Trade Expert: Why TPP — “NAFTA on Steroids” — Must Be Stopped

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Gary Hefner, local union chapter 182 president, is seen Saturday, Feb. 22, 1997, standing in front of signs he put up after General Electric closed its plant in Hickory, NC, and moved it to Mexico. (AP Photo/Nell Redmond)

The post-NAFTA era has been marked by growing inequality, declining job security and new leverage for corporations to attack government regulations enacted in the public interest.

But it wasn’t supposed to be that way. Back in 1986, when the leaders of the US, Canada and Mexico began talks on a regional trade deal that eight years later would culminate in the signing of the North American Free Trade Agreement (NAFTA), they sold the pact to the public as an economic win-win for all parties involved.

On signing the treaty in 1994, then-President Bill Clinton said, “NAFTA means jobs. American jobs, and good-paying American jobs. If I didn’t believe that, I wouldn’t support this agreement.” He promised that NAFTA would result in “an export boom to Mexico,” and claimed that such trade deals “transcend ideology” because support for them “is so uniform that it unites people in both parties.”

Twenty years later, we can test how those claims panned out in the real world. And Public Citizen’s Global Trade Watch did just that, releasing a comprehensive study of NAFTA’s impacts.

Last week, Global Trade Watch Director Lori Wallach spoke to Moyers & Company about NAFTA at age 20, and what it portends for other trade treaties like the Trans-Pacific Partnership. Below is a transcript of the conversation, edited for clarity.

Joshua Holland: Last Wednesday was the 20th anniversary of NAFTA going into effect. Has it at least led to an increase in the trade of goods and services between the US, Canada and Mexico?

Lori Wallach: That is the only measure where you can show that the promises of NAFTA’s proponents were met. The flow of goods has increased. Unfortunately, that flow has been a huge surge of imports into the United States, from Mexico, and, interestingly, from Canada, so that we’ve seen the displacement of one million jobs on net because of the huge increase — a 450 percent increase — in our trade deficit in the 20 years since NAFTA went into effect.

Holland: They said that it would be a net job winner. At the time, the conventional wisdom was that there would be some job displacement but the vast majority of us would be winners in this.

What about Canada and Mexico? I know Mexico’s agricultural labor market was devastated by NAFTA, as subsidized corn and other products flooded into the country, and it certainly spurred a huge wave of immigration from the south, as all those agricultural workers lost their jobs. But in terms of employment in other sectors, did it end up a net winner or loser for them?

Wallach: Mexico is probably the saddest story of NAFTA’s effect because, 20 years into the agreement, the level of employment in manufacturing there is actually down relative to its pre-NAFTA economy.

Part of that is the result of NAFTA having wiped out a lot of the small and medium size production: food processing and small textile and apparel plants, and other plants that were supplying the independent mom and pop stores which were devastated by the invasion of the Wal-Marts and other big US chains. There’s a whole movement called El Barzón of folks who had been the owners of those factories or of those small retail stores, who had been for NAFTA in the beginning but are now very strong NAFTA opponents.

Also, if you look at Mexico, the level of poverty has stayed the same, but income inequality has increased, and industrial wages are actually down in real terms.

One statistic that really shows the failure of the free trade model is that the price paid to Mexico’s farmers for their corn dropped 80 percent within the first three years of NAFTA, as a huge flood of subsidized US corn started flowing in. But the price Mexicans pay for tortillas—a staple food—has increased almost 300 percent. Under free trade theory, some folks lose — those corn farmers lose — but everyone is supposed to get richer because prices go down. That is the theory of free trade — the consumer benefits, and the producer who loses should be compensated — and the tortilla shows how that promise has been proven false.

There are many reasons for this. NAFTA wasn’t just about trade. It set up all these rules that, for instance, allowed Archer Daniels to buy up not only the processing plants for corn, but also to buy a stake in one of the biggest tortilla makers, Bimbo, which is sort of the Wonder Bread of Mexico. And as a result, you have Archer Daniels and other companies selling to themselves, and marking up the profit margin each time. So with this “competition” that free trade is supposed to create, with all these corporate rights to acquire and basically monopolize sectors, the consumer is the loser.

Holland: Let’s return to the United States. We were told before NAFTA — and we hear this with every single trade deal — that this is all about opening overseas markets for our exports. But we’ve seen the opposite of that in the NAFTA context – as you mentioned, our trade deficit has exploded.

Is it because our trading partners don’t like our products, or is this evidence that US multinationals move their production overseas to save on labor costs and regulations but then just re-import the products for sale right here at home?

