As Battle Over NAFTA 2.0 Heats Up, New Report Documents 25 Years of NAFTA's Disproportionate Damage to U.S. Latino and Mexican Working People

With the signing of the renegotiated North American Free Trade Agreement (NAFTA) on Nov. 30 as the migrant crisis at the border escalates, the Labor Council for Latin American Advancement (LCLAA) and Public Citizen’s Global Trade Watch released a timely analysis of the North American Free Trade Agreement’s (NAFTA) disproportionate damage to U.S. Latinos and Mexican workers, and whether the NAFTA 2.0 deal would stop it.

“While President Trump’s manipulation of grievances over trade and immigration brought him to power, absent from his worldview is the reality that NAFTA was developed by and for multinational corporations seeking to pay workers less and has hurt both U.S. and Mexican workers,” said Hector Sanchez, executive director of LCLAA at a Press Club event today. “Indeed, NAFTA’s destruction of millions of Mexican small farmers’ livelihoods and the pact’s race-to-the-bottom wage incentives have pushed many in Mexico to search for work outside their home country.”

Titled “Fracaso: NAFTA’s Disproportionate Damage to U.S. Latino and Mexican Working People,” the report’s findings upend President Donald Trump’s xenophobic NAFTA narrative that blames Mexican workers for harming U.S. workers. The report’s analysis of the NAFTA 2.0 text in the context of the ongoing NAFTA-related damage to Mexican and U.S. workers alike spotlights why further improvements are necessary before a final NAFTA 2.0 deal can achieve broad support in Congress next year. The report was produced through a partnership that united LCLAA’s decades of advocacy for Latinos and Public Citizen’s decades of analysis of trade pacts and their impacts.

“NAFTA not only didn’t deliver on its proponents’ rosy promises of more jobs and higher wages, but its ongoing damage ended decades of bipartisan congressional consensus in favor of trade pacts,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “For a final NAFTA 2.0 package to get through Congress next year, the signed deal will need more work so its labor standards are subject to swift and certain enforcement and the other improvements are made to stop NAFTA’s ongoing job outsourcing, downward pressure on wages and environmental damage.”

The data on NAFTA’s disproportionately negative effect on both Mexican and U.S. working people undermine Trump’s nationalist critique while also spotlighting why more-of-the-same neoliberal NAFTA policies are equally unacceptable. Among the report’s findings:

• Government-certified NAFTA job loss has been greatest in regions where the U.S. Latino population is concentrated. The 15 states where 85 percent of Latinos reside account for nearly half (46 percent) of total NAFTA job loss certified under just the narrow Trade Adjustment Assistance program.
• Latino workers were disproportionately represented in the light manufacturing industries hit hardest by the outsourcing NAFTA incentivized. Latinos lost 138,000 jobs in the apparel and textile sector and 123,000 jobs in the U.S. electronics industry during the NAFTA era.
• As NAFTA eliminated U.S. manufacturing jobs, the related wage stagnation for workers without college educations across all industries hit Latinos asymmetrically. Rather than the Latino-white pay gap closing, it increased during the NAFTA years.
• For Mexican workers, increased investment and trade with the United States failed to translate into per capita income growth or rising wages in Mexico. Annual per capita income grew less than 2 percent in the first seven years of NAFTA and less than 1 percent thereafter.
• Real average annual wages have declined in Mexico under NAFTA. According to analysis by Bank of America/Merrill Lynch, manufacturing wages in Mexico are now 40 percent lower than in China. Prior to NAFTA, Mexican auto wages were five times lower than in the United States. Today, even as U.S. wages have stagnated, Mexican auto wages are nine times lower
• NAFTA devastated Mexico’s rural sector. Amid a NAFTA-spurred influx of subsidized U.S. corn, about 2 million Mexicans engaged in farming and related work lost their livelihoods.
• With millions of Mexicans displaced from rural communities competing for the hundreds of thousands of new manufacturing jobs outsourced from the United States, and a lack of independent unions in Mexico to bargain for better wages, employers could keep wages reprehensibly low. Overall, in real terms average annual Mexican wages are down 2 percent and the minimum wage down 14 percent from pre-NAFTA levels.
• As NAFTA destroyed Mexican livelihoods and displaced millions in rural Mexico, it became a powerful push factor for migration. From 1993, the year before NAFTA, to 2000, annual immigration from Mexico increased from 370,000 to 770,000. With annual immigration on the rise, the total number of undocumented immigrants from Mexico living in the United States increased from about 2.9 million in 1995 to 4.5 million in 2000 to 6.9 million by 2007 when the financial crisis limited job opportunities and slowed migration rates.
• Nearly 28,000 small- and medium-sized Mexican businesses were destroyed in NAFTA’s first four years alone, spurring the El Barzon movement of formerly middle-class Mexican entrepreneurs protesting NAFTA. Losses included many retail, food processing and light manufacturing firms that were displaced by NAFTA’s new opening for U.S. big-box retailers that sold goods imported from Asia.

