Eagle Pass, Texas-Piedras Negras, Mexico.(30) The world's highest rate of Lupus occurs in the Nogales, Arizona and Nogales, Sonora border area. Here factories producing and using toxic chemicals and solvents and using unhealthy operations, such as lead smelters and glass factories that burn old tires as fuel, operate without environmental rules. Since NAFTA went into effect, rather than leaving the area, at least 150 new plants have opened. The Lupus rate in Nogales has continued to grow since NAFTA. (31)
In a forthcoming report, Public Citizen further documents the failure of NAFTA's environmental institutions three and one half years into NAFTA. In sum, the NAFTA-created North American Development Bank [NADBank] has done little to further cleanup of the pre-NAFTA or post-NAFTA mess on the border. NADBank has not made a single actual loan in three and one half years of existence. It has only approved several million in loans or loan guarantees, with the most polluted towns unable to afford the Bank's market interest rates. If fully funded, the NADBank could provide $2 billion in loans. Yet in 1993, the Sierra Club had estimated that $20 billion would be necessary to fund essential border cleanup and infrastructure improvement. The North American Commission on Environmental Cooperation [CEC] has also done very little to improve enforcement of environmental law in the NAFTA countries. The CEC has not approved a single case requesting more than a factual review. Thus, not a single attempt to get this body to enforce environmental laws has been successful. Currently, the CEC is refusing to release a thorough report on NAFTA's impacts on the environment.
6. Mexico's Economy is in a State of Crisis and is Not a Significant Source of Consumer Demand for U.S. Goods
Mexico remains in its worst economic crisis in decades. By August 1995, Mexican earnings had fallen 12% from the year before(32) and by August 1996, real hourly wages in Mexico stood at half their 1980 level.(33) Mexico's foreign debt has increased by over $30 billion in the first three and one half years of NAFTA, putting in perspective the so-called peso "bailout." The Mexican economy lost 1,850,000 jobs in 1995, increasing the pressure on poor Mexicans to migrate to the United States.(34) An estimated 40,000,000 Mexicans, nearly half the population, lived on less than $5 per day in 1996.(35) According to a study by Mexico's National Autonomous University, three years into NAFTA, 50% of Mexicans are considered to be "extremely poor" compared to 31% in 1993 before NAFTA.(36) 10% of Mexicans accounted for 70% of all consumer spending in 1996.(37)
Today, Mexican maquila employment is up more than 60% percent since NAFTA(38) as many U.S. manufacturers relocated there to obtain post-devaluation $8/day total labor costs. 62% of the maquiladoras are found in border cities. The rest of the Mexican economy had collapsed. NAFTA's provisions have caused significant economic displacement in the Mexican rural sector. NAFTA has also led to damage to the independent Mexican retail and manufacturing sectors, which has led many of Mexico's former middle class entrepreneurs to abandon their support for NAFTA and to join the million-member El Barzon group that opposes NAFTA expansion and demands that NAFTA itself be replaced.
Over 8 million Mexicans have slid from the middle class into poverty since NAFTA went into effect, according to El Barzon. A June, 1995 CIEMEX-WEFA forecast concluded that it may take into the next century before Mexican workers again reach their pre-NAFTA 1994 wage levels in dollar terms.(39)
7. The Political and Social Situation in Mexico has Deteriorated with the Economy
NAFTA supporters argued that an important reason to pass NAFTA was to strengthen democracy and improve political and economic stability in Mexico.(40) The opposite has occurred. Anticipation of NAFTA's negative effects sparked the Zapatista uprising in Chiapas on NAFTA's January 1, 1994 implementation date. The poverty-stricken Mayan Indian peasants in the region said NAFTA was their "death sentence."(41) National protests supporting the Zapatistas ensued as the Mexican military killed and tortured Mayan prisoners as documented by Amnesty International.(42)
A series of political assassinations followed the Chiapas revolt, including the murder of PRI presidential candidate Luis Donaldo Colosio and that of the second ranking PRI official, Jose F. Ruiz Massieu. Former Mexican president Carlos Salinas' brother was arrested for masterminding the Massieu killing. He remains in jail. Meanwhile, Mexico's former deputy attorney general and brother of Massieu, was arrested in the U.S. on allegations of links to drug traffickers and the cover up of his brother's assassination. The whereabouts of former Mexican President Carlos Salinas, creator of NAFTA, who was presented to the American public and Congress during the NAFTA debate as a reformer and man of integrity, are unknown after he fled Mexico in the spring of 1995. A poll conducted in 1995 found that 90% of Mexicans felt that President Salinas should be tried for treason.(43) An August 1996 poll found that 2 out of three Mexicans believe that government corruption has increased under current Mexican President Zedillo.(44) The Mexican federal police are increasingly beyond civilian government control and a growing source of fear and mayhem for the Mexican people.
