NAFTA on Steroids

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NAFTA on Steroids
by Lori Wallach
www.dissidentvoice.org
November 15, 2003

This week, when trade ministers gather in Miami for a Free Trade Area of the Americas summit, they will be greeted by thousands of protestors. FTAA negotiations have been quietly underway since 1995 with a December 2004 target deadline. The Miami summit is a deciding moment—as awareness about FTAA has grown, so has opposition.

The draft FTAA text contains hundreds of pages of rules to which every country would be required to conform its national, state and local policies—regardless of whether voters and their democratically-elected representatives had previously rejected the same.

FTAA is a proposal to extend NAFTA to 31 Latin American and Caribbean nations. If you liked NAFTA, you will love FTAA. It is NAFTA on steroids.

When NAFTA was being negotiated and debated in the early 1990s, it was sold as the only path to bring Mexico's standard of living closer to that of its northern neighbors.

As we mark the tenth anniversary of the NAFTA agreement on January 1, 2004, the time for promises is past: the data clearly shows the damage NAFTA has wrought for millions of people in the United States, Mexico and Canada. Yet the Bush administration again is selling FTAA as the best path to pull the rest of the hemisphere out of poverty and a boon for U.S. workers and farmers. At a Miami forum this month, Otto Reich, the White House special envoy for the Western Hemisphere, went so far as to claim that the FTAA is "the best route to achieving the goal of lifting people out of poverty."

Ten years after NAFTA we find that NAFTA's special protection for foreign investors did increase foreign direct investment in Mexico from $9.53 billion in 1995 to $24.73 billion in 2001 and Mexico was the world's eighth-largest exporter in 2002. Yet, the standard of living for most Mexican has declined under NAFTA, with Mexico now ranking 54th in human development indices.

NAFTA's agriculture rules have resulted in tons of corn being dumped into Mexico below the cost of production—costing 3 million campesino farm families their livelihoods. Economic theory says these poorest of the poor will find jobs in more productive economic sectors. In reality increasing numbers have been forced to attempt the dangerous migration to the United States or have crowded into Mexico's cities where unemployment and underemployment is epidemic.

Mexican workers have not obtained the promised higher wages or better standards of living under NAFTA. About 25 percent of the country's 40 million workers make the minimum wage of $4 a day; half of the workforce makes less than $8 a day. These wages are estimated to have lost 50 percent of its purchasing power over the NAFTA decade meaning, according to Mexican government estimates, the income of over half of the population does not cover the basics of food, clothing, housing, health care, public transportation and education.

Yet, in the global race to the bottom, Mexico's starvation wages are too high for footloose multinational corporations. Over 500,000 of the 900,000 maquiladora factory jobs initially created under NAFTA have disappeared, as foreign production facilities have moved to China, Malaysia and Guatemala where labor is cheaper—often $1 per day.

Polls in Mexico show that, given NAFTA's damage there, Mexicans assume that NAFTA must have benefited the United States. The Office of U.S. Trade Representative repeats endlessly that American households have gained $1,260 in annual savings per household under NAFTA and WTO. Public Citizen demanded information about this figure using the Freedom of Information Act. The figure is derived from a 1997 White House report that divides the total tariff cuts expected under NAFTA by 2003 by the number of U.S. households. It assumes that every cent of tariff cuts is passed on to consumers in lower prices and equates this with an annual tax cut of $210. The study then adds other assumed gains from greater "efficiency" and other abstract presumptions to cook up the $1,260 figure.

Some of the families suffering from the loss of 2.5 million U.S. manufacturing jobs during the NAFTA era should bill the White House for this money. NAFTA has transformed the kinds of jobs available to the 75 percent of Americans without a college degree, contributing to stagnant wage levels that have destroyed millions of families' economic security. From 1946 to '73, there was an 80 percent gain in median wages. Yet from 1973 to 2000, U.S. median wages have been almost flat, although trade now represents two times the share of U.S. economic activity in 1973. One result: growing disparities in income inequality unknown since the "Robber Baron" age. And now the latest trend is loss of high-tech and professional jobs with a new Berkeley study estimating as many as 14 million U.S. service jobs are at risk of being "outsourced" to cheaper labor countries.

Add to this the string of attacks corporations have launched under NAFTA's extravagant investor protections against basic government environmental, zoning, and health regulations—claiming billions in compensation from taxpayers and trumping the democratic process. Can you imagine a hemisphere engulfed by these rules, because they are also at the heart of FTAA?

Fortunately, NAFTA's dismal results and mass movements in several Latin American countries mean some FTAA governments have become skeptical. Expect the Miami meetings to be well-choreographed displays of ministers hard at work, trying to resolve growing differences and smiling for photos. Stay tuned for a report on what really happened in Miami's streets and negotiating suites.

Lori Wallach is director of Public Citizen’s Global Trade Watch.

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