This report makes clear that neither status-quo neoliberalism nor Trump’s anti-Mexico nationalism is in the interest of working people in the United States or Mexico.

“Tens of millions of Mexican and U.S. Latino workers have been hurt by NAFTA – from the factory worker in El Paso, Texas, who lost her livelihood making blue jeans after the apparel industry moved to Mexico to take advantage of low wages, to the Mexican farmer in Chiapas who can barely make ends meet as the prices paid for his corn plummeted after subsidized U.S. corn flowed into Mexican markets after NAFTA,” said Yanira Merina, national president of LCLAA. “It is the future of these workers, their families and their communities that will be determined by whether there is a new NAFTA deal that can raise wages and replace NAFTA’s race to the bottom with fair trade.”

“NAFTA 2.0 labor enforcement must be greatly strengthened,” said Guillermo Perez, labor educator at the United Steelworkers and president of the Pittsburgh LCLAA. “It is in the interest of workers in all three countries to ensure that Mexico adopts strong workers’ rights provisions and monitors and enforces their implementation. Workers in Mexico must be able to form labor organizations and collectively bargain for better wages and working conditions to stop downward pressure on wages in Canada and the United States.”

“Trade agreements like NAFTA, which are not fair and leave workers in the U.S., Canada and Mexico out in the cold, have caused immense pain and disruption in the lives of everyday working people in all three countries. The NAFTA 2.0 that was signed will not stop the wage suppression in Mexico and the related outsourcing from the U.S. and Canada. Our future, the future of manufacturing and the future of workers’ lives depends on getting trade policy right,” said Dora Cervantes, general secretary-treasurer at the International Association of Machinists & Aerospace Workers.

The full report is available here.

Transitions at Eyes on Trade

This blog post is a farewell of sorts.  After three years, today is my last day at Public Citizen.  In a couple weeks, I’ll be continuing to push for a more just trade model over at Sierra Club’s climate and trade program as senior policy advisor. Eyes on Trade, of course, will still be here in the good hands of my colleagues at Global Trade Watch. 

It has been a treat to have this space to amplify the call of many for a new trade model, document the damage wrought by our existing trade deals abroad and at home, fact-check dubious economic projections and predictable spin jobs for pending trade deals, spotlight the threats those deals pose to our health/environment/economy/democracy, and witness the growth of the largest, most diverse coalition ever to oppose an expansion of the trade status quo.  

I started working on trade when I realized that three lawyers in an investor-state tribunal could trump basic tenets of democracy and rule against health and environmental protections for which many of us have fought.  When I saw how a particular model of trade has contributed to the growing gulf between the rich and the rest of us.  When I realized that multinational corporations could obtain special protections that restrict consumers' access to life-saving medicines and still get away with calling it "free trade."  

Of course, one need not work on trade to know about trade.  It is little wonder that majorities of Republicans, Democrats and independents alike oppose the status quo trade pact model.  More than two decades of NAFTA, the WTO and NAFTA expansion pacts have contributed to surging U.S. trade deficits, widespread job loss, a flood of agricultural imports, downward pressure on middle-class wages and unprecedented levels of income inequality.  Behind the aggregate data lie shuttered factories, lost livelihoods and struggling communities.

These outcomes directly contradict the rosy promises made by corporate interests to sell these controversial deals to a skeptical U.S. Congress and public.  They also contradict President Obama’s stated economic agenda to revive U.S. manufacturing, boost middle-class wages and tackle inequality – an agenda that the TPP would undermine.  The Obama administration’s push for yet another NAFTA expansion deal casts a blind eye to the damaging legacy of the current trade model.

With opinion polls showing that the U.S. public is painfully aware of this legacy, the administration’s TPP push faces stiff opposition in the halls of Congress and the court of public opinion.  Turning a blind eye to the lived realities of the status quo trade model is unlikely to prove a winning strategy. 

