Why Nafta Hurts The American Economy

The North American Free Trade Agreement, better known as NAFTA opened a trap door through which American manufacturing jobs were funneled into today’s globalized neo-liberal labor market.

By establishing laws that allowed U.S. corporations to relocate their production processes abroad and sell their products back into the U.S., NAFTA effectively undercut American workers’ bargaining power, which once drove the growth of the middle class after the Second World War.

The resulting 20 years of stagnating wages and massive redistribution of income has benefited the powerful, the monied, and the elected.

NAFTA hurt American workers in four ways. It caused the loss of over 700,000 jobs as production was relocated to Mexico. The majority of workers put out of work from NAFTA suffered permanent income downgrades.

The deal emboldened employers to force workers into lower wages and fewer benefits. As soon as it became law, managers began telling workers their companies were moving to Mexico unless they accepted less compensation.

Some companies even started loading machinery into trucks they said were headed for Mexico. Similar threats were used to break up unions.

Another destructive effect of NAFTA was felt by several million dislocated Mexican workers and is part of the impetus behind the spectacular rise in undocumented workers coming into the U.S. This put more downward pressure on American wages in the already degraded market for low skilled labor.

The most important and destructive effect of NAFTA was the drastically altered rules of the global economy, wherein the governing class- in confederation with financial elites- applied NAFTA rules to the WTO to the World Bank, the IMF, and to the deal where China’s employers’ massive supply of low-paid laborers were given access to U.S. markets in exchange for American corporations gaining the right to invest in China.

In U.S. politics, the ratification of NAFTA made it clear that the Democratic Party, suspiciously, had accepted the economic views of Ronald Reagan.

The “North American Accord” was proposed by Reagan in 1979, one year before he would be elected president. Ten years later, his successor, George Herbert Walker Bush, spearheaded the final agreements with Canada and Mexico.

But Democrats who were in control of the Congress refused to approve it. When the Democrat, Bill Clinton was finally elected in 1992, it was broadly assumed that the political/economic pendulum would naturally swing back from the far right side of the spectrum and that NAFTA, therefore, would never pass into law.

But Bill Clinton surrounded himself with a strange coterie of economic advisers directly from Wall Street. In his first year as president, he pushed hard for the approval of NAFTA in the Congress.

Despite Clinton’s usual slick rhetoric, the NAFTA’s goal was never to “expand trade.” The U.S., Canada, and Mexico, had been trading for over three hundred years. NAFTA’s clear purpose was to free up American corporations from U.S. laws that protected workers.

It paved the way for the neo-liberal economic agenda in the US; ie, the privatization of public services, massive finance regulation, and the termination of independent trade unions.

The foreseeable result was to sell American workers short and curtail their living standards all across the country. Benefits and wages have dropped dramatically in America, Mexico, and Canada.

Despite flagging wages, the gap between American and Mexican manufacturing workers remains the same as before. After adjusting for the disparity in living costs, Mexican workers still make 30% of what U.S. workers make. So when they tell you it’s about economic justice, you can tell them you know better.

In North America, there are just two political strategies to effect a change of this situation. One is to repeal it. NAFTA allows each nation an out option.

The trouble is- the three national economies have become so deeply integrated that dis-integration could cause another massive worker dislocation, more unemployment, and another massive drop in living standards. In other words, NAFTA’s hook is a barbed one.

The other option is building a trans-border political movement to push for the revision of NAFTA’s provisions so that labor protections and workers rights would be made equal to those of corporate investors. 

This would not be easy. But a foundation is already being laid by a growing collaboration of immigrant and trade unionist organizations in the U.S., Canada, and Mexico.

Such a development would be welcome. But its chances of success would be severely limited as long as people like William Jefferson Clinton are still active in Washington. Pirates like him and the global banks that back them up must be confronted before the situation becomes intractable.

Regards,
Ethan Warrick
Editor, Wealth Authority

http://www.wealthauthority.com/articles/why-nafta-hurts-the-american-economy/?AID=7236