8. The Citizens of the NAFTA Countries Oppose Expanding NAFTA
A poll conducted by the Wall Street Journal and NBC and released by the Journal on May 1 found only 28% of respondents saying NAFTA had a positive impact on the U.S., whereas 43% thought that NAFTA had had a negative impact. A November 1996 Bank of Boston poll of U.S. residents found 51% believe that trade agreements result in fewer U.S. jobs (23% believe more U.S. jobs are created) and 57% oppose new trade pacts with Latin America. The poll also found 52% had less favorable views toward free trade than a year before as the result of what they now know about NAFTA and GATT (27% had more favorable opinions). A November 1996 poll of residents in El Paso, Texas found 55% disapproved of NAFTA (28% had a positive impression).
Polls in Mexico show even stronger public opposition. A June 1996 poll conducted by the Mexican newspaper Reforma found 67% of Mexicans said that NAFTA had brought Mexico little or no benefit. 86% of Mexican respondents reported that their economy had either not improved or gotten worse since the December 1994 peso devaluation, and 64% expected that the economy would remain at that level or further deteriorate in 1997.
In a poll conducted in late summer 1996, more than two out of three Mexicans reported that their personal economic situation was worse than it was before NAFTA passed.
It is increasingly apparent that NAFTA has not improved the quality of life in any NAFTA country. The 750 pages of rules contained in the NAFTA are not producing the positive results promised by the corporations that helped write them. On the contrary, the pattern of U.S.-Mexico-Canada trade shaped by this set of NAFTA rules is causing widespread suffering.
It is the failure of NAFTA in the laboratory of human experience that has created such strong opposition to expanding NAFTA. There is a also a growing demand that NAFTA be replaced by a different type of agreement that truly safeguards the jobs, wages, health, environment and the democratic rights of the people of North America.
We are glad that the unpopularity of the NAFTA agenda has caused President Clinton to delay pushing for the expansion of NAFTA until the fall. In the meantime, the White House plans a major public relations campaign to convince Americans to believe in the fairy tale of free trade in spite of their experience. Therefore, we cannot sit still.
We are asking members of the California Congressional delegation to cosponsor the NAFTA Accountability Act. This legislation would apply a "do no further harm" test to NAFTA in order to ensure that conditions remain at least equal to those prior to NAFTA's implementation. If conditions have deteriorated, then NAFTA would be renegotiated or its Congressional authorization would terminate. Furthermore, no expansion of NAFTA to other nations would be permitted under the Act until Congress receives assurances that conditions have not deteriorated under NAFTA. The California Fair Trade Campaign would like to thank Reps. Miller, Dellums, Pombo, Lantos, Stark, Gallegly, Waxman, Martinez, Waters, Bono and Hunter for standing up for working families in California and throughout North America by cosponsoring the NAFTA Accountability Act.
See Public Citizen's Global Trade Watch Voting Index, a summary of House votes on trade issues since 1991. Of the current members of California's Congressional delegation who were serving in the House in November 1993, Representatives Wally Herger, Vic Fazio, Robert Matsui, Nancy Pelosi, Anna Eshoo, Sam Farr, Calvin Dooley, William Thomas, Howard McKeon, Howard Berman, David Dreier, Xavier Becerra, Lucille Royball-Allard, Esteban Torrez, Steve Horn, Jerry Lewis, Jay Kim, George Brown, Ken Calvert, Dana Rohrabacher, Christopher Cox, Ron Packard, and Randy Cunningham voted for NAFTA.
