-Caveat Lector-
School of Real-Life Results
Report Card
December 1998
Student: North American Free Trade Agreement
Grading Period: January 1, 1994 to January 1, 1999
ÿÿÿÿ
Individual Subjects: Grade:
U.S. Job Creation and Job Quality F
Agriculture F
The Environment F
Public Health F
Wage Levels in the U.S. and Mexico F
Economic Development and
Living Standards in Mexico F
Sovereignty and
Democratic Governance F
Highway Safety,
Drug Enforcement and Smuggling F
Labor and Environmental Side
Agreements and Training Programs F
ÿ
Comments: NAFTA's proponents promised benefits for the U.S., Canada and
Mexico. The promises - 200,000 new U.S. jobs from NAFTA per year, higher
wages in Mexico and a growing U.S. trade surplus with Mexico,
environmental clean-up and improved health along the border - have all
failed to materialize. However, as this report illustrates, after five
years, NAFTA fails to pass the most conservative test of all: a simple
do-no-harm test. Under NAFTA, conditions have deteriorated in many areas
in which gains were promised. In each subject NAFTA's grade is a failing
one - data and examples are provided to explain why.
NAFTA at 5
January 1, 1999 is the fifth anniversary of the implementation of the
North American Free Trade Agreement: NAFTA now has an extensive real
life record. Public Citizen's Global Trade Watch conducted a detailed
review of that track record, assessing the results of NAFTA in several
crucial areas. This Report Card - reflecting the results of our review -
grades NAFTA on the major issues.
Impact on Job Creation and Job Quality in the U.S. Impact on
Agriculture Impact on the Environment Impact on Public Health Impact
on Wages in the U.S. and Mexico Impact on Economic Development and
Living Standards in Mexico Impact on Democratic Governance and
Sovereignty Impact on Highway Safety, Drug Enforcement and Smuggling
The Performance of NAFTA's Trade Adjustment Assistance Program The
Performance of NAFTA's Labor and Environmental Side Agreements
NAFTA's proponents promised the pact would create new benefits and gains
in each of these areas. The promised benefits - 200,000 new U.S. jobs
from NAFTA per year, higher wages in Mexico and a growing U.S. trade
surplus with Mexico, environmental clean-up and improved health along
the border - have to a one failed to materialize.(1)
However, as this report illustrates, after five years, NAFTA fails to
pass the most conservative test of all: a simple do-no-harm test. Under
NAFTA, conditions have not only have not improved, they have
deteriorated in many areas. As a result, on each of the issues examined,
the only fair grade for NAFTA is a failing one - hard data and real-life
examples tell the story.
The American Public Also Grades NAFTA a Failure
Recent opinion polls show that the majority of Americans are aware of
NAFTA's poor performance. Asked for their views, everyday citizens give
NAFTA "F's" for benefitting the public interest and "A's" for boosting
big corporations.
66% of Americans believe that free trade agreements between the U.S.
and other countries cost the U.S. jobs(2) 66% of Americans believe that
NAFTA has helped large corporations(3) 27% of Americans believe that
NAFTA has helped small business in the U.S.(4) 58% of Americans agree
that foreign trade has been bad for the U.S. economy because cheap
imports have cost wages and jobs here(5) 81% of Americans say that
Congress should not accept trade agreements that give other countries
the power to overturn U.S. laws on consumer safety, labor or the
environment(6) For the first time ever, Americans say the U.S. trade
deficit is the most important economic issue facing the country, above
taxes, the federal budget deficit, and inflation. In 1993, only 7% of
Americans thought the trade deficit was the most important economic
issue facing the country, trailing unemployment, the federal deficit and
taxes.(7)
ÿ
U.S. Job Creation and Job Quality
.......................................................................
On the issue of U.S. job creation, the central focus of pro-NAFTA
compaigning, it is fair to measure NAFTA's real-life results against its
backers' expansive promises of hundreds of thousands of new, high-paying
U.S. jobs. However, even measured against the more lenient "do no harm"
standard, NAFTA has been a failure. Using trade flow data to calculate
job loss under NAFTA (incorporating exactly the formula used by NAFTA's
backers to predict 200,000 per year NAFTA job creation) yields net job
destruction numbers in the hundreds of thousands. Whether the loss of
hundreds of thousands of jobs qualifies as "a giant sucking sound"
depends on the ear of the listener. It is clear, however, that NAFTA has
indisputably led to widespread job loss, with over 200,000 U.S. workers
certified as NAFTA casualties under just one narrow government program.
The fact that job growth totally unrelated to NAFTA has produced a net
gain in U.S. employment during this period in no way changes the reality
that NAFTA has cost large numbers of individual workers their jobs -
most of whom are now unemployed or working at jobs that pay less than
the ones they lost.(8)
The U.S. economy has created jobs at a fairly rapid rate in the 1990s,
but without NAFTA, hundreds of thousands of full time, high wage,
benefit-paying manufacturing jobs would not have been lost. It is also
important to note that while the U.S. economy is generating substantial
numbers of new jobs in absolute terms, the quality of the jobs created
is often poor. The U.S. Department of Labor projects that the
professions with the greatest expected future growth in the U.S. are
cashiers, waiters and waitresses, janitors and retail clerks.(9) These
and other lower-wage service jobs are the kind that will most likely be
available to workers displaced by NAFTA.
