5 Reasons Mexican Workers Would Cheer the Demise of NAFTA

Manuel Perez Rocha February 26, 2018

Mexican farmers take part 31 January, 2008 in Mexico City in a march of hundreds of corn producers protesting against the NAFTA (North American Free Trade Agreement). (LUIS ACOSTA/AFP/Getty Images)

This arti­cle was pro­duced in part­ner­ship with For­eign Pol­i­cy In Focus.

Mex­i­cans have plen­ty not to like about Don­ald Trump: his racism, his wall, his tirades against immi­grants. But if there’s a dis­rup­tion pro­voked by Trump we should actu­al­ly embrace, it’s the rene­go­ti­a­tion of NAF­TA — or even the trade pact’s pos­si­ble end.

Along with Mexico’s upcom­ing pres­i­den­tial elec­tions on July 1 — in which cen­ter-left can­di­date Andres Manuel Lopez-Obrador (AMLO, as he is pop­u­lar­ly known) is the clear front run­ner — the pos­si­ble unrav­el­ing of NAF­TA has the coun­try’s busi­ness elite and polit­i­cal estab­lish­ment freak­ing out.

While AMLO sees the rene­go­ti­a­tion of NAF­TA as an oppor­tu­ni­ty for mean­ing­ful changes that would ben­e­fit the major­i­ty of Mex­i­cans, Mex­i­can nego­tia­tors from the rul­ing estab­lish­ment par­ty have been very busy try­ing to secure a deal before the vote, in order to keep the sta­tus quo as intact as possible.

Dur­ing its 24 years, NAF­TA has helped to widen inequal­i­ties in Mex­i­co, Cana­da and the Unit­ed States alike — and to play work­ers in the three coun­tries against each oth­er. Since the pact went into effect, inequal­i­ty in Mex­i­co has risen to lev­els at triple the OECD aver­age, while about half of the pop­u­la­tion remains in poverty.

An end to NAF­TA could help Mex­i­co final­ly reduce its eco­nom­ic and polit­i­cal sub­or­di­na­tion to the Unit­ed States, diver­si­fy its trade rela­tions and devel­op a sov­er­eign eco­nom­ic pol­i­cy that ben­e­fits its pop­u­la­tion — not only transna­tion­al corporations.

Here are at least five rea­sons why most Mex­i­cans would cheer the end of NAFTA.

1. NAF­TA has been a net job destroy­er in Mexico.

The most con­tentious issue in the NAF­TA talks is the preva­lence of very low salaries and labor stan­dards in Mex­i­co, which com­pa­nies from the Unit­ed States and Cana­da have exploit­ed ruth­less­ly by mov­ing jobs south of the bor­der. This pres­sure has led the U.S. team to call for bet­ter labor stan­dards in Mex­i­co — a major pro­gres­sive demand the admin­is­tra­tion would like­ly nev­er take up for U.S. work­ers at home.

In the lat­est rounds of nego­ti­a­tions, the U.S. and Cana­di­an gov­ern­ments have pro­posed rais­ing the min­i­mum wage in Mex­i­co. A recent let­ter signed by 183 mem­bers of Con­gress urges the U.S. Trade Rep­re­sen­ta­tive to nego­ti­ate a new NAF­TA” with strong, clear and bind­ing pro­vi­sions that address Mexico’s labor con­di­tions.” And Peter Navar­ro, a trade advis­er to Trump, said recent­ly that high­er wages in Mex­i­co are in the inter­ests of Mex­i­co and the Unit­ed States. With­out this adjust­ment, Mex­i­co will nev­er have a robust mid­dle class, and our mid­dle class will with­er if not die.”

The Unit­ed States and Cana­da are also push­ing for tougher Mex­i­can labor stan­dards, such as ensur­ing that Mex­i­can work­ers can freely orga­nize unions and stage strikes with­out fear of los­ing their jobs.

How­ev­er, the Mex­i­can gov­ern­ment con­tends ludi­crous­ly that salary pol­i­cy is an inter­nal matter.”