And with that, at the risk of making this my shortest blog post to date (a perhaps not difficult feat), I bid you adieu.  It has been an honor to work with Public Citizen, and to work alongside many of you in pushing for a fair trade policy.  I look forward to continuing to do so from my new post. 

CAFTA’s Decade of Empty Promises Haunts the TPP

Ten years ago, after a flurry of backroom deal-making, Congress passed the Central America Free Trade Agreement (CAFTA).  In the dead of night.  By a single vote.  

Exactly one decade later, today trade ministers are gathering in Hawaii to try to conclude deadline-missing negotiations on the Trans-Pacific Partnership (TPP) – a sweeping deal that would expand the CAFTA model of trade across the Pacific.

In attempt to quell the controversy surrounding the TPP, the administration is recycling the same lofty promises that were used to push for passage of CAFTA: the deal would safeguard public health, spur economic prosperity at home and abroad, and protect workers, consumers, and the environment.

After 10 years of CAFTA, the emptiness of such promises is on full display. Today in Central America, life-saving medicines are more expensive due to monopoly protections that CAFTA gave to pharmaceutical corporations – protections that are slated for expansion in the TPP.  And the headlines from several CAFTA countries do not report economic prosperity, but economic instability, drug violence and forced migration.  Meanwhile, CAFTA’s labor provisions have failed to halt the assassination of dozens of Central American union workers who were trying to end unmitigated labor abuses like wage theft.  In contrast, the pact’s foreign investor privileges, which the TPP would expand, have succeeded in empowering multinational corporations to challenge domestic laws, including consumer and environmental protections.

Worse than repeating the mistakes of the past, the TPP would repeat the mistakes of CAFTA’s present.

Making life-saving medicines unaffordable

During the debate over CAFTA, health experts warned that by handing pharmaceutical firms greater monopoly protections, the deal would restrict Central Americans’ access to more affordable generic versions of life-saving drugs.

Unfortunately, they were right.  Take, for example, Kaletra, a drug used to fight HIV/AIDS.  Under CAFTA rules, Kaletra has enjoyed monopoly protections in Guatemala, making generic versions unavailable, for the entire first decade of CAFTA.  Without a generic alternative, Guatemala’s public health system pays about $130 per bottle of Kaletra.  In contrast, the generic version of Kaletra costs less than $20 per bottle, according to the Pan American Health Organization reference price.  For Guatemala’s taxpayers, paying more than six times the generic price for Kaletra under CAFTA means less money to build schools or bridges.  For Guatemala’s HIV/AIDS patients, it can mean the difference between life and death.

Like CAFTA, the TPP is slated to include extreme monopoly protections for pharmaceutical corporations.  Indeed, the deal even omits limited provisions to protect access to affordable medicines that were included the most recent U.S. free trade agreements.  That’s why Doctors without Borders has described the TPP as not only worse than CAFTA in restricting access to medicines, but “the most damaging trade agreement ever for global health.” 

Turning a blind eye to labor abuses

One decade ago, the Office of the U.S. Trade Representative sold CAFTA as the “best ever trade agreement on labor,” boasting “world class” labor provisions.  Those provisions failed to prevent the murder of 68 Guatemalan unionists over the course of seven years without a single arrest.  In 2008, the AFL-CIO and Guatemalan unions filed an official complaint under CAFTA’s labor provisions, calling for an end to the rampant anti-union violence, wage theft, and other abuses.  It was not until six years and dozens of unionist murders later that the U.S. government moved to arbitration on the case.  Today Guatemala’s union workers still endure frequent attacks with near-total impunity.

CAFTA’s labor provisions have proven similarly ineffective in the Dominican Republic, where sugar cane workers endure 12-hour workdays in hazardous conditions without receiving legally-required overtime pay.  A Spanish priest who filed an official CAFTA complaint in attempt to rectify the abuses was informed by U.S. Department of Labor officials, “Nothing is going to happen on account of not complying.”  Indeed, nothing has happened.  Despite CAFTA’s “world class” labor provisions, the Dominican Republic’s underpaid cane workers continue laboring in squalid conditions.

Why has CAFTA, like U.S. trade agreements before and since, failed to curb widespread labor abuses?   Kim Elliot, a member of the Department of Labor’s National Advisory Committee on Labor Provisions of U.S. Free Trade Agreements, recently offered this blunt explanation: the labor provisions of U.S. trade deals “are in there because they’re necessary to get deals through Congress.”  She added, “It’s really all about politics and not about how to raise labor standards in these countries.”