Wallach: That is what’s happening. Shortly after NAFTA, we did a very detailed dig to find all the promises of US producers who made very specific claims before the treaty was signed that ‘if NAFTA passes, we will add X number of jobs.’ So we went and looked at the federal government’s Trade Adjustment Assistance database and we found that company after company — big US manufacturers like Chrysler, GE, Caterpillar — that promised to create specific numbers of US jobs instead were offshoring thousands and thousands of US jobs to Mexico, and then they were bringing the product back into the country and selling it. It was still their US brand name, but made with much lower wages in Mexico.

The trade data are very telling. The year before NAFTA, the United States had a small trade deficit with Canada — about $20 billion dollars — and a slight surplus of $2 billion dollars with Mexico. Now, 20 years later, we have almost a $200 billion dollar trade deficit with those countries. So the surplus with Mexico turned into a huge, huge deficit, as all those companies relocated there to produce goods with lower wages.

And this Trade Adjustment Assistance database is really fascinating. There are 845,000 specific US workers who are certified under just this one narrow program as having lost their jobs since NAFTA to trade with Mexico and Canada. And you’d be surprised at the kinds of companies you see. In the beginning it was a huge wipeout of the auto sector, textiles and apparel, and appliances. But now it’s computers, it’s clean manufacturing of computer chips, high-end electronics, aircraft – these are high-end, high-tech, well-trained, well-paid jobs. The so-called jobs of the future are all being offshored.

Even if you didn’t lose a job, what we’ve found with this study, and, more importantly, what economists, including those who supported NAFTA originally, found is that shifting a million well-paying jobs out has an effect economy-wide on wage levels and on income inequality.

The statistic that is most important is what happens when those folks whose jobs were lost are reemployed. According to the Department of Labor, they lost more than 20 percent of their previous wages. So when we say that wages in real terms are flat—we’re at 1979 levels of median income, but we’re obviously not at 1979 prices — it is in large part the result of the downward pressure of this kind of trade on all of our wages.

What was really different with NAFTA is that it had a whole chapter that included investor protections — special rights and privileges for companies that relocate production.

Before NAFTA they wouldn’t go. They were afraid that they might get expropriated. They were afraid that they might end up with some new policy that they’d have to adjust to. And they were afraid of having to rely on the Mexican courts. But under NAFTA’s investor rules, the famous Chapter 11, there is “a minimum standard of guaranteed treatment” for any investor who moves to another country. It guaranteed compensation for regulatory changes and costs, and it created a system of tribunals, with corporate lawyers as the so-called judges. So they can easily dodge domestic courts.

It was an incentive to relocate that production, make it for those low wages, then slap on the US brand and sell it back here. That’s the NAFTA trade deficit.

Holland: Those investor-state tribunals are what many critics say is the most anti-democratic aspect of these trade deals. Can you tell us a little bit about their record in these first two decades of NAFTA?

Wallach: Over the 20 years of NAFTA, $400 million dollars have been paid out in these investor-state lawsuits. In these cases, corporations have directly sued governments, dragging them in front of extrajudicial tribunals presided over by corporate lawyers who are empowered to order any amount of damages. There is no outside appeal

There’s a whole string of cases around water rights, around timber rights. And in the most recent one, ExxonMobil is going to end up with tens of millions of dollars in a case against Canada because Canada required that for any company—US, Mexican, Canadian, a firm from Mars—any company that got an offshore oil or gas exploration permit was required to pay a fee for research on renewable energy in the future as part of the licensing process. It seems reasonable, but [under NAFTA's Chapter 11] it’s considered a forbidden performance requirement on a foreign investor, and ExxonMobil is going to get tens of millions of dollars from the Canadian government even though Canadian companies who are doing the exact same work have to pay this fee.

And then there is the chilling effect, because on average it costs $8–10 million dollars to fight a Chapter 11 suit, and even if the country wins, it has to pay those costs. It’s just a second bite at the apple for corporations — a chance of getting out of regulations and trying to bully governments –because in a country like Canada or the US, where the courts work fine, there is no other reason to have these extrajudicial tribunals.

And if all of this sounds bad, the Trans-Pacific Partnership — the TPP, which is under negotiation right now — is an attempt to expand NAFTA, and all of this damage — from the investor state system to the job offshoring — to 11 more countries. It is NAFTA on steroids.

The good news is that 20 years of NAFTA’s damage has made Congress very suspicious, and other countries have become very suspicious of these kinds of agreements.