Worse still, a new labor bill being pro­posed in Mex­i­co would elim­i­nate all restric­tions on sub­con­tract­ing, includ­ing those that require com­mon-sense” com­pli­ance with health and safe­ty laws. Labor orga­ni­za­tions like the AFL-CIO have warned that the bill’s over­all impact would be to pre­vent unions fight­ing for a liv­ing wage,” Reuters para­phras­es, and would lure more jobs south of the border.”

NAF­TA was sold to Mex­i­cans as a deal that would reduce the salary gap between Mex­i­co and its neigh­bors to the north. In fact, this gap has only widened. Man­u­fac­tur­ing work­ers in Mex­i­co earn an aver­age wage of about $13 a day, while the typ­i­cal assem­bly-line work­er in the Unit­ed States makes $25 per hour, accord­ing to the Labor Depart­ment. As the Chica­go Tri­bune reports, In Mex­i­co, $2 per hour work­ers make $40,000 SUVs.”

What would hap­pen to NAF­TA jobs in Mex­i­co if the pact end­ed? Not much.

Although the Mex­i­can gov­ern­ment and the busi­ness elite boast that NAF­TA has made Mex­i­co into an export­ing pow­er­house of the man­u­fac­tur­ing sec­tor, the over­all job mar­ket is not so depen­dent on exports.

As Alber­to Arroyo Picard, a pro­fes­sor at the Autonomous Met­ro­pol­i­tan Uni­ver­si­ty in Mex­i­co City, told In These Times, a forth­com­ing paper of his demon­strates with offi­cial data that Mexico´s man­u­fac­tur­ing export­ing sec­tor accounts for only 2.4 per­cent of the total jobs in the country.

One could argue that many oth­er jobs in Mex­i­co depend on for­eign investors — for exam­ple, the retail sec­tor. How­ev­er, as they have in the Unit­ed States, for­eign com­pa­nies like Wal-Mart have dis­placed scores of small­er Mex­i­can com­pa­nies, destroy­ing count­less jobs. Accord­ing to small and medi­um busi­ness lead­ers in the coun­try, more than 600,000 com­pa­nies have gone bank­rupt dur­ing the cur­rent admin­is­tra­tion alone, and only 5 per­cent of Mexico´s com­pa­nies export.

2. Multi­na­tion­al com­pa­nies have used NAF­TA to dev­as­tate Mex­i­co’s environment.

Despite con­tain­ing a non­bind­ing envi­ron­men­tal side agree­ment, NAFTA’s envi­ron­men­tal safe­guards” nev­er had the fund­ing or legal man­date need­ed to actu­al­ly pro­tect the envi­ron­ment. And so NAF­TA has had a ter­ri­ble effect on the health of North Amer­i­can com­mu­ni­ties, as sev­er­al co-authors and I doc­u­ment­ed in a 2014 report pub­lished by the Sier­ra Club.

In Mex­i­co, we wrote, NAF­TA has encour­aged a boom in envi­ron­men­tal­ly destruc­tive min­ing activ­i­ties.” One rea­son? Along with pass­ing NAF­TA, the Mex­i­can gov­ern­ment rat­i­fied nation­al laws that facil­i­tat­ed the entry of Cana­di­an and U.S. min­ing cor­po­ra­tions into Mex­i­co,” our report states, giv­ing them easy access to lands and min­er­al resources. 

Since then, the Mex­i­can gov­ern­ment has grant­ed more than 32,000 min­ing con­ces­sions and devot­ed more than 20 per­cent of Mexico’s land to min­ing, which has been dev­as­tat­ing for the envi­ron­ment. Mex­i­co has mean­while become the world’s lead­ing importer of tox­ic sodi­um cyanide for min­ing, which is a major source of water contamination.

While the rights of for­eign min­ing com­pa­nies are strong­ly pro­tect­ed under NAF­TA, the pact’s envi­ron­men­tal side agree­ment has not required Mex­i­co to bet­ter reg­u­late the harm­ful envi­ron­men­tal impacts of run­away extrac­tion. Com­mer­cial rights are bet­ter pro­tect­ed than envi­ron­men­tal and human rights.

3. NAF­TA has destroyed the liveli­hoods of mil­lions in the Mex­i­can countryside.

NAF­TA back­ers’ promise that Mex­i­co would become an agro-export­ing pow­er” failed. Instead, Mex­i­co now imports 45 per­cent of the food it con­sumes, mak­ing it one of the most import-depen­dent coun­tries in the world for food.