Now, in attempt to get the TPP through Congress, the Office of the U.S. Trade Representative is parroting the same promise it made for CAFTA, claiming that the deal would include “the highest-ever labor commitments.”  While the TPP’s labor provisions have been described as more “enforceable” than those in CAFTA, this is nothing new.  The last four U.S. Free Trade Agreements (FTAs) already included such “enforceable” terms, but still failed to end on-the-ground offenses, according to a 2014 U.S. government report.  Colombia’s unionists have faced dozens of assassinations and hundreds of death threats despite the Colombia FTA’s inclusion of TPP-like labor provisions.  And last year Peru explicitly rolled back occupational health and safety protections for workers despite the Peru FTA’s “enforceable” labor provisions.  Neither country has faced penalties under the FTAs.  It’s unclear why the TPP’s replication of such unsuccessful labor provisions should be expected to curb the systematic labor abuses in TPP countries like Vietnam, which bans independent unions, uses forced labor, and, by the Vietnamese government’s own estimate, has more than 1.75 million child laborers.

Empowering corporate attacks on consumer and environmental protections

In contrast to CAFTA’s unenforceable “protections” for workers, the deal granted highly enforceable privileges to foreign corporations.  This includes empowering them to bypass domestic courts and challenge domestic consumer and environmental protections before extrajudicial tribunals via “investor-state dispute settlement” (ISDS).

Corporations have not held back in using this controversial parallel legal system to challenge pro-consumer policies, including government efforts to keep electricity affordable.  In 2010 a U.S. energy company with an indirect, minority stake in Guatemala’s electric utility used ISDS to challenge Guatemala’s decision to lower electricity rates for consumers.  The next day, the company sold off its minority share.  A three-person ISDS tribunal generously decided to treat the firm as a protected “investor” in Guatemala and ordered the government to pay the corporation more than $32 million.  In another energy-related CAFTA case, a U.S. financial firm challenged the Dominican Republic’s decision not to raise electricity rates amid a nationwide energy crisis.  The government decided to pay the firm to drop the case in a $26.5 million settlement, reasoning that it was cheaper than continuing to pay legal fees.

CAFTA countries also face an increasing array of ISDS cases against environmental protections.  A U.S. mining company, for example, has launched a claim against the Dominican Republic for delaying and then denying environmental approval for an aggregate materials mine that the government deemed a threat to nearby water sources.  Other U.S. investors in the Dominican Republic have threatened to launch a CAFTA claim against the government for denying environmental approval for their plans to expand a gated resort.

The TPP would dramatically expand the controversial ISDS system, newly empowering more than 28,000 additional foreign-owned firms to ask private tribunals to order taxpayer compensation for commonsense environmental and consumer protections.

Fueling economic instability

Ten years ago, CAFTA proponents promised the deal would bring economic prosperity to Central America, making it “the best immigration, anti-gang, and anti-drug policy at our disposal.”  Today, CAFTA countries Honduras, El Salvador, and Guatemala are plagued by drug-related gang violence and forced migration.  While the causes are many, “economic stagnation” has fed the crisis, according to the U.S. State Department.  CAFTA clearly failed to deliver on its promise of economic growth for the region.

Worse still, CAFTA has contributed to the region’s economic instability.  Before the razor-thin passage of CAFTA, development organizations warned that the deal could lead to the displacement of the family farmers that constitute a significant portion of Central America’s workforce, by forcing them to directly compete with highly-subsidized U.S. agribusiness.  Indeed, agricultural imports from the United States in Honduras, El Salvador, and Guatemala have doubled since the deal went into effect, while the countries’ agricultural trade balance with the United States has dropped, spelling farmer displacement. 

And despite promises that CAFTA would make up for rural job loss by creating new jobs in apparel factories, apparel exports to the United States from Honduras, El Salvador, and Guatemala have actually fallen $1.6 billion, or 21 percent, since the year before CAFTA took effect.  Not only has the promise of new factories disappeared – so have existing factories.  

If the TPP were to take effect, the apparel jobs of Central America would be expected to decline even quicker, contributing to further economic instability.  That’s because the TPP includes Vietnam, a major apparel exporter where independent unions are banned and where the minimum wage averages less than 60 cents an hour – a fraction of the minimum wages in Central America (or even in China).  Central America is already losing the race to the bottom.  It will only fall further behind if the TPP makes Vietnam the newest low-wage competitor. 

