NAFTA AT SEVEN
Its impact on workers in all three nationsIntroduction
Each year since the implementation of the North American Free Trade Agreement (NAFTA) on January 1, 1994, officials in Canada, Mexico, and the United States have regularly declared the agreement to be an unqualified success. It has been promoted as an economic free lunch-a "win-win-win" for all three countries that should now be extended to the rest of the hemisphere in a Free Trade Area of the Americas agreement.
For some people, NAFTA clearly has been a success. This should not be a surprise inasmuch as it was designed to bring extraordinary government protections to a specific set of interests-investors and financiers in all three countries who search for cheaper labor and production costs. From that perspective, increased gross volumes of trade and financial flows in themselves testify to NAFTA's achievements.
But most citizens of North America do not support themselves on their investments. They work for a living. The overwhelming majority has less than a college education, has little leverage in bargaining with employers, and requires a certain degree of job security in order to achieve a minimal, decent level of living. NAFTA, while extending protections for investors, explicitly excluded any protections for working people in the form of labor standards, worker rights, and the maintenance of social investments. This imbalance inevitably undercut the hard-won social contract in all three nations.
As the three reports in this paper indicate, from the point of view of North American working people, NAFTA has thus far largely failed.
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http://www.epinet.org/content.cfm/briefingpapers_nafta01_index NAFTA's Hidden Costs
Trade agreement results in job losses, growing inequality, and wage suppression for the United Statesby Robert E. Scott, Economic Policy Institute
The North American Free Trade Agreement (NAFTA) eliminated 766,030 actual and potential U.S. jobs between 1994 and 2000 because of the rapid growth in the net U.S. export deficit with Mexico and Canada. The loss of these real and potential jobs1 is just the most visible tip of NAFTA's impact on the U.S. economy. In fact, NAFTA has also contributed to rising income inequality, suppressed real wages for production workers, weakened collective bargaining powers and ability to organize unions, and reduced fringe benefits.
NAFTA's impact in the U.S., however, often has been obscured by the boom and bust cycle that has driven domestic consumption, investment, and speculation in the mid- and late 1990s. Between 1994 (when NAFTA was implemented) and 2000, total employment rose rapidly in the U.S., causing overall unemployment to fall to record low levels. Unemployment, however, began to rise early in 2001, and, if job growth dries up in the near future, the underlying problems caused by U.S. trade patterns will become much more apparent, especially in the manufacturing sector. The U.S. manufacturing sector has already lost 759,000 jobs since April 1998 (Bernstein 2001). If, as expected, U.S. trade deficits continue to rise with Mexico and Canada while job creation slows, then the job losses suffered by U.S. workers will be much larger and more apparent than if U.S. NAFTA trade were balanced or in surplus.
Growing trade deficits and job losses
NAFTA supporters have frequently touted the benefits of exports while remaining silent on the impacts of rapid import growth (Scott 2000). But any evaluation of the impact of trade on the domestic economy must include both imports and exports. If the United States exports 1,000 cars to Mexico, many American workers are employed in their production. If, however, the U.S. imports 1,000 foreign-made cars rather than building them domestically, then a similar number of Americans who would have otherwise been employed in the auto industry will have to find other work. Ignoring imports and counting only exports is like trying to balance a checkbook by counting only deposits but not withdrawals.
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http://www.epinet.org/content.cfm/briefingpapers_nafta01_us The impact of NAFTA on wages and incomes in MexicoThe decline in real wages and the lack of access to stable, well-paid jobs are critical problems confronting Mexico's workforce. While NAFTA has benefited a few sectors of the economy, mostly maquiladora industries and the very wealthy, it has also increased inequality and reduced incomes and job quality for the vast majority of workers in Mexico. In many ways (such as the stagnation of the manufacturing share of employment), the entire process of development has been halted, and in some cases it even may have been reversed. NAFTA has created some of the most important challenges for Mexico's development in the 21st century. The question that remains is whether Mexico can, under NAFTA, restart its stalled development and find a way to redistribute the benefits of the resulting growth.
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