-Caveat Lector- Wage Levels in the U.S. and Mexico ....................................................................... U.S. Workers Forced by NAFTA to Compete with Maquila Wages: Production workers in manufacturing in the U.S., where average hourly compensation is approximately $18.74/hour,(81) must, as a result of NAFTA, compete directly with maquila workers now located in new foreign-owned high-tech plants who are paid $1.51 per hour.(82) Wage Stagnation for U.S. Workers: In the 1990s we have witnessed a period of wage stagnation followed by anemic wage growth despite sustained and much-heralded economic expansion. Many economists attribute this wage stagnation to trade. For instance, William Kline of the pro-free trade Institute for International Economics, argues that economic integration - like that generated by NAFTA - has been responsible for 39% of the growth in wage inequality in the U.S.(83) NAFTA - The Ultimate Union-Buster: NAFTA makes it easier to suppress workers' wages and to discourage unionization with threats of job relocation. According to a study undertaken under NAFTA's labor side agreement, employers use the threat of relocation under NAFTA as leverage against the organizing efforts and salary demands of workers. Kate Bronfrenbrenner of the Cornell University School of Industrial Relations found that the percentage of U.S. companies following through on threats to close in response to union drives tripled under NAFTA. (84) Mexican Wages Plummet Since NAFTA: NAFTA was supposed to lift living standards in Mexico so that Mexican citizens could develop into a consumer society, thus creating a relationship between two mature trading partners. Yet the earnings of Mexicans have declined precipitously since NAFTA's enactment: In 1997, 7,771,607 Mexicans were documented as earning less than Mexico's legal minimum wage of $3.40 a day, 20% more than in 1993.(85) Among Mexico's working class, salaries at the end of 1997 had fallen to 60% of their 1994 value.(86) Mexican Maquila Workers Not Paid a Living Wage: In the maquila zones, a basic market basket comprised of food, gas, rent, electricity, transportation, water and refrigerator costs totaled $54.00 per week in 1998. The average net weekly pay for maquila workers is $55.77. This leaves $1.77 per week to spend on child education expenses, clothing, medical attention and other necessities (to say nothing of the occasional "luxury" like a ticket to the movies).(87) Mexican Wages Are Falling Relative to U.S. Wages: Sixety-Seven percent of Americans think that trade agreements negotiated by the U.S. should include provisions desgined to insure that the wages of our trading partners gradually rise to the level of the U.S. minimum.(88) Yet precisely the opposite is occurring under NAFTA. According to the U.S. Department of Labor, hourly wages of Mexican manufacturing sector workers comprise only 9.6% of the wages earned by U.S. manufacturing workers, down from 22% in 1980.(89) Not Everyone Can be a Computer Programmer: Under NAFTA, textile workers in depressed border towns such as El Paso are forced to compete with Mexican workers who are paid the same amount per day as Americans receive per hour - about $5.15.(90) Given high regional unemployment rates and low education levels, there simply are not jobs to fill the void of the exported U.S. textile jobs. NAFTA's 5th Year Casualties: The Disappearance of American Icons In 1998: Huffy Bicycles closed the world's largest bicycle plant, in Celina, Ohio - laying off 650 workers and shifting production to Mexico. Bass Shoes shifted production to Mexico after being located in Maine for 122 years, laying off 350. Thomson Consumer Electronics, successor to RCA-Victor, moved what was once the world's largest TV factory located in Bloomington, Indiana - the self-proclaimed "Color Television Capital of the World" - to Mexico, laying off 1,200 workers. The Indiana Department of Workforce Development has tracked the Thomson workers: Only 8% found jobs that match or better their old pay. The rest are either working for less, are unemployed, or have left the work force. Workers at Thomson's plant in Ciudad Juarez earn typically meager maquiladora wages and have little hope of better earnings in the future: management has announced that it won't raise wages as a matter of principle - even though the plant has vacancies and high turnover. Their stated reason? Raises increase the cost of business.