The bad news is that the Obama Administration is hell bent on signing it, this year, in the first couple of months of this year, and is asking for fast track trade authority — the outrageous procedure that is the only reason that NAFTA got greased through Congress. It’s a procedure that takes away all of Congress’s normal operations and basically zooms a bad trade agreement through Congress with very little oversight and makes it almost impossible for the public to hold their members of Congress accountable.

Holland: Lori, what questions should people ask about the TPP that weren’t asked about  NAFTA?

Wallach: Number one question to your member of Congress should be, have you read the actual full text of the agreement? Do you know about the investment rules that promote job offshoring? Do you know about the rules that require us to import food that doesn’t meet our safety standards? Do you know about the ban on buy American and buy local? If you don’t know, if you haven’t read those chapters—the investment chapter, the food chapter, the procurement chapter—then you cannot vote yes to approve this.

Question number two: do you know this becomes binding US law limiting what Congress, states and local city councils can do as far as making domestic policy on all of these nontrade issues, and that not a word of this agreement can be changed unless all 12 countries agree? Do you understand that you are limiting the future of our democracy, indefinitely, on everything from internet freedom and our energy and climate policy to the prospect of having green jobs and an equitable economy? Do you understand that’s what you’re doing, i.e. throwing away your job as a Congressperson?

And then the third question is: what single piece of evidence do you have that this trade agreement is actually going to create jobs here versus lose more US jobs and push down our wages? We now have free trade agreements with 17 countries. Show me a single one of those agreements in which we have gained jobs on net. Show me evidence from a single one of those agreements that the partner countries have reduced their poverty. Show me any of the past promises that are being repeated now by the same interests — the same corporate think tanks, the same companies — to push TPP which has come true.

After this post was published, a bipartisan group of lawmakers introduced legislation that would grant the White House “fast-track” trade authority. Details can be found here.

You can read Public Citizens report, “NAFTA at 20,” here

Joshua Holland is a senior digital producer for BillMoyers.com. He’s the author of The Fifteen Biggest Lies About the Economy (and Everything Else the Right Doesn’t Want You to Know about Taxes, Jobs and Corporate America) (Wiley: 2010), and host of Politics and Reality Radio. Follow him on Twitter or drop him an email at hollandj [at] moyersmedia [dot] com.
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  • Willy

    Thank you for this great interview. As a European, I find it disgusting to hear what the USA is doing to these poor countries, small businesses en fore most; their own citizens!
    How can you still say you live in a democracy with something like this. America; the greatest threat for the world since whenever you guys started slaying Indians.
    Your govt officials are using your patriotism to screw you and everybody else in this fckd up world

  • Roman Berry

    Government now represents corporations, money and profits. The people? We’re just patsies that get served up a marketing campaign of BS on the way to being sold out so that someone somewhere can be made a little richer than they are today at our expense.

  • Anonymous

    So, what what happen if a major player in this agreement, was to elect to stop honoring the terms the agreement, to opt out of certain provisions, like the refusing to honor the decisions of the investor-state tribunals because, for instance, there was found to be a fundamental conflict with, say, their constitution? Are the terms of the new agreement separable?

  • Anonymous

    A tribunal could allow other countries to impose countervailing tariffs — basically making that country pay dearly. Trade treaties are really the only ones with real enforcement mechanisms.

  • Baron95

    Why should a trade agreement measure of success be the number of jobs created?

    The fact of the matter is there when GE or Levis or Chrysler or Ford or GM m moved production to Mexico, all Americans benefit, because GE light bulbs and Cars cost less, and have better quality and are less vulnerable to strikes and other disruptions.

    Did NAFTA provide benefits to the 315,000,000 US consumers? That is the key question.

    If 1,000,000 Americans lost their jobs, but 315,000,000 have better lives because clothing, cars, TVs, light bulbs, produce are now much cheaper than before, it is a huge success story.

  • Anonymous

    Baron, PLEASE put that Kool-Aid down! Things do not cost less, the CEO’s are simply getting bigger bonuses.

    Workers on BOTH sides of the borders haev suffered as a result of NAFTA while the corporate goons have had a huge party,

  • Anonymous

    Fine, so Mexico tarriffs us, And we ship all of their illegal aliens back home. Screw ‘em!

  • Anonymous

    Obama knows the destruction this will bring, as did Bush and Clinton. They don’t care as long as it enriches their crony friends. Get it? Good.

  • Anonymous

    Yeah, I get it perfectly! Read my post above, workers on BOTH sides got hurt. The blame falls squarely on the corporation, and please remember that “American” (traitor) corporations moved 3 million jobs to Mexico.

    Check your car, if the first character in the VIN is a 3, it’s assembled in Mexico. They’ve pushed the supply chain South, when you buy replacement parts look at the box. But we’re paying a VERY “American price” for these MIM parts.

