Will We Fast-Track Past The Lessons Of The NAFTA Trade Debacle?

Dave Johnson

There are numerous reports that the Obama administration is getting ready to push “Fast Track” legislation in Congress. It looks like there will be a major effort to get this through. We all need to understand what this means to our wages, jobs and economy.

“Fast Track” is the common name for Trade Promotion Authority (TPA). If passed, this means trade bills that come before Congress will have limited debate, will have to be voted on in a short period, and can’t be amended or filibustered.

This rigged process gives the big corporations an opportunity to set up a crisis atmosphere around trade agreement votes; by saturating the country with ads, the airwaves with TV and radio talkers, the newspapers with op-eds, and generally creating a fog of PR and spin promising jobs and prosperity-for-all if it passed, and the death of the economy and all children under the age of 5 if it does not. Meanwhile behind the scenes they will be handing out the cash and job offers to get the required votes.

The Push For Fast Track

Here is the Washington Post: Obama, to sell trade pacts, will outline the benefits of globalization,

The legislation needed for both agreements to clear Congress is expected to be introduced early in 2014, and the administration “is beginning to ramp up” for what could be the most extensive debate in more than a decade over the opportunities and risks of globalization, said an official who was not authorized to speak publicly about the administration’s strategy. “We will be mobilizing a whole administration effort” to build public and congressional support, the official said.

The next big trade agreement that they want Fast Track for is the Trans-Pacific Partnership (TPP). TPP will likely be sold as “increasing exports” while keeping quiet about the fact that previous trade deals have (obviously) cost jobs and (massively, massively) increased the trade deficit. (Can you buy anything made in America anymore?) These agreements pushed American wages down, and the money that had been going to wages is divided up between the top 1%, Wall Street and billionaires in the low-wage countries to which production is moved.

Every Recent Trade Agreement Since Cost Jobs And Increased The Trade Deficit

It is the 20th anniversary of the North American Free Trade Agreement (NAFTA). NAFTA was sold as increasing exports — and it did. But it increased imports more, which means it cost jobs and drained money from our economy. All you have to do is drive around the areas of the country where the economy depended on manufacturing to see the result of trade deals like NAFTA, which moved production from the US to countries that pay low wages and do not protect the environment.

Yesterday’s post by Charles McMillan, NAFTA: 20 Years of Spin for America’s Failed Globalization Model talked about how NAFTA was sold and the spin used to continue to sell similar trade agreements,

In 1993, the broadest assurance by those selling this model – including almost all Republicans and President Clinton – was that it would create U.S. jobs by expanding the trade surplus the U.S. then enjoyed with Mexico. Of course, statistically a trade surplus adds to domestic production, jobs, incomes and tax revenues, whereas a deficit cuts production, jobs, incomes and tax revenues.

That was the sales pitch. What actually happened?

In fact, the U.S. trade surplus with Mexico vanished within months of NAFTA’s implementation and worsened rapidly despite an almost immediate financial bailout of Mexico’s global bankers by the U.S. and other governments. Bankers were made whole; the Mexican people were forced to repay the debt.

Now the U.S. suffers chronic $60 billion-$70 billion annual trade deficits with Mexico and by this summer the accumulated U.S. current account losses with Mexico under NAFTA will pass $1 trillion.

Robert Scott of the Economic Policy Institute (EPI) writes in, NAFTA’s Legacy: Growing U.S. Trade Deficits Cost 682,900 Jobs,

NAFTA led to a flood of outsourcing and foreign direct investment in Mexico. U.S. imports from Mexico grew much more rapidly than exports, leading to growing trade deficits, as shown in the Figure. Jobs making cars, electronics, and apparel and other goods moved to Mexico, and job losses piled up in the United States, especially in the Midwest where those products used to be made. By 2010, trade deficits with Mexico had eliminated 682,900 good U.S. jobs, most (60.8 percent) in manufacturing.

In addition, Scott writes, “…production workers’ wages have suffered in the United States. Likewise, workers in Mexico have not seen wage growth. Job losses and wage stagnation are NAFTA’s real legacy.”

Following NAFTA the US entered into similar one-sided trade deals with China, Korea and many others. These agreements have cost jobs and increased the trade deficit. The 2012 Korea-US agreement, for example, has already cost 40,000 jobs and increased the trade deficit by $8.5 billion. “Trade” with China has cost us jobs, factories and entire industries. And our enormous, humongous trade deficit with China is already $267 billion and the year isn’t over yet! (Please click through and see the charts in that post.)

Effect On Workers

How does this loss of jobs and increased trade deficit translate into our daily lives? US jobs are shipped out of the country, and the workers who remained here were told, “shut up or we’ll move your job, too.” The trade deficit drains money and tax revenue from our economy.

In NAFTA’s Impact on U.S. Workers, EPI’s Jeff Faux writes,

By establishing the principle that U.S. corporations could relocate production elsewhere and sell back into the United States, NAFTA undercut the bargaining power of American workers, which had driven the expansion of the middle class since the end of World War II. The result has been 20 years of stagnant wages and the upward redistribution of income, wealth and political power.

Faux outlines four ways NAFTA affected workers here,

First, it caused the loss of some 700,000 jobs as production moved to Mexico. … The vast majority of workers who lost jobs from NAFTA suffered a permanent loss of income.

Second, NAFTA strengthened the ability of U.S. employers to force workers to accept lower wages and benefits. As soon as NAFTA became law, corporate managers began telling their workers that their companies intended to move to Mexico unless the workers lowered the cost of their labor. … The message was: “If you vote in a union, we will move south of the border.” With NAFTA, corporations also could more easily blackmail local governments into giving them tax reductions and other subsidies.

Third, the destructive effect of NAFTA on the Mexican agricultural and small business sectors dislocated several million Mexican workers and their families, and was a major cause in the dramatic increase in undocumented workers flowing into the U.S. labor market. This put further downward pressure on U.S. wages, especially in the already lower paying market for less skilled labor.

Fourth, and ultimately most important, NAFTA was the template for rules of the emerging global economy, in which the benefits would flow to capital and the costs to labor. …

And the larger effect?

NAFTA’s central purpose was to free American corporations from U.S. laws protecting workers and the environment. Moreover, it paved the way for the rest of the neoliberal agenda in the US—the privatization of public services, the regulation of finance, and the destruction of the independent trade union movement.

The inevitable result was to undercut workers’ living standards all across North America. Wages and benefits have fallen behind worker productivity in all three countries.

If Congress signs up for “Fast Track” they are signing up for American wages and benefits and tax revenue to be pushed even further downward. American jobs, factories and industries will continue to be moved to low-wage, low-democracy countries that do not protect the environment. The proceeds will be split among a few billionaires here, Wall Street and billionaires in the countries to which production is moved.

Call and write your member of Congress and your state’s Senators and tell them you do not want them to approve Fast Track. Visit their offices and let them know in person if you can.

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