(91) Economic Development and Living Standards in Mexico ............................. NAFTA was supposed to be a win-win proposition, providing hope, economic development and a better life for Mexicans as well as Americans. NAFTA was to make Mexico, in economic and social terms, more like the United States - a more prosperous society with a middle-class. In order to enter into NAFTA, the Mexican government had to make extensive changes to its Constitution. These changes included amending Article XVII - the Revolutionary-era land redistribution program - in order to attract and accommodate foreign acquisitions in agricultural and other land. These changes have led to increased foreign investment in Mexico under NAFTA, but also to a decline in living standards among Mexican workers and extensive failures among Mexcian small- and medium-size businesses. Mexico's level of development has regressed under NAFTA: poverty is greater, the middle class is smaller, wages are lower and maquiladora employment offering sub-living wage jobs and diminishing the quality of life along the border has burgeoned. While things have gotten easier under NAFTA for foreign investors seeking to exploit the low-wage export processing zones, the vast majority of small to medium-sized Mexican firms have suffered from financial, capital and administrative problems. (92) Indeed, when asked, 67% of Mexicans say that Mexico has had little or no success with NAFTA.(93) I. Mexican Economic Development "Bad" Jobs for Mexicans: Proponents of NAFTA said the pact would place Mexico on a new development path, away from the low-paying, oppressive, pollution-choked border maquiladora zones and towards the sort of development necessary for genuine and sustainable growth. The day NAFTA went into effect, maquila employment along the U.S.-Mexico border stood at 546,433.(94) As of April 1998, 983,272 Mexicans were employed in maquiladoras.(95) The maquila sector is the top generator of employment in Mexico.(96) Yet wages in the maquiladora manufacturing sector are 16% lower than wages in the manufacturing sector as a whole.(97) Maquila Model Spreads Throughout Mexico: Rather than decreasing the role of maquiladoras along the border, NAFTA has encouraged the spread of export processing zones into Mexico's interior. Mexican officials have announced that their original plans to pursue the elimination of maquilas under NAFTA by revoking their special tax treatment may now be jettisoned.(98) Proponents of export processing zones have claimed that "more sophisticated factories are scattered throughout the country."(99) Instead, they are simply promoting the spread of the export manufacturing zones to parts of Mexico with even lower wages. Lack of Mexican Business Development Under NAFTA: 300 maquila firms, mostly foreign transnationals, account for 70% of Mexican exports. Yet these maquiladoras use less than six percent of Mexican inputs(100) and pay the typically low wages associated with maquiladora employment. NAFTA Crushes Mexican Small Businesses: Under NAFTA, by 1997, an estimated 28,000 small businesses in Mexico had been destroyed by competition with foreign multinationals and their Mexican partners.(101) Mexican Farmers Demand Suspension of NAFTA: NAFTA market access and anti-subsidy rules for agriculture have forced huge numbers of peasants off the land because they are no longer "competitive." This has greatly contributed to Mexico's 65% under/unemployment rate and subsequent increases in immigration into the U.S. In Mexico, the Association of Commercial Companies for Rural Producers (ANEC) requested a "three year temporary suspension" of NAFTA, in which the process of phased-out agriculture import duties will be put on hold. The farmers are requesting that the government apply emergency measures, because it has not fulfilled its promises of agricultural investment and sufficient compensatory subsidies that it agreed to implement under NAFTA.(102) Mexican Unemployment Rampant: In 1997, 65% of the actual Mexican labor force was either unemployed or underemployed.(103) Economic Instability Still a Problem in Mexico: Mexico posted a trade deficit of $798 million in October 1998, bringing its total trade deficit for the first 10 months of 1998 to $5.978 billion. This trade balance instability fits into a pattern last seen before the 1994 peso crash, and may signal another looming financial crisis. Indeed, Mexico has still not recovered from the 1994 crash (in part caused by Mexico's reluctance to devalue the peso gradually before NAFTA was enacted, lest the country seem less attractive to foreign investors(104) despite the much ballyhooed Mexican bailout of 1995. The Mexican unemployment/underemployment rate is at 65%,(105) while the country must create one million jobs a year just to accommodate young people newly entering the workforce.