The promise-defying track record of CAFTA need not be repeated.  When the TPP negotiators meeting today in a resort hotel in Hawaii finish this round of negotiations, we are likely to hear a familiar litany of promises about how the TPP would benefit consumers, workers, and the environment.  With those promises punctured by a decade of CAFTA’s stark realities, we have a unique opportunity to say “enough is enough.” 

CAFTA and the Forced Migration Crisis

What does a trade agreement have to do with the thousands of unaccompanied children risking their lives to try to cross the U.S. southern border?  

Earlier this month Congresswoman Marcy Kaptur (D-Ohio) hosted a congressional briefing entitled "Economic Underpinnings Of Migration In The Americas," focusing on the role that the U.S.-Central America Free Trade Agreement (CAFTA) has played in contributing to the forced migration crisis.  

Watch Congresswoman Marcy Kaptur and GTW research director Ben Beachy explain how CAFTA has exacerbated the instability feeding this crisis in the video below.  Ben's prepared remarks follow. 

0:00 -- Congresswoman Kaptur introduces the event
4:57 -- Ben delivers remarks
16:40 -- Congresswoman Kaptur answers a question about Fast Track
24:34 -- Ben answers a question on how to achieve a more fair trade model

 

CAFTA and the Forced Migration Crisis

Ben Beachy, Research Director, Public Citizen's Global Trade Watch

I’d like to start with a quote from former Representative Tom Davis, from my home state of Virginia, when he was speaking on the House floor in favor of CAFTA on July 27, 2005.  He said:

“…we need to understand that CAFTA is more than just a trade pact. It's a signal of U.S. commitment to democracy and prosperity for our neighbors. And it's the best immigration, anti-gang, and anti-drug policy at our disposal…Want to fight the ever-more-violent MS-13 gang activity originating in El Salvador but prospering in Northern Virginia? Pass CAFTA …Want to begin to ebb the growing flow of illegal immigrants from Central America? Pass CAFTA.”

One day later, the House passed CAFTA, at midnight, by a single vote.

Nine years later, gang and drug-related violence in Central America has reached record highs and the “growing flow” of immigrants from Central America that Representative Davis referenced has surged.

At a minimum, CAFTA failed to stem violence and migration from Central America as Rep. Davis and other CAFTA proponents promised.  But it’s worse than that.  The deal appears to have actually contributed to the economic instability feeding the region’s increase in violence and forced migration. 

I’m not going to argue that CAFTA is singularly responsible for the surge of Central American children trying to cross the southern border into the United States.  The horrific violence in Honduras, El Salvador and Guatemala is the proximate cause of this crisis.  But that violence has been fed by economic instability in those countries.  And it makes sense to examine whether CAFTA has done more to mitigate or to exacerbate that instability. 

The evidence, unfortunately points to the latter.  Under CAFTA, family farmers in El Salvador, Guatemala and Honduras have not fared well, the economies have become dependent on short-lived apparel assembly jobs – many of which have vanished, and economic growth has actually slowed. 

First, let’s look at the situation for family farmers.  A number of development groups unfortunately predicted during the CAFTA debate that the deal could lead to the displacement of the family farmers that comprise significant portions of the region’s workforce.  Indeed, that should have been the expected result if NAFTA, the predecessor to CAFTA, offers any indication. 

NAFTA removed Mexican tariffs on corn imports and eliminated Mexican supports for small farmers but did not discipline U.S. subsidies.  The predictable result was an influx of cheap U.S. corn into Mexico, which caused the price paid to Mexican farmers for the corn that they grew to fall by 66 percent, forcing many to abandon farming.  An estimated 1.1 million small-scale farmers and 1.4 million other Mexicans dependent on agriculture soon lost their livelihoods.  Immigration to the United States soon soared.  While the number of people immigrating to the United States from Mexico remained steady in the three years preceding NAFTA’s implementation, the number of annual immigrants to the U.S. from Mexico more than doubled in NAFTA’s first seven years. 

Under CAFTA, family farmers in Honduras, El Salvador, and Guatemala have been similarly inundated with subsidized agricultural imports – mainly grains – from U.S. agribusinesses.  Agricultural imports from the United States in those three CAFTA countries have risen 78 percent since the deal went into effect.  While these exports represent a small fraction of the business of U.S. agricultural firms, they represent a big threat to the Central American family farmers who do not have the subsidies, technology, and land to compete with the influx of grain.  

