NAFTA At 20: “A Vehicle To Increase Profits At The Expense Of Democracy”

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Campaign for America's Future Blog

NAFTA At 20: “A Vehicle To Increase Profits At The Expense Of Democracy”

Thursday the AFL-CIO released a new report, NAFTA at 20. The report makes the point that, “On the whole, NAFTA-style agreements have proved to be primarily a vehicle to increase corporate profits at the expense of workers, consumers, farmers, communities, the environment and even democracy itself.”

In a press release accompanying the report AFL-CIO President Richard Trumka says that working people and democratic governance on all sides of NAFTA’s borders are now worse off, and Congress should recognize this before approving any more “NAFTA-style” trade agreements.

“There is no success story for workers to be found in North America 20 years after NAFTA,” said Trumka. “The NAFTA model focuses on lifting corporations out of reach of democratic governance, rather than solely reducing tariffs. This report should serve as a cautionary tale to the Obama Administration and Congress as they consider negotiating and implementing new trade deals.”

Trade Agreements Should Stop Following The NAFTA Model

Preceding the report, Trumka gave a major speech on trade at the Center for American Progress. He talked about the history of “a disastrous, outdated, failed model of global economic policies.” He said that trade agreements should abandon the NAFTA model and instead offer a “global new deal … to bring the basic infrastructure of modern society—electricity, water, schools, roads, internet access—to everyone on Earth.”

The Report

A summary of the report contains these points about NAFTA:

  • It’s a flawed model that promotes the economic interests of a very few and at the expense of workers, consumers, farmers, communities, the environment and even democracy itself.
  • While the overall volume of trade within North America due to NAFTA has increased and corporate profits have skyrocketed, wages have remained stagnant in all three countries.
  • Productivity has increased, but workers’ share of these gains has decreased steadily, along with unionization rates.
  • NAFTA pushed small Mexican farmers off their lands, increasing the flow of desperate undocumented migrants.
  • It exacerbated inequality in all three countries.
  • And the NAFTA labor side agreement has failed to accomplish its most basic mandate: to ensure compliance with fundamental labor rights and enforcement of national labor laws.

The NAFTA architecture of deregulation coupled with investor protections allowed companies to move labor intensive components of their operations to locations with weak laws and lax enforcement. This incentivized local, state and federal authorities to artificially maintain low labor costs by ignoring–or in some cases actively interfering with–such fundamental rights as the rights to organize, strike and be free from discrimination. This dynamic undermined organizing and bargaining efforts even in areas with relatively robust labor laws. Today, it is commonplace for employers to threaten to move south—whether to South Carolina or Tijuana—if workers do not agree to cuts in wages and benefits.

See the report at NAFTA at 20.

The Speech

In his speech Trumka began by outlining how NAFTA failed regular people by killing jobs and keeping wages down, which enriching an already-wealthy few – setting the stage for the 2008 financial collapse.

Excerpts of the speech follow, but please try to see or read the whole thing:

“Back then, nobody really knew what the results of NAFTA would be. Today we do. They’re bad.”

“You see, NAFTA put corporations in charge of America’s economic strategy — with the goal of shipping jobs off-shore to lower labor costs. The big trade deals since then used NAFTA as a starting blueprint—from the World Trade Organization to our bilateral relationship with China to the recent agreements with Korea, Colombia and Panama.”

The big problem: “NAFTA put corporations in charge of America’s economic strategy — with the goal of shipping jobs off-shore to lower labor costs.”

“Over all – this model is simply not working, not here in the United States, not in most of our trading partners.”

The Damage

“No other country pursues trade deals like we do. Nobody else — not India or Germany, Sweden or China — uses these deals to get rid of good jobs. We have lost more than 60,000 factories in the last dozen years, as major companies created more jobs offshore than at home, and imports outstripped exports year after year. Our current account deficit in 1993 was 1 percent of GDP. In 2012 it was almost three times that. We run our biggest trade deficit with China—the bulk of those imports is electronics. Many of our top 10 exports to China are basically trash – things like scrap metal and waste paper.”

This Damage Was Done On Purpose

“We pursued the strategy that led to structural trade deficits on purpose, because it pitted the workers of our trading partners against our own, and against each other. For their part, our trading partners short-changed their domestic markets in favor of supplying America, so they, too, pushed weak unions, low wages, artificially cheap currency and subsidies for foreign investment like tax-free export zones.”

The Damage Helped Cause The 2008 Collapse

“This trade-fueled imbalance fed a glut of global savings. That savings glut in turn funded a bloated global financial system, which gave us the global economic crisis of 2008 and today continues to fuel rising inequality around the world.”

“For business, NAFTA – and the tax, deregulation, and austerity policies that went with it — seemed great. But 2008 revealed how destructive these economic policies truly are. The model chronically starves the productive sector and working families, while it fuels financial bubbles and busts, after which working people everywhere struggle to provide for ourselves and our families. Economists call it a crisis in global demand.”

Global New Deal

“We need a global New Deal, a worldwide program to bring the basic infrastructure of modern society—electricity, water, schools, roads, internet access—to everyone on Earth. It’s the right thing to do, and it would build our economies by giving us more customers.”

“We know what we’re looking for in these agreements. We want trade agreements to contribute to democratic global economic governance and to promote good jobs, full employment and rising wages.

A key element, of course, is strong labor rights protections so that every worker in every country can exercise fundamental human rights on the job – without fear.”

“We live in a globalized economic environment, and one where the need for rules that protect people and the planet is growing. We simply cannot afford trade rules that push in the other direction, that make the global economy a free fire zone for corporate power, or make it impossible to act effectively to address profound challenges like climate change.

All of these ideas together would put our democratic rights at the center of our economic policies and our trade agreements. Otherwise, we have the NAFTA model thinly disguised tools to increase corporate profits by poisoning workers, polluting the environment and hiding information from consumers.”

“If there is one thing we have learned in the 20 years since NAFTA and the original Fast Track, it’s that to achieve any of these measures, trade agreements must be negotiated in an open, democratic and accountable manner.

Trade deals that affect jobs and wages, health care and food security and electricity rates affect us all, and we need to be able to engage citizens to promote, amend or defeat them.”

“But we need a complete change in approach to trade deals, globalization, and our own domestic policies to achieve that. Trade deals should not be used to make offshoring investments less risky and more profitable, or to gut consumer and environmental protections — any more than our tax code should be used to reward moving jobs overseas.
Instead, we need to put good jobs at the center of our trade policy – in terms of currency, procurement, and rules of origin — just as we recommit to invest in the infrastructure and the skills of the future.

We are ready to stand with President Obama in realizing the vision of global economic growth and equity. But first he has to decide if that is the vision that will animate his trade policies.’

Dave Johnson

Dave Johnson is a contributing blogger for the Campaign for America's Future.

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