(106) II. Mexican Living Standards Wages Are Falling While Productivity Increases: The productivity of Mexican workers has increased 36.4% since NAFTA went into effect, yet their wages have declined by 29% between 1993 and 1997.(107) The Mexican Middle Class is Vanishing: Under NAFTA, eight million Mexicans have been pushed out of the middle class and into poverty.(108) Declining Purchasing Power: Salaried (that is, largely middle-class) workers in Mexico lost 34% of their purchasing power since 1994, the year NAFTA went into effect.(109) More Mexicans Thrown into Poverty: Between 1984 and 1994 - and through several currency devaluations - the Mexican poverty rate remained constant at 34% of the population.(110) As of 1997, 60% of the Mexican labor force live below the poverty line.(111) Respect for Sovereignty and DemocraticGovernance ....................................... An important, but little-known component of NAFTA is the new power it grants to private corporations to directly attack laws and policies they deem harmful to profitability. Under NAFTA's new investment protections (Chapter 11), the decisions made by local and national governments in all three NAFTA countries are now subject to challenge before NAFTA tribunals by corporate plaintiffs. This provision of NAFTA, which only took effect in 1996, has already produced seven challenges, demanding damage payments in excess of a billion dollars. Remarkably, in every instance these challenges have had little or nothing whatsoever to do with international trade. Rather, public health, environmental zoning and state court civil procedures have been attacked. One such challenge already has led to the repeal of a major public health law in Canada. And knowledgeable observers believe that this initial spate of suits may be the harbinger of a far larger legal onslaught in the coming years as more corporations discover the potential uses of the new tool NAFTA provides: Laws and policies can be challenged whether or not they have anything to do with international trade - as long as an investor or corporation in one country has some actual or potential business interest in the country it wishes to sue. Health Law Sacked - Ethyl v. Canada: The U.S.-based Ethyl Corporation - the company that put the lead in leaded gasoline - used NAFTA against the government of Canada to get the ban of its gasoline additive MMT reversed. Canada banned MMT because public health officials determined that potential neurotoxins in MMT posed a public health hazard. Ethyl demanded $251 million in compensation under NAFTA, arguing that Canada's ban constituted an unfair "taking" of Ethyl's property - that property included the profits Ethyl expected to earn from the sale of MMT in Canada. Ethyl charged, among other things, that simply by debating the proposed ban, the Canadian parliament had damaged Ethyl's reputation - an actionable offense under NAFTA's rights for intellectual property holders.(112) Faced with the growing likelihood it could lose the suit, Canada agreed to repeal the ban and pay Ethyl $13 million in damages for lost profits to-date. Contrary to the views of its own Canada further agreed to pronounce MMT safe - without scientific evidence and in direct contradiction to the views of the nation's environmental protection agency. (113) Many trade lawyers viewed the Etyl suit as a test case that would indicate whether NAFTA's investor rights provisions went too far. Some sought to allay public concerns, predicint - incorrectly - that Ethyl would lose.(114) Environmental Zoning Attacked - Metalclad v. Mexico: The Metalclad Corporation is claiming that a Mexican state's environmental zoning law prohibiting the opening of a planned waste disposal plant constitutes an illegal seizure of Metalclad's assets and future profits. The Mexican state of San Luis Potosi re-zoned land upon which sat a waste disposal plant purchased by Metalclad after an environmental impact assessment revealed that the facility lay atop an aquifer that provides the region's water supply. The company claims that this public health safeguard is tantamount to a "nationalization" of its property and seeks $90 million in compensation from the Mexican Treasury under NAFTA. U.S. Civil Justice System as a NAFTA Violation - The Loewen Case: For the first time, the United States is being sued by a private corporation for cash damages under the "investor-to-state" NAFTA provisions. In 1995, Canadian-based Loewen Group, a major funeral conglomerate with 90% of its business and 100 funeral homes in the