Monthly Archives: July 2016

After 20 Years, NAFTA Leaves Mexico’s Economy in Ruins

Twenty years ago, on Jan. 1, 1994, a trade deal championed by Democratic President Bill Clinton went into effect. The North American Free Trade Agreement was meant to integrate the economies of the United States, Canada and Mexico by breaking down trade barriers between them, creating jobs and closing the wage gap between the U.S. and Mexico.

nafta-decimated-mexican-agriculture

What in fact happened under NAFTA was that heavily subsidized U.S. corn flooded the Mexican market, putting millions of farmers out of work. Multinational corporations opened up factories creating low-wage jobs at the expense of organized labor and the environment. This, in turn, drove waves of migration north.

Meanwhile, corporate profits soared, and Mexico boasted the richest man in the world, Carlos Slim. Walmart and Krispy Kreme conquered Mexico, and ordinary Mexicans had access to the same consumer goods as their neighbors to the north. The economies of all three nations, measured only by GDP rather than jobs or wages, were pronounced grand successes, even though the U.S. and Canada disproportionately reaped more financial benefits.

Meanwhile, in the U.S., manufacturing jobs fell dramatically and organized labor lost even more clout. The Great Recession of 2008 worsened the downward trend, especially for Mexicans. Mexico’s economy, tied intimately to the U.S.’ because of NAFTA, suffered more than any other country in Latin America.

News reports on NAFTA’s anniversary point out that as a result of the free trade agreement, Mexicans today can buy designer sneakers or iPhones. Manuel Perez-Rocha, an associate fellow at the Institute for Policy Studies in Washington, D.C., and a Mexican national, told me in an interview, “This is a new spin—praising the riches of consumerism. All these new analyses about how Mexico is becoming a more middle-class society and able to buy more products from the United States—it’s just baloney. According to official statistics from Mexico, most Mexicans are poor and belong to the lower class, and this is the reason why there has been so much migration to the United States.”

Coinciding with NAFTA was one of the biggest waves of migration from Mexico to the U.S., which slowed only in recent years. Perez-Rocha asserted that, “The fact is that most Mexicans are jobless, or have very difficult job conditions, or are underemployed, and so the push for migration continues. Most of the routes by which people would migrate from Central America and Mexico to the United States have been severed by violence, and by the ‘narcos’ [drug lords], sometimes with the complicity of the Mexican migration authorities.”

Even analysts who tout the economic benefits of NAFTA to all three member countries acknowledge that Mexico has benefited less than its neighbors to the north. Perez-Rocha confirmed that, saying, “During NAFTA, Mexico has had the slowest rate of economic growth than [with] any other previous economic strategy since the 1930s. From 1994 to 2013, Mexico’s gross domestic product per capita has grown at a paltry rate of 0.89 percent per year.” Additionally, “During NAFTA, Mexico’s economy grew much slower than almost every Latin American country. So to say that NAFTA has benefited the Mexican economy is also a myth. It has boosted trade and investment, but this has not translated into meaningful growth that generates jobs. One of the problems that NAFTA has generated is basically an exporting economy for transnational corporations, not for the Mexican industry per se.”

It turns out that not only did NAFTA, “flood Mexico with imported corn and cheap grains from the United States,” but “it also destroyed Mexico’s own industries,” according to Perez-Rocha.

Having grown up in Mexico, the analyst reminisced, “Before NAFTA, I still remember how my father would take me to different industries in which Mexico would manufacture its own tractors and buses. We had an industry that was completely dismantled to give way to bigger corporations from the United States to use Mexico as an assembly plant for exporting cars back to the United States. And this hasn’t produced the boom of jobs that was promised.” Perez-Rocha concluded,“So in the end what NAFTA did was destroy the Mexican national industry and destroy a lot of jobs.”

Read the full article on Common Dreams

Advertisements

Obama and Sanders battle over TPP and the Democratic platform

As he faced the press in Ottawa, flanked by other leaders of NAFTA signatories, President Obama argued that both the right and left were misleading people about the challenges of global trade.

GettyImages-543633458

It was true, he said that workers left out of economic growth were growing angrier. As they did so, “the social cohesion and political consensus needed for liberal market economies starts breaking down,” as seen in the Brexit vote. But their anger was being misdirected.

“The prescription of withdrawing from trade deals and focusing solely on your local market, that’s the wrong medicine,” he said. “You are right to be concerned about the trends, but what you’re prescribing will not work.”

There was no mystery about who on the right and left Obama was talking to. At a rally in Pennsylvania, Donald Trump said that the president and presumptive Democratic nominee Hillary Clinton were wrong to back the Trans Pacific Partnership. In an op-ed published in today’s New York Times, Sen. Bernie Sanders told readers that Trump was wrong about the solution but right about the threat.

“We need to fundamentally reject our ‘free trade’ policies and move to fair trade,” wrote Sanders. “Americans should not have to compete against workers in low-wage countries who earn pennies an hour. We must defeat the Trans-Pacific Partnership. We must help poor countries develop sustainable economic models.”

With that back-and-forth, Sanders and Obama elevated a debate that has gone on in public and private for years. It has intensified since Sanders began winding down his campaign for president and focusing on changes to the Democratic platform. According to people with knowledge of the platform negotiations, Sanders used his post-primary meeting with the president to say he would push for the party to officially oppose the TPP. The president said he would not allow it. And since then, the White House has leaned on key Democrats to make sure that the platform did not include a rebuke.

That became clear last weekend in St. Louis, when the platform drafting committee — which includes just five Sanders appointees — shot down a TPP plank. According to several committee members, the president personally spoke to the drafting committee’s chairman, Rep. Elijah Cummings (D-Md.), and the White House did more outreach to make sure that Clinton appointees who might otherwise oppose TPP did not write that into the platform.

Read the full article at the Washington Post