Mex­i­co now relies heav­i­ly on the Unit­ed States for basic sta­ples like corn, soy, wheat, rice, and beans. Accord­ing to one study, in fact, a stun­ning 99 per­cent of Mex­i­co’s imports of corn come from the heav­i­ly sub­si­dized U.S agri­cul­ture indus­try. All this has cost Mex­i­co more than $20 bil­lion in the last five years alone.

Food depen­den­cy reflects the dev­as­ta­tion of Mex­i­co’s small farm­ers’ liveli­hoods since NAF­TA. Left to com­pete with U.S.-based mega-exporters, mil­lions of Mex­i­can farm­ers have been dri­ven out of work, dri­ving dis­place­ment, impov­er­ish­ment and mas­sive social dis­rup­tion — and cre­at­ing huge oppor­tu­ni­ties for orga­nized crime groups.

Vic­tor Suarez of the Nation­al Asso­ci­a­tion of Rur­al Com­mer­cial­iza­tion Enter­pris­es has said that what Mex­i­co needs is to reach food self-suf­fi­cien­cy” and re-acti­vate the inter­nal pro­duc­tion of food to gen­er­ate employ­ment, income and oppor­tu­ni­ties to young peo­ple” to keep them from resort­ing to migra­tion or orga­nized crime.”

4. Cor­po­ra­tions are using NAF­TA to roll back legit­i­mate gov­ern­ment mea­sures aimed at pro­tect­ing health and the envi­ron­ment.

Although for­eign direct invest­ment from NAF­TA has been her­ald­ed as the panacea for eco­nom­ic growth, Mexico’s econ­o­my grew at an ane­mic 1.2 per­cent growth rate per capi­ta from 1994 to 2016,” accord­ing to The Wash­ing­ton Post. And even that mod­est growth has been heav­i­ly con­cen­trat­ed in few eco­nom­ic enclaves, accen­tu­at­ing region­al dis­par­i­ties.

To attract this invest­ment, the Mex­i­can gov­ern­ment agreed to enor­mous curbs on its abil­i­ty to reg­u­late industry.

NAF­TA’s invest­ment chap­ter” helped estab­lish a so-called Investor-State Dis­pute Set­tle­ment (ISDS) mech­a­nism that lets cor­po­ra­tions sue gov­ern­ments in supra­na­tion­al tri­bunals, like the World Bank’s Inter­na­tion­al Cen­ter for the Set­tle­ment of Invest­ment Dis­putes, when a government’s reg­u­la­tion in the pub­lic inter­est tam­pers with cor­po­rate profits.

This means that multi­na­tion­al com­pa­nies and unelect­ed for­eign bureau­crats, not vot­ers and their rep­re­sen­ta­tives, get the final say over many health and safe­ty reg­u­la­tions that impact local populations.

The first case under NAF­TA was con­clud­ed in 2000, when a World Bank tri­bunal ruled in favor of the U.S. waste man­age­ment com­pa­ny Met­al­clad, forc­ing Mex­i­can tax­pay­ers to pay the U.S. com­pa­ny $16.7 mil­lion. The rea­son was that a munic­i­pal­i­ty in San Luis Poto­si had denied the com­pa­ny a con­struc­tion per­mit until exist­ing tox­ic con­t­a­m­i­na­tion was cleaned up. 

This was just the begin­ning. To date, Mex­i­co has paid more than $200 mil­lion under sim­i­lar ISDS, with more than $1 bil­lion more in pend­ing cases.

These pro­vi­sions have come under huge crit­i­cism from civ­il soci­ety groups, which argue that they make it eas­i­er for cor­po­ra­tions to roll back legit­i­mate gov­ern­ment mea­sures aimed at pro­tect­ing health, the envi­ron­ment and oth­er pri­or­i­ties. Now even the U.S. Trade Rep­re­sen­ta­tive office is con­sid­er­ing a pro­pos­al for the NAF­TA rene­go­ti­a­tions that would give each of the coun­tries the option to opt-in or out of the con­tro­ver­sial pro­vi­sion, as Inside U.S. Trade report­ed.