U.S., was the defendant in a Mississippi lawsuit involving allegations of fraudulent and malicious business practices. After a trial highlighting how the conglomerate had set out to ruin a local small business, the jury found Loewen liable for predatory and anticompetitive business practices, malicious monopoly and fraud, and awarded huge damages to the plaintiff, a local funeral home owner. Loewen ultimately settled the case for $150 million. Now, three years after the verdict (with it's stock down and the company seeking a new infusion of cash) Loewen is claiming that the Mississippi state court award constituted a violation of NAFTA. Loewen is seeking hundreds of millions of U.S. taxpayer dollars in compensation. It is arguing, among other things, that the everyday workings of the Mississippi legal system (and a long-standing federal procedural rule requiring defendants found liable for damages to post a bond if they wish to appeal) constitute a violation of its new NAFTA-given "investor rights." (The bond requirement insures that a party found liable in a civil proceeding will not hide assets or otherwise evade liability during appeal.) Suggested Non-Trade NAFTA Uses: Challenging Professional Sports Franchises Subsidies International trade lawyer Barry Appleton - the attorney for the plaintiff in two major NAFTA-inspired lawsuits - urged the Canadian government to investigate whether state and local subsidies given to National Hockey League teams in the United States violate NAFTA.(115) Highway Safety and Law Enforcement ....................................................................... ..... On September 22, 1998, Mexico formally requested formal dispute resolution (a binding arbitration panel) under NAFTA to force the U.S. to open its border to Mexican trucks with destinations anywhere in the U.S. (presently, Mexican trucks are limited to destinations within a certain distance from the U.S.-Mexico border). The border had been scheduled to open on December 17, 1995, but the U.S. Department of Transportation denied full access to the U.S. market to Mexican truckers because of safety concerns. If the arbitration panel decides in Mexico's favor, the U.S. will be forced either to open its border to Mexican truckers or pay compensation to Mexico. A 1997 U.S. government report highlighted many environmental reasons and environmental reasons for not opening the U.S. border to Mexican trucks. In the five years since NAFTA went into effect, none of the concerns regularly voiced by the U.S. government and public safety advocates - like the existing problems of drug and gun smuggling across the border - have been addressed. I. Trucks Insufficient Truck Inspections at the Border: According to the Government Accounting Office, fewer than 1% of the 3.3 Mexican million trucks crossing into the U.S. each year are inspected.(116) Nearly half of those that are checked are put out of service because of safety concerns.(117) At least 5,000 trucks per day cross the Texas/Mexico border, but only two to five inspectors are on duty during weekdays. (118) Mexican Trucks Still Forced Out of Service Far More Often Than U.S. Trucks: The U.S. began truck border inspections in December 1995. Mexican trucks were forced our of service due to safety violations at a 45% rate, in comparison with a 28% rate for U.S. Trucks. In 1997, little had changed: 45-48% of Mexican trucks were forced out of service, compared with a 25% rate for U.S. trucks.(119) Mexican Trucks Demonstrated Unsafe: Under NAFTA, an estimated 8 to 12 million Mexican trucks per year will operate in the U.S. by the year 2000; an estimated 69%, or 5 to 8 million, of those trucks "will have overweight loads, no insurance, faulty breaks, or some other serious problem."(120) The average age of U.S. trucks is 4.5 years, while the average age of Mexican trucks is 15 years.(121) II. Drugs Most Cocaine Comes Across U.S.-Mexico Border: The U.S. Drug Enforcement Agency estimates that 70% of the cocaine smuggled into the United States comes across the U.S.-Mexico border.(122) U.S. Customs estimates that 330 tons of cocaine are smuggled into the U.S. from Mexico annually. (123) Increased Heroin Smuggling Linked to Mexican Truck Traffic Through Texas: The Texas Commission on Alcohol and Drug Abuse reports that heroin smuggling into Texas has "increased considerably since the NAFTA deal," blaming the influx of Mexican trucks.