"Export jobs related to Mexico have grown from 300,000 to 700,000 over the last five years, with another 200,000 predicted by 1995 if NAFTA with the supplemental agreement is implemented." US Trade Representative Mickey Kantor at the National Press Club, May 5, 1993.
GAO/RCED-97-102, Agricultural Inspection, May 1997: Improvements Needed to Minimize Threat of Foreign Pests and Diseases, May 1997.
Forbidden Fruit, Environmental Working Group, 1995.
"Morales Warns of Potential Disaster of Toxic Spills from Unsafe Mexican Cargo Trucks," Press Release from the Office of the Attorney General, State of Texas, November 9, 1995.
Annex on Transportation, NAFTA Chapter 9, Annex 913.5.a-1.
U.S. General Accounting Office, "Commercial Trucking: Safety Concerns About Mexican Trucks Remain Even as Inspection Activity Increases," Report to Congressional Committees, April 9, 1997.
Howard Chua-Eoan, "Burning Up the Road," Time, December 11, 1995.
U.S. Government Accounting Office.
"Drop Seen in Real Wages in All Three NAFTA Countries," Journal of Commerce, May 29, 1996.
Real median hourly wages computed by Jared Bernstein, Economic Policy Institute, from Bureau of Labor Statistics data. Wages are given in 1996 dollars.
See the text of NAFTA at, for example, http://www.sice.oas.org/trade/nafta/naftatce.stm. It is striking to read all of the Chapter 11 rules protecting the investments of multinational corporations from government regulation in light of the view of some NAFTA proponents ?-- many of whom have never read the NAFTA text --? that NAFTA is primarily about reducing tariffs. Indeed, NAFTA ?1110 is but one example of NAFTA's generosity to corporations. It provides no cost risk insurance, backed by the U.S. Treasury, for investors in one NAFTA country to relocate to the other two.
See news release from the Bureau of Labor Statistics at http://stats.bls.gov/news.release/disp.nws.htm.
Bureau of Labor Statistics, 1996.
Jared Bernstein, Economic Policy Institute. See footnote 4.
Kate Bronfenbrenner, Final Report: The Effects of Plant Closing or Threat of Plant Closing on the Right of Workers to Organize, Cornell University, September, 1996. The Bronfenbrenner study concluded that NAFTA "has created a climate that has emboldened employers to aggressively threaten to close, or to actually close their plants to avoid unionization."
See for example Rob Scott, "The Impact of NAFTA on Workers and Wages in the U.S.," testimony before the U.S. International Trade Commission, Economic Policy Institute, 1997. Commerce estimates that in 1994 $1 billion of exports supported 14,197. Scott uses 14,000 as the multiplier for the period 1994-1996, taking into account the effects of inflation.
Note that for the purpose of this calculation, what matters is not whether the imports in question went to California; what matters is whether California was impacted by the import. Thus, if another state imports goods from Mexico that it formerly got from California, California will feel the impact.
For the California GDP data we used 1994, the last year available. California GDP data is from the U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Analysis Division. We looked at the increased trade deficit with Mexico for 1993-1996 and with Canada for 1993-1995, because for Canada 1995 is the last year for which state level export data is available. Thus, we underestimate job loss with respect to the Canada deficit compared to the national estimate, since the national trade deficit with Canada increased from 1995-1996. California export data is from the Office of Trade and Economic Analysis, U.S. Department of Commerce, using the Exporter Location Series from the U.S. Census Bureau.
California's exports to Mexico increased $2.7 billion in 1993-96; its exports to Canada increased $2.4 billion from 1993-95. California's GDP in 1994 was $876 billion, 13% of U.S. GDP for that year. U.S. imports from Mexico increased $33 billion from 93-96; U.S. imports from Canada increased $34 billion from 93-95. California's share, 13%, of increased Mexican imports was $4.2 billion and of increased Canadian imports was $4.4 billion; thus, California's NAFTA trade deficit was $3.6 billion for 1993-1996. Using the Economic Policy Institute's multiplier of 14,000 jobs for every $1 billion of net exports for 1994-96, we estimate that NAFTA cost California 50,292 jobs from 1994-96.
