NAFTA, Trumped

Simply because Trump said NAFTA was bad for American workers, doesn’t mean it wasn’t. Just don’t look to him for a fix.

By Jeff Faux

Tagged CanadaDonald TrumpMexicotrade

In mid-August, Donald Trump began his promised renegotiation of the North American Free Trade Agreement with Mexico and Canada. “If we don’t get the deal we want,” he pledged on the campaign trail last year, “we will terminate NAFTA.”

Given that he scuttled Obama’s Trans Pacific Partnership trade agreement upon taking office, Trump’s working class supporters might reasonably think that he will deliver on his promise to make NAFTA “a lot better” or rip it up. They should not hold their breath. On trade—as on health care and taxes—Trump’s gasbag populism is relentlessly deflating. Any changes to NAFTA will be marginal—and they will favor corporate interests.

Still, overall, NAFTA displaced about 850,000 U.S. jobs, concentrated especially in the small- and medium-sized towns in the Midwest whose votes elected him.

But Trump’s claim that American workers lost jobs to Mexicans because U.S. negotiators were outsmarted is simply wrong. The interests of workers were never a priority for those involved in the negotiations. As Jorge Castañeda, later Mexico’s foreign minister, explained, NAFTA was “for the rich and powerful in the United States, Mexico and Canada, an agreement effectively excluding ordinary people in all three societies.” This then became the template for a quarter century of U.S. neoliberal trade deals (e.g., China, Korea, the World Trade Organization) that pushed American workers into brutal global competition for which they were not equipped.

NAFTA is not just a “free-trade” agreement. It is a thousand pages of complex rules that traded away the interests of American workers for those of corporate investors. Corporations are given privileged access to the U.S. market to sell goods produced in Mexico where both workers and government regulators come cheap. Among other things, it includes secret dispute settlement panels of corporate-connected lawyers with the power to override national labor and environmental regulations that may threaten profits.

Proposed by Ronald Reagan, negotiated under George Bush I, and sold to Congress by Bill Clinton, NAFTA was hailed by the governing classes of all three countries as a triumph of economic and political enlightenment. Their workers were told that deregulating trade and investment would create a ladder of upward mobility. Thus, Mexicans would get more jobs at the bottom (making t-shirts and plastic toys). Americans and Canadians would get more jobs at the top (automobiles and TV sets). Prosperity would in turn strengthen human rights, democracy, and the rule of law in Mexico.

Skeptics were dismissed as economic Neanderthals. During the congressional debate that proceeded the agreement, a reporter from National Public Radio asked me, in a voice dripping with contempt, “Don’t those autoworkers get it? NAFTA will create a huge middle class market in Mexico for the cars they make.”

But by strengthening the power of the oligarchs that dominate Mexico’s political economy, NAFTA suppressed wages on both sides of the border. (Somewhat less so in Canada where unions and social protections are stronger.)

Today, Mexico produces half of all the autos and parts made in North America. But Mexicans can afford to buy only 8 percent of them. The average Mexican autoworker makes $3 an hour. On average, Mexican labor costs remain roughly 12 percent of those in the United States, and are now about 40 percent below China’s.

Meanwhile, Mexico’s 2014 poverty rate was higher than it was 20 years prior, when NAFTA was first implemented. Human rights and citizen safety has deteriorated as drug lords and criminal gangs with ties to public officials murder and extort with impunity. Efforts to organize independent labor unions are met with beatings and worse by government-tolerated company thugs. And thanks to NAFTA, low-priced U.S. government subsidized corn and wheat drove several million Mexicans from their farms. Unable to find decent work in the cities, they swelled the rising tide of immigrants into the United States, which Trump so skillfully demagogued in last year’s election.

For Trump to make good on his promise to the American workers who helped elect him, he would need to negotiate an agreement with enforceable labor standards and protections for human rights, democracy, and the environment equaling those given to corporate investors.

Forget it. Trump and the Republican-led Congress are committed to further deregulating worker’s rights. Trump’s economic advisers are the same sort of Wall Street characters that negotiated NAFTA with only their interests in mind 25 years ago. And already, Trump’s government has given access to the otherwise secret negotiations to hundreds of corporate lobbyists, just as the previous Administration did during negotiations for the ill-fated TPP.

Neither has Mexico’s president, Enrique Peña Nieto, any interest in changing an arrangement that allows his party’s cronies to get rich by selling cheap labor to global investors. Justin Trudeau, the new Canadian prime minister, supports some strengthening of worker and human rights language, but he doesn’t hold much leverage over the other two leaders.

Neither, in some ways, does Trump, whose threat to blow up NAFTA if he doesn’t get what he wants has been largely disarmed by the implacable hostility of both Congress and corporate America to destroying the agreement.

But what does he want anyway? As with most issues, it seems clear that he himself doesn’t know. Required by law to make negotiating objectives public, Trump’s people gave out a vague and largely uninspiring list of changes they will seek. Some are certainly sensible—such as increasing the percentage of North American content in goods allowed to be traded freely in the three countries. Others, like imposing U.S. intellectual property laws on Mexico and Canada would add to the pile of NAFTA’s corporate goodies. Ironically, the Trump agenda for NAFTA looks very much like the Obama agenda for the TPP that Trump killed.

Trump says he wants a deal in six months. Both he and Peña Nieto have reason to conclude one before the Mexican elections are held next July; currently the leftist Andrés López Obrador is ahead in the polls. Yet history suggests this kind of negotiation always takes longer, especially now that Trump has opened it up to a feeding frenzy of corporate lobbyists each being paid to bite out new profit sources for their clients.

However long it takes, neither the American workers who voted for Trump nor the Mexican workers who voted for Peña Nieto will see much improvement in their lives.

And, however marginal the changes, we can be certain that our huckster-in-chief, standing side-by-side with his Mexican counterpart, will try to sell it as the greatest deal in the history of the world.

The question for workers on both sides of the border is whether they will continue to buy it.

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Jeff Faux is the Founder and now Distinguished Fellow at the Economic Policy Institute. His most recent books are The Servant Economy and The Global Class War.

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