(124) III. Smuggling Stolen Cars: U.S. Customs reports that one of the U.S. hottest exports, stolen cars, are funneled through Mexico. Of the 200,000 stolen automobiles shipped from U.S. ports annually, at least 10% of these are simply driven across the California border; this doesn't include those smuggled across the California border by rail or truck or those driven or smuggled across Mexico through other border states.(125) Stolen Guns: Gun smuggling between the U.S. and Mexico is a problem that has only been exacerbated by the more permeable border between the two countries: 90% of illegally owned guns in Mexico come across the U.S.-Mexico border.(126) Programs for Harmed Workers and NAFTA Side Agreements.................. I. Worker Adjustment Assistance and Training NAFTA's Trade Adjustment Assistance Program (NAFTA-TAA) was designed, ostensibly, to provide assistance to workers who lose jobs due to NAFTA. Unfortunately, five years later, it is clear that the majority of workers displaced by the agreement never receive benefits. Indeed, the program's harsh eligibility restrictions virtually guaranteed this outcome: workers are only eligible if they produce a "product" that is "directly affected" by NAFTA. Thus, all service workers and all retail and agricultural workers are automatically excluded, as are all manufacturing workers who lose their jobs because their industry is indirectly affected by the agreement - for example, makers of inputs for manufacturers who have relocated to Mexico. Anemic Efforts to retrain workers: Despite Clinton Administration promises of a fully funded NAFTA trade adjustment assistance program, as of May 1998, only $418 had been spent on retraining and assistance for each laid-off worker.(127) Wage Cuts for workers after participating in training program: The NAFTA-TAA program is ostensibly designed to ensure that workers displaced by NAFTA can get the training necessary to secure equally paying or higher paying jobs in the future. Yet, studies confirm that the wages of dislocated workers participating in NAFTA-TAA training programs are most often not as high in the next job as in the job lost to NAFTA.(128) NAFTA-TAA Program is Narrow and Inaccessible: Studies conducted in the early years of the NAFTA-TAA program documented how many workers laid off during NAFTA do not know the program exists. Five years into the program, the Department of Labor has still not implemented a policy to systematically post information about the program in local unemployment offices. Many of the nation's trade-harmed workers (immigrants, workers in small towns and in non-union plants especially) remain ignorant of the existence, much less eligibility rules, of NAFTA-TAA. II. Labor Side Agreement NAFTA's co-called "side agreements" were supposed to be its saving grace - counterbalancing any NAFTA damage to the environment and the rights and interests of workers. The labor side agreement, the North American Agreement on Labor Cooperation (NAALC), added to NAFTA by the Clinton Administration in order to win Congressional votes crucial to the pact's approval, has been a model of regulatory toothlessness. Despite repeated efforts by labor unions and others to use the labor side agreement for the purposes for which it was intended - to stop the abuse of workers - the agreement has proven useless. Major instances of abusive practices have been identified by the new NAFTA labor commission, yet, to date, not a single enforcement action has been leveled against an offending country nor a targeted practice abolished. Not One Labor Rights Violation Remedied: 19 submissions have been brought forward under the NAALC: 12 against Mexico, six against the United States and one against Canada.(129) None of these have resulted in fines against the offending country.(130) Designed to Fail: In 1998, the budget for the Commission for Labor Cooperation - the investigative and enforcement arm of the NAALC - is one third of what was originally proposed.(131) No Enforcement for the Right to Organize: Although the right to organize is a universally recognized fundamental human right, under the NAALC, failure by Mexico, Canada and the U.S. to enforce the right to unionize is not a punishable offense.(132) Test Cases Failed: Theoretically, the failure to enforce health and safety, child labor, or minimum wage laws can lead to sanctions against a negligent NAFTA government. This alleged enforcement mechanism was recently tested when the U.S. Department of Labor's National Administrative Office (NAO) found that Mexico failed to remedy numerous safety violations at the Han Young plant in Tijuana. Han Young - a subsidiary of the Hyundai Corporation - forced employees to work without safety gear in an unventilated and unsanitary environment using faulty and dangerous equipment and failed to employ a company doctor on the premises.