    As for illegals, yes they also got screwed by NAFTA. but share some blame for their lawlessness and insistance on having more kids than they can support. But that is another conversation. As for illegal employers, they should hang.

  • Baron95

    You are ranting, but didn’t answer the question. Are you saying that Walmart, sourcing clothing and TVs and light bulbs and tools from Mexico and China, do not provide better prices to Americans than if we closed the borders and forced everything to be made in the US?

    Corporate profits and lower prices are not mutually exclusive. In fact, the companies like Walmart, Costco, Target, etc, that offer lower prices and much more profitable than companies like Macy’s that offer higher prices.

    Trade policy needs to balance the benefits for 100% of Americans who are consumers and the 5% of Americans that work in manufacturing.

    This entire article only talks about the impact on the 5%, and is, therefore, irrelevant.

  • Anonymous

    It doesn’t matter what something costs if you have no money because you have no job.

  • Anonymous

    I have tried and tired in vain to find current language. They have been debating this for over two years. If the language of the horrible original were in place still, we’d have no more meetings but would pass it. So something is up – as it was for NDAA and many other issues. What begins does not remain. It is essential that right now our focus is on what is IN TPP – not the original but the negotiated versions. THEN we will be able to act wisely upon what it says – not what we fear.

  • Anonymous

    Employee owned businesses would totally alter the ability to have sustainable self sufficiency.

  • Anonymous

    What a crock – it would undermine all PBO has done. So it is not at all likely that it says what it originally said. He’s NOT stupid. If it were Hillary maybe so. Not this president whose lack of cronies in finance are why he’s under attack from the rich and the right.

  • Anonymous

    No – they provide cheaper INFERIOR goods to those whose wages are also being lowered in reality and in adjusted terms. That’s not providing value – it’s exploiting the ability to gouge working people from their value share of what they produce.
    And where oh where did you get the notion manufacturing is only 5% of the economy? It’s NOT. It is much, much larger.
    We are selling ourselves out by moving capital and durable goods overseas. It weakens the economy by the ‘race to the bottom’. I’d recommend you read Alan Tonelson’s excellent (but hard) book of the same name – this is NOT value added but value subtracted. Read “The Jungle” – Upton Sinclair’s 1906 novel about the degradation of food so that those workers being exploited would have cheap food – but the contamination and poisoning of meats affected the entire population. FACT – more troops died from contaminated meat in the Spanish American War than from the war itself. That’s the future of the ‘race to the bottom’ – and you won’t escape it.
    Cheap goods as a slop to hideously underpaid workers leads to one thing – banana republic style society and government. That is NOT the promise of America. We are at our most prosperous when wages are high and domestic production is strong on all levels. Exploitation of workers is an unsustainable policy.

  • Anonymous

    That is accurate – the costs are rising, the profit INTERVAL between labor and investor is growing. Labor in manufacturing used to be about 30% of the sales dollar, and now it is considerably less, but we are not paying less for most things. Sure there is a load of cheap crap – but it’s trinkets not substance. We can do quality work and sustainable jobs via employee ownership. If businessmen can’t run a going concern without exploiting workers, then they are UNFIT to do that business. Move over, bad management, and let the really knowledgeable people take over – those who produce the wealth.

  • Anonymous

    We don’t know this. We have seen language from years ago – what does it say NOW? You do not meet and negotiate for years and come out with the same thing, so we need to understand who is discussing what before we assert any points at all.

  • Anonymous

    Oh you know this for a fact? Wow. They can’t get welfare – not even the kids – so your assertion is bogus. READ about what undocumented people put INTO this society and how they will never EVER reap the benefits you and I take for granted. No health care, social security, nothing. You are totally wrong.

  • Erik

    The fact that they don’t want to let anyone read this POS agreement is telling.

  • Anonymous

    Illegals so get benefits. Education, emergency room service without payment, the kids can and do get assistance if they are born here. They cost American workers and tax payers a ton of money.

    Undocumented? No, they simply do not lke what their documents say..

    Illegal contribute to the profits of their employers, to everyone else, they are a burden. We’re all colateral damage from this invasion. For instance in Colorado, my auto insurance was 3x the PA rate. Why? Uninsured moroeists, also unlicenced. Guess who!

    It’s good to have stmpathy, mine is for less fortunate American workers who are being quantifiably harmed by illegal employers and illegal aliens who are driving wages down and unemployment among Americans up.