NAFTA's Broken Promises: Failure to Create U.S. Jobs ? NAFTA's Three Year Reality: Spiraling Job Loss and Trade Deficits Instead of Job Creation, Public Citizen, February 1997. Hereafter referred to as "Public Citizen's NAFTA jobs report"
See, for example, NAFTA: We Need It, National Association of Manufacturers, November, 1993
For an account from a prominent supporter of deregulated trade of how NAFTA TAA undercounts in particular non-unionized workers, workers in smaller firms, and workers displaced due to an import surge see Ra?l Hinojosa Ojeda et al, North American Integration Three Years After NAFTA:A Framework for Tracking, Modeling and Internet Accessing the National and Regional Labor Market Impacts, North American Integration and Development Center, December 1996.
NAFTA TAA certifications as of May, 1997.
List of worst NAFTA TAA Companies, May 17, 1997, on file at Public Citizen's Global Trade Watch.
"The new agreement binds all three nations to get smart about environmental protection. It mandates pollution prevention -- not just cleanup...The new agreement has teeth. It makes it harder to pollute in all three countries...The agreement also guarantees more public access to courts and other administrative bodies that enforce environmental law throughout the continent..." Statement of EPA Administrator Carol Browner on the Environmental Side Agreement, August 13 1993.
See footnote 26.
NAFTA's Broken Promises: The Border Betrayed ? U.S. Mexico Border Environment and Health Decline in NAFTA's First Two Years, Public Citizen and RMALC, 1996.
Texas Department of Health, Division of Epidemiology, 1995.
"Primary Prevention of the Recurrence of Neural Tube Defects," Quarterly Report, Texas Neural Tube Defect Surveillance and Intervention Project, Texas Department of Health, April 1995.
The Santa Cruz County Community Health Survey prepared under contract from the Arizona Department of Health Services, December 1994; Dafna Gladman and Murray Urowitz, "Clinical Features: A History of Lupus," Section 6, Chapter 2, in Practical Rheumatology, Mosdy Press, 1994.
"Drop Seen in Real Wages in All Three NAFTA Countries," Journal of Commerce, May 29, 1996.
Harvey Shaiken, "The First Three Years of NAFTA," letter to Richard Gephardt, February 26, 1997.
International Business (Harrison, NY), June 1996.
Dallas Morning News, October 6, 1996.
Cited in Molly Moore, "3 Years After Mexico Embraced Free Trade, Rural Poor Still Flock to Capital," Washington Post, 12-31-96, p. A12.
El Financiero, Weekly International (Mexico City) December 14, 1996.
Mexico's National Statistics Institute, July 1996, cited in Transport Topics, Alexandria Virginia, October 7, 1996; Ciemex-Wefa, reported in "Reportan un aumento de 21% in maquilas," REFORMA June 2 1997; Mexico's Secretary of Commerce, quoted in La Jornada, May 12, 1997. See also Mexican Labor News and Analysis web site maintained by Dan La Botz and the United Electrical Radio and Machine Workers of America (UE) at HTTP://www.igc.apc.org/unitedelect, which includes current social statistics.
"Maquiladora Industry Analysis," CIEMEX-WEFA, June, 1995, p. 3-8.
"NAFTA will not only make Mexico a better customer, but a stronger and more stable neighbor. The success of President Salinas' reforms is very much in his country's interest, but it is also, very much, in ours." Testimony of USTR Mickey Kantor before the Senate Commerce Committee, October, 21, 1993.
"This is our response to the implementation of the North American Free Trade Agreement, because this represents a death sentence for all of the Indigenous ethnicities in Mexico, which are disposable for the government of Carlos Salinas de Gortari...." Subcommandante Marcos, municipal presidential balcony, San Cristobal de las Casas, January 1, 1994.
See, for example, "Members of the Mexican army rape three Tzeltal women," Amnesty International Index (AMR 41/12/94), which can be viewed at http://www.amnesty.org/.
Houston Chronicle, March 3, 1996.
San Antonio Express News, September 14, 1996.