Economic surveys of dislocated workers shows that the jobs lost to
NAFTA, in many cases high-paying manufacturing jobs, are, in the
majority of cases, replaced by lower-paid employment.(10) NAFTA also has
had a negative effect on the wages of many Americans whose jobs have not
been relocated but whose wage bargaining power with their employers is
substantially lessened; NAFTA puts them in direct competition with
skilled, educated Mexican workers who work for a dollar or two an hour -
or less. NAFTA was supposed to ameliorate this problem by raising
Mexican living standards and wages. Instead, both have plummeted,
harming the economic prospects for workers on both sides of the border.
Unique U.S. Trade Deficits Under NAFTA: NAFTA has transformed the U.S.'
$1.7 billion trade surplus(11) with Mexico in 1993 into a projected
$14.7 billion deficit for 1998.(12) During NAFTA's five years, other
developed countries - such as the European Union - have maintained their
trade surpluses with Mexico, even during the 1995 peso devaluation. A
major new trade deficit means that more U.S. jobs have been lost as a
result of imports from Mexico than have been created by exports to
Mexico. Likewise, the 1998 U.S. trade deficit with NAFTA member Canada
is projected to be $18.5 billion, meaning more jobs are being lost to
Canadian imports than are created by exports to Canada.
Many U.S. Exports to Mexico Never Reach Consumer Markets, But Are Sent
Back to the U.S.: In 1990, 34.7% of so-called U.S. "exports" to Mexico
under NAFTA never reached the Mexican consumer market. Rather they were
sent for assembly to low-wage, U.S.-owned maquiladora plants and then
quickly re-imported into the U.S. as finished products. NAFTA failed to
reverse this dynamic. This "industrial tourism" under NAFTA now
constitutes a larger percentage of U.S. exports to Mexico than was the
case at the beginning of the decade.(13)
High-Wage Manufacturing Jobs Lost: A significant portion of the jobs
destroyed or exported by NAFTA are in sectors - like automobiles and
electronics - that pay above average wages. According to the most recent
estimates of sectoral job loss due to NAFTA (using government data)
economists found that 70% of jobs lost were in manufacturing.(14) The
U.S. has gone from a pre-NAFTA manufacturing sector trade surplus of
$4.6 billion with Mexico to a deficit of $8.9 billion. Manufacturing
imports have increased from Mexico by 129% since NAFTA went into effect.
(15)
Many Documented NAFTA Victims, Few Documented NAFTA Success Stories:
According to the U.S. Department of Labor, approximately 204,451
American workers have been certified under one narrow program as having
been laid off due to NAFTA.(16) Of course, not all people who lose jobs
due to NAFTA end up receiving benefits under the Labor Department's
NAFTA Trade Adjustment Assistance (TAA) program. Many are ineligible and
many who are eligible never learn of the program. Proponents of NAFTA
have failed to document creation of even 200,000 jobs during the five
years of NAFTA and thus cannot balance the specific names and faces of
these NAFTA job loss victims. Indeed, several years ago the U.S.
Commerce Department canceled its program of bi-annual surveys of U.S.
companies to document NAFTA job creation because the data was so
embarrassing - fewer than 1,500 specific jobs could be documented.
Companies that Promised to Create Jobs Under NAFTA Failed: In February
1997, Public Citizen's Global Trade Watch conducted an investigation of
companies that had specifically promised that they would create jobs if
NAFTA were enacted in 1993. Of the 67 companies studied, 60 had not
created jobs or even increased their exports to Mexico. Rather, many of
these companies were documented by the government to have laid off U.S.
workers due to NAFTA.(17)
U.S. Border Suffers High Unemployment Under NAFTA: U.S. counties on the
U.S.-Mexico border have borne a disportionate portion of the NAFTA job
loss burden. In El Paso, Texas alone, over 10,000 jobs have been lost
due to NAFTA.(18) Indeed, Texas counties have the highest poverty rates
in the country, as well as the highest percentage of adults who have not
received a high school diploma.(19) Under five years of NAFTA job losses
and TAA programs, the employment crisis has only increased: The
unemployment rate in all U.S. counties bordering Mexico in 1993 was
already very high at 10.4%;(20) it has now reached 13.5%.(21)
Agriculture
.......................................................................
U.S. agriculture is in crisis. The "free market-free trade" farm
policies of the 1990s have eviscerated U.S. wheat, winter fruit and
vegetable, and tomato producers. And they have tied the hands of
policymakers - preventing them from safeguarding U.S. farmers from the
dumping that has resulted from recent shocks like the currency
depreciation in Canada and the suppression of worldwide demand for
commodities caused by the Asian financial crisis. In addition, as a
result of NAFTA, U.S. producers are now forced to compete with products
from Mexico, where agribusiness - though not farm workers or consumers -
benefit from lower wages and less rigorous standards on pesticide
residues, bacterial contamination and other potential public health
threats. Meanwhile, since NAFTA, the number of small U.S. farmers has
declined nine percent while the percentage of U.S. farm households at or
near the federal poverty level has skyrocketed to 93%.(22) Consumer
prices for food, however, have not dropped.(23)
Agricultural Trade Volume Rises, While Farmers' Incomes Decline: A
consensus among farmers from all three NAFTA countries is emerging about
NAFTA's effects on the agricultural trade. While agricultural exports
have increased under NAFTA, neither farmers in Canada, Mexico nor the
U.S. have reaped benefits in an increase in their standard of living.
