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January 01, 2014

NAFTA at 20: Two Decades of Job Loss, Record Inequality, Mass Displacement, and Corporate Attacks on Environmental and Health Laws

Today marks the 20th anniversary of the implementation of the North American Free Trade Agreement (NAFTA). The promises made by NAFTA proponents and warnings issued by its opponents during the fierce 1993 debate over congressional approval of the pact can now be measured against two decades of actual outcomes. For a detailed analysis of NAFTA's two-decade legacy, check out our new NAFTA at 20 report.

NAFTA was an experiment, establishing a radically new “trade” agreement model. Despite the documented damage caused by 20 years of NAFTA, the Obama administration is now seeking to deepen the NAFTA model and expand it to additional countries through the Trans-Pacific Partnership (TPP), a massive agreement with 11 Asian and Latin American countries. The Clinton administration’s efforts to do the same – through a Free Trade Area of the Americas and an Asia-Pacific Economic Cooperation (APEC) Free Trade Agreement (FTA) – were rejected by negotiating partners as the damaging results of NAFTA became apparent.

NAFTA was fundamentally different than past trade agreements in that it was only partially about trade. Indeed, it shattered the boundaries of past U.S. trade pacts, which had focused narrowly on cutting tariffs and easing quotas. In contrast, NAFTA created new privileges and protections for foreign investors that incentivized the offshoring of investment and jobs by eliminating many of the risks normally associated with moving production to low-wage countries. NAFTA allowed foreign investors to directly challenge before foreign tribunals domestic policies and actions, demanding government compensation for policies that they claimed undermined their expected future profits. NAFTA also contained chapters that required the three countries to limit regulation of services, such as trucking and banking; extend medicine patent monopolies; limit food and product safety standards and border inspection; and waive domestic procurement preferences, such as Buy American.

In 1993, NAFTA was sold to the U.S. public with grand promises. NAFTA would create hundreds of thousands of good jobs here – 170,000 per year according the Peterson Institute for International Economics. U.S. farmers would export their way to wealth. NAFTA would bring Mexico to a first-world level of economic prosperity and stability, providing new economic opportunities there that would reduce immigration to the United States. Environmental standards would improve.

Twenty years later, the grand promises made by NAFTA’s proponents remain unfulfilled. Many outcomes are exactly the opposite of what was promised, as detailed in our new NAFTA at 20 report. In sum:

  • Rather than creating the promised 170,000 jobs per year, NAFTA has contributed to an enormous new U.S. trade deficit with Mexico and Canada, which had already equated to an estimated net loss of one million U.S. jobs by 2004. This figure, calculated by the Economic Policy Institute, includes the net balance between jobs created and jobs lost. Much of the job erosion stems from the decisions of U.S. firms to embrace NAFTA’s new foreign investor privileges and relocate production to Mexico to take advantage of its lower wages and weaker environmental standards. The NAFTA-spurred job loss has not abated during NAFTA’s second decade, as the burgeoning post-NAFTA U.S. trade deficit with Canada and Mexico has not declined.
  • Real wages in Mexico have fallen significantly below pre-NAFTA levels as price increases for basic consumer goods have exceeded wage increases. A minimum wage earner in Mexico today can buy 38 percent fewer consumer goods as on the day that NAFTA took effect. Despite promises that NAFTA would benefit Mexican consumers by granting access to cheaper imported products, the cost of basic consumer goods in Mexico has risen to seven times the pre-NAFTA level, while the minimum wage stands at only four times the pre-NAFTA level.

U.S. Public Opinion Polling Shows Overwhelming Opposition to NAFTA

The U.S. public’s view of NAFTA has shifted from a divide during the time of the NAFTA debate to broad opposition and now to overwhelming opposition to NAFTA-style trade deals. According to a 2012 Angus Reid Public Opinion poll, 53 percent of Americans believe the United States should “do whatever is necessary” to “renegotiate” or “leave” NAFTA, while only 15 percent believe the United States should “continue to be a member of NAFTA.” Rejection of the trade deal is the predominant stance of Democrats, Republicans and independents alike. NAFTA has drawn the ire of Americans across stunningly diverse demographics. A 2011 National Journal poll showed strong rejection of the status quo trade model from both lower-educated and higher-educated respondents, and a 2010 NBC News – Wall Street Journal survey revealed that a majority of upper-income respondents have now joined lower-income respondents in opposing NAFTA-style pacts.

Given NAFTA’s record of diverse damage, it is not surprising that opposition to the TPP – a supersized NAFTA that would be open for any Pacific Rim country to later join – is growing among the U.S. public and in Congress.

For a detailed analysis of NAFTA's two-decade legacy of job loss, income inequality, agricultural instability, corporate attacks on safeguards, and mass displacement, check out our new NAFTA at 20 report.

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Comments

Ernesto Maldonado

It may be consider that 90% of products in USA are currently made in China, even american flags sold in Walmart, an anti all american corporation seeking profits over the communities where they set up the stores.

We mexicans, love our towns and wish never leave our families, risk our life crossing the border to face the ghost of the american dream and discrimination.

I am law student and ex-truck driver and proud of living in USA. I talk to young people, students and local bussinessmen to stop illegal immigration

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