  • Anonymous

    Our trade policy enriched the 1%, while driving the rest of us downward. By the way, the price tag you see at Wal-Mart is not the total cost of what you are buying. How many fewer unemployed would we have to support if jobs stayed here? How many underpaid Wal-Mart workers recieve government benefits?

    I’m no fan of socialism, but ‘Free Trade Fundamentalism” has failed, yet people hang on to it as if it was a religion. Capitalism only works with democracy, our democracy has been removed from that equation.

  • Anonymous

    Gotta pass it so you can see what’s in it….

  • Marjorie Caprood Rosen

    “You are ranting… therefore, irrelevant.” Opening and closing, poor.

  • Anonymous

    You don’t get it.

  • Breeze

    How can we buy American made products when we don’t make anything here anymore? There is only a handful of things we make in America. My kids used to hate going shopping with me because I would make them look at the labels so we could purchase American made products…………..now this many years later, it’s almost impossible to have my grandchildren do this because it would take hours – if not days to actually find something in a store made here. It’s so disheartening.

  • Anonymous

    And things like clean water.

  • Penn State engineer

    “One statistic that really shows the failure of the free trade model is that the price paid to Mexico’s farmers for their corn dropped 80 percent within the first three years of NAFTA, as a huge flood of subsidized US corn started flowing in. But the price Mexicans pay for tortillas—a staple food—has increased almost 300 percent. Under free trade theory, some folks lose — those corn farmers lose — but everyone is supposed to get richer because prices go down. That is the theory of free trade — the consumer benefits, and the producer who loses should be compensated — and the tortilla shows how that promise has been proven false.”

    This is NOT free trade, but does illustrate how corporations have profited by lobbying for corporatized trade deals such as NAFTA and the Trans-Pacific Partnership. Unfortunately, much of what our supposed government of, by, and for the people does is to the benefit of the largest campaign contributors with little thought to how the majority of the population is affected. No wonder we have had millions of Mexicans coming across the border for work when the price for the corn they were growing dropped 80% while the cost of their staple food went up 300%.

  • ccaffrey

    Well, America should know something about stealing other peoples’ land, that’s for sure. We were founded on it. It helps to remember, too, that Colorado was, only a few generations back, a part of Mexico. We have a long history of funding bloody revolutions, even against duly elected governments, in Central and South America in more recently, to make them “safe for…business”. We have a long history of using Mexican laborers whenever it benefitted American businesses. WE were the lead country in NAFTA which has served workers from NO country well. FAR more of your taxes go to fund bailouts and tax breaks for corporations than go to all social services COMBINED. Don’t further play into their narrative by continuing to disparage families for trying to survive, like us, in spite of unmitigated corporate greed. We are ALL expendable in their world. They turn us against one another to keep us from turning on them. This is a GLOBAL struggle. There IS no hiding place.

  • Anonymous

    Do you hear me defending our government’s role in NAFTA? Or corporate welfare?

    Families trying to survive? By displacing and depressing the wages of our citizens. Sorry, no sympathy. But I do reserve the most disgust for illegal employers. Illegal employers should hang.

    Yes, “we” need to turn against “them”! Not sure how that happens without bloodshed.

  • http://smu.gs/L1p7XU winston

    We make weapons systems (then use ‘em up illegal wars of aggression based on lies, which transfers trillions of dollars into the hands of the already filthy rich, -and destroy countless lives.

  • Cindy Kaes Neal

    Sounds like a twin to the “Trickle Down ” Economy.

  • Anonymous

    Exactly.
    “Fascism should rightly be called Corporatism, as it is the merger of corporate and government power.” ~Benito Mussolini~

  • Keith

    If you are a young engineer looking for a future move to Mexico. there are plenty of good jobs.

  • Keith

    That is the biggest bunch of BS I have read on the internet today and that is saying something.

  • mark manges

    Like Religion, we need to get money out of politics.

  • Invictus Corruptus

    The downward death spiral of America continues as our elected officials continue aiding and abetting the economic and financial terrorists. I am convinced that capitalism is the beast system spoken about in the book of revelation.

  • eli

    Not BS, just basic econ 101. Mexico is an exported of many products. They produce those things cheaper than us. Thus, we can buy them at a lower price.

  • fittobetied

    It is called Neo liberalism. Not to be confused with the term liberal. It is an ideological and economic plan whereby Oligarchs,and wealthy corporations control government. Using their vast fortunes to buy politicians and religious leaders and create and pass laws that benefit their interests and leave the middle class in a declining downward spiral of economic despair. It’s been going on slowly for several decades and is happening on a global scale. google it and see for yourself. By the way it has friends in both political parties.

  • Keith

    you as most other folks that use the econ 101 crap have never taken the course.