How­ev­er, the Mex­i­can gov­ern­ment is try­ing to pre­serve ISDS. Why would law­mak­ers seek to con­tin­ue being hand­cuffed in pol­i­cy making?

In talks over anoth­er agree­ment — the Transpa­cif­ic Part­ner­ship — Mex­i­can Sec­re­tary of Econ­o­my Ilde­fon­so Gua­jar­do gave a rea­son: The trade agree­ment will give pro­tec­tion” in the event that future pres­i­dents of the coun­try try to revert Mexico´s ener­gy reform.”

In oth­er words, ISDS is a tool for the present gov­ern­ment to cement the pri­va­ti­za­tion of Mexico’s oil and oth­er indus­tries. No won­der Jack Ger­ard, head of the Amer­i­can Petro­le­um Insti­tute, says that ISDS is cru­cial to max­i­miz­ing the indus­try’s eco­nom­ic upside in a new NAF­TA deal.

5. NAF­TA made Mex­i­co the most obese coun­try in Latin America.

Because the ini­tial promis­es for NAF­TA utter­ly failed, the new spin is to hype its con­sumer benefits.”

Extreme exam­ples in The Wash­ing­ton Post, for instance, cel­e­brate that Mex­i­co is buy­ing more U.S. goods than ever” and that in Mexico’s Cost­co stores, sta­ples such as tor­tilla chips and chipo­tle sal­sa are trucked in from fac­to­ries in Cal­i­for­nia and Texas that pro­duce for both sides of the border.”

Anoth­er arti­cle in the Post cel­e­brates the Amer­i­can­iza­tion of Mex­i­co, say­ing that Mex­i­cans have become accus­tomed to such lux­u­ri­ous shop­ping cen­ters, where you can browse Williams-Sono­ma crock­ery, try on Steve Mad­den shoes, eat at Olive Gar­den, take your kids to Chuck E. Cheese’s, and watch War for the Plan­et of the Apes on the big screen.”

The real­i­ty is that the Amer­i­can­iza­tion of Mex­i­can cul­ture has meant the destruc­tion of Mex­i­co’s food secu­ri­ty and sov­er­eign­ty — and with it, Mex­i­cans’ health. The con­sump­tion pat­terns encour­aged by a glut of U.S.-made processed foods have made Mex­i­co the sec­ond-most obese of the OECD, with dia­betes becom­ing the coun­try’s lead­ing cause of death.

The Insti­tute for Agri­cul­ture and Trade Pol­i­cy has doc­u­ment­ed that Mex­i­can diets under NAF­TA have shift­ed from tra­di­tion­al food sta­ples toward ener­gy-dense, processed foods and ani­mal-source foods — which tend to be high­er in fats and added sweet­en­ers.” The New York Times sim­i­lar­ly report­ed late last year that NAF­TA had trans­formed Mex­i­co in a way that would sad­dle mil­lions with diet-relat­ed illnesses.”

Mean­while, in a sad irony that speaks to the inequal­i­ty and dis­par­i­ties pro­voked by NAF­TA and relat­ed poli­cies, some 8,000 Mex­i­cans die of mal­nu­tri­tion every year.

What Mex­i­co Needs Instead of NAFTA

Any new inte­gra­tion mod­el for North Amer­i­ca should be based on jus­tice, equal­i­ty, democ­ra­cy, peace and care of the environment.

Mex­i­co needs trade agree­ments that include bind­ing labor chap­ters, sup­port small and medi­um com­pa­nies and don’t rely on sup­press­ing wages. Com­plex, anti-demo­c­ra­t­ic investor priv­i­leges should be excluded.

Instead of greater dereg­u­la­tion, Mex­i­co should push for a new agree­ment of coop­er­a­tion and com­ple­men­ta­tion in North Amer­i­ca, one that strength­ens our inter­nal econ­o­my, devolves food sov­er­eign­ty and self-suf­fi­cien­cy, ele­vates the rights of work­ers and the envi­ron­ment and diver­si­fies our rela­tions with the world.

Manuel Perez Rocha is an asso­ciate fel­low of the Glob­al Econ­o­my Project at the Insti­tute for Pol­i­cy Studies.
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