(133) While the NAO noted that Mexico failed to apply any legal remedies to the violations - and cannot even verify that Mexico collected the paltry $9,000 fine it finally imposed on the recalcitrant company - it did not exercise its right to recommend that sanctions be imposed on the Mexican government. Sex Discrimination goes Unremedied: The labor side agreement has, to date, failed to provide any remedy to women routinely subjected to sex discrimination in many maquiladora factories - the vast majority of which are owned by American companies.(134) For example, maquiladora managers have forced women to undergo pregnancy tests as a condition of employment; if the women are found to be pregnant they are denied employment. Pregnancy tests have also been systematically administered to female employees, who are fired on the spot - and denied any benefits - if found to be pregnant. III. NAFTA's Environmental Side Agreement It is widely recognized that the institutions established under NAFTA's environmental side agreement have failed to ameliorate the infamous environmental degradation along the U.S.-Mexico border.(135) First, these institutions have proved to be structurally flawed: the Commission for Economic Cooperation (CEC), which can investigate governmental non-enforcement of environmental laws, itself has no enforcement power. The North American Development Bank (NADBank), designed to finance waste water treatment projects along the border, places market considerations above all else in its financing criteria, even though it is dealing with some of the poorest communities in North America - communities not likely to have any credit ratings, much less good credit ratings. Indeed, many of the communities most in need of clean water are grouped in "colonias," which do not have standing as incorporated entities. Also, the environmental institutions were bound to fail from the start because of NAFTA's enforceable market access provisions, which encouraged even more environmentally unsound growth along the border. Despite the fact that 72% of Americans believe that it is "very important" that environmental standards are included in trade agreements,(136) five years under NAFTA's side agreements has shown that they are unable to play a proactive or even protective role on environmental policy. Mexico Not Monitoring Border Pollution: Five years since NAFTA went into effect, Mexico still has not begun to collect data on environmental pollution, in violation of the North American Agreement on Environmental Cooperation, the environmental side deal.(137) The problems of pollution, toxic waste and other public health threats cannot be identified and addressed until data is collected. Border Problems Outpace Solutions: Meanwhile, public health crises along the border have been exacerbated by the explosion of maquiladora employment. 500,000 people on the U.S. side of the border live in colonias (unincorporated settlements), many of which lack running water and sewage systems.(138) The institution that was ostensibly designed to address such problems, the North American Development Bank, has been capitalized at $450 million,(139) yet it has disbursed a mere $15.6 million in grants and $4.6 million in direct loan money.(140) CEC has Zero Enforcement Power: Of the 20 cases of alleged non enforcement of environmental laws submitted to the CEC by citizens, only two have yet been accepted by the CEC for preparation of a factual record. In this process, the CEC issues a report that determines whether a government has failed to enforce its environmental laws in order to attract investment. The first factual record involved a Mexican pier built off the island of Cozumel which had involved destruction of an ecologically critical and delicate coral reef. The CEC issued what the environmental groups submitting the complaint termed a "beautiful" report agreeing that Mexico failed to enforce its environmental laws to attract the Cozumel investment. But the report didn't make a single recommendation nor did it censure the government. By the time the CEC report was issued nearly two years later, the pier was completed. The second case involves an allegation that Canada is not enforcing its Fisheries Act against a hydro-electric power company that is polluting a river and endangering fish. Canadian environmental, indigenous and fishing groups submitted the complaint in April 1997 and still await the CEC's report on its factual findings. DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. 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