During the five years of NAFTA, U.S., exports to Canada and Mexico grew
35%, but net farm incomes have remained the same. In fact, 45% of U.S.
small- and medium-sized farms suffered real declines in income.(24)
During that same period, Canadian agricultural exports to the U.S. grew
57%, but net farm income in Canada hasn't caught up to 1986 levels.(25)
Where's the Beef? Consumers Prices Do Not Fall Under NAFTA
In theory, tariff cuts and new competition under NAFTA are supposed to
benefit consumers by reducing costs. These savings are supposed to
trickle down from producers to packing plants to retailers - and
ultimately to consumers. In a number of prominent instances under NAFTA,
consumer prices have actually risen.
The 62% decline in hog prices in the U.S. has failed to reach the
nation's consumers, who pay more for a pound of pork now than they did
five years ago - even after adjusting for inflation.(26) The price of
tomatoes have risen 16% in real terms since NAFTA went into effect in
1993.(27) In Canada, producers receive $60 per pig. It costs $3,200 for
that same pig in the supermarket.(28)
Bleak NAFTA Agriculture Data: Over the past five years, the worldwide
U.S. agricultural trade surplus has been growing. However, since 1993,
the U.S. agricultural surplus with Mexico and Canada has declined by two
thirds under NAFTA.(29)
Attack of the NAFTA Tomatoes: Under NAFTA, Mexican tomato imports have
increased 63%.(30) Between 1993 and 1998, over 100 Florida tomato
farmers have gone out of business and 24 packing houses have closed.(31)
The loss of tomato farmers has cost Florida agriculture $1 billion.(32)
During the same period, consumer prices for tomatoes increased by 16%.
(33)
U.S. Farmers Can't Compete with $6/Day Labor In Mexico
While its namesake is the capital of Belgium, 93% of brussels sprouts
consumed in the U.S. are grown in California - but not for long. "It's
simple math," said Steve Bontadelli, third generation California
brussels sprouts producer. In Mexico, they pay workers $6/day. That's
what we're paying per hour. We just can't keep up."(34) From 1993 to
1998, brussels sprouts imports from Mexico increased 49%.(35)
NAFTA Exposes U.S. Farmers to Canadian Currency Depreciation: NAFTA's
prohibitions on import quotas and snap-back tariffs (tariffs that kick
in when domestic producers are threatened by dumping of commodities on
the U.S. market) have made U.S. farmers and meat producers vulnerable to
floods of cheap imports from Canada. Canada's currency has suffered a
drastic depreciation of 11% over the past year, making Canadian
agricultural imports much cheaper. This has hurt many U.S. farmers,
especially hog farmers who have watched hog prices fall 62% since 1997.
(36) This has been attributed in part to the influx of Canadian hogs,
which have increased from a pre-NAFTA level of 670,000 head in 1992 to
an anticipated 5 million head by the end of 1998.(37) Yet, consumer
prices for pork remain the same as they were last year, and have
increased 6% in real terms since 1993.(38)
Canadian Wheat Floods U.S. Markets: Before the 1988 Canada-U.S. Free
Trade Agreement and NAFTA, Canadian wheat imports to the U.S.- a major
wheat producer and exporter - were virtually zero. Five years after
NAFTA, the U.S. is Canada's number two export market for wheat. U.S.
imports of Canadian spring wheat increased 2,000%, to 1.45 million tons,
from 1990 to 1997. The Canadian wheat flood has taken its toll of U.S.
wheat farmers, who are prevented by NAFTA from countering what they see
as the Canadian wheat board's predatory pricing practices. U.S. farmers
claim that American food processors are getting Canadian wheat at less
than its cost of production. Canada denies that allegation, but refuses
to disclose how it prices its wheat. The last tariff quotas, imposed on
Canadian wheat in 1994, have been lifted.
Agribusiness Only Winner Under NAFTA: The big winners under NAFTA have
been large agribusiness companies exploiting the below-market priced
cheap imports to drive down domestic commodity prices such as wheat,
hogs and cattle. NAFTA's market access provisions ensure that the U.S.
imports Canadian wheat even though U.S. grain stocks are high.(39) One
observer notes the same practice with below-market priced cattle
imports: "Iowa Beef Packers is bringing Canadian cattle in and using it
to drive the market against our people. . . .There would be no NAFTA
without multinational corporations. Somebody didn't wake up one morning
and say, Hey, let's open the borders."(40)
[to be continued
... also available at
http://www.citizen.org/pctrade/nafta/reports/5years.htm]
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