And despite promises to the contrary, most small-scale farmers in those countries have not seen a boost in exports of their products to the United States.  The growth in agricultural exports from El Salvador to the U.S. under CAFTA has actually been lower than global growth in agricultural exports to the U.S.  And Honduras’s agricultural exports to the U.S. have been swamped by the surge in agricultural imports.  Honduras went from being a net agricultural exporter to the United States in the six straight years before CAFTA to being a net agricultural importer from the United States in the six straight years after the deal took effect. 

Some CAFTA proponents understood that Central America’s small-scale farmers may not fare well under the deal, but promised that displaced workers could find new jobs in the garment assembly factories, or maquilas, producing clothing for export to the U.S.  These factories are not only notorious for abusing workers’ rights and paying low wages, but for leaving a country as soon as cheaper wages can be found in another low-wage country.  Indeed, this race to the bottom was evident in Mexico under NAFTA.  Maquila employment surged in NAFTA’s first six years. But since 2001, hundreds of factories and hundreds of thousands of jobs in this sector have been displaced as China joined the WTO and Chinese sweatshop exports gained global market share. 

Apparel production in Central America’s factories has faced a similar fate.  Apparel exports to the United States from each of the three countries in question – Honduras, El Salvador, and Guatemala – were lower last year than in the year before CAFTA took effect.  In Honduras, apparel exports to the U.S. have fallen more than 20 percent in CAFTA’s first 9 years.  Guatemala has seen a nearly 40% downfall.  Jobs in the apparel factories of Central America would be expected to disappear even quicker if the controversial Trans-Pacific Partnership would take effect.  The TPP contains Vietnam, where the average minimum wage is 52 cents an hour – a fraction of minimum wages in Central America, and even in China. 

A final promise of CAFTA that I’ll highlight is that the pact would boost Central American economic growth.  This promise was also made for Mexico under NAFTA.  But since NAFTA took effect, Mexico’s average annual per capita growth rate has been just 1 percent, significantly lower than the pre-NAFTA rate. Indeed, Mexico had the third-lowest per capita growth rate in all of Latin America during the first 20 years of NAFTA. 

The outcome has not been much better under CAFTA.  The average annual GDP growth rates in El Salvador, Honduras and Guatemala have all been lower than the overall growth rate in Latin American developing countries in CAFTA’s first 9 years. In fact, the average annual growth rates of El Salvador and Honduras have fallen since the deal took effect, while the growth rate of Guatemala went from being above the regional average before CAFTA to falling below it since CAFTA. 

These aggregate numbers of course represent thousands of individual families who have found themselves facing increased economic instability and greater difficulty in making ends meet.  Thousands of youth more susceptible to the influence of gangs and drugs.  And thousands of children who have decided that a life threatening journey to the United States is better than an even more life-threatening existence at home.  

In sum, representative Davis was clearly wrong, as were the other CAFTA proponents who promised the deal would bring “prosperity” to Central America, thereby diminishing gang and drug-related violence and stemming the need to migrate to the U.S. 

While Rep. Davis is no longer in Congress, his arguments are still here.  Some members of Congress and industry lobbyists are making very similar promises regarding the proposed Trans-Pacific Partnership – which would expand the NAFTA/CAFTA model across the Pacific.  They have argued, essentially, that this time will be different.  That this time, a more-of-the-same trade deal will actually spur prosperity among our trade partners. 

Most members of Congress, thankfully, are not buying it.  Most Democrats have opposed the effort to Fast Track the TPP through Congress, as has a sizeable bloc of Republicans.  For those still on the fence, it would be prudent to consider the failed legacy of past agreements before committing us, and our trade partners, to a new one.  

Central America Crisis Belies CAFTA’s Empty Promises

 

“…[the Central America Free Trade Agreement (CAFTA) is] the best immigration, anti-gang, and anti-drug policy at our disposal…”

--Representative Tom Davis, July 27, 2005 – one day before Congress passed CAFTA

“Something must be happening that children and their mothers are now leaving for the United States in busloads…People are saying, ‘There’s no future here.’”

--Miriam Miranda, Honduran human rights leader and recent kidnapping survivor, July 30, 2014

 

Nine years ago this week, the polemical Central America Free Trade Agreement (CAFTA) was passed by the House of Representatives…in the dead of night…by a single vote.  

CAFTA proponents promised the deal would reduce gang and drug-related violence in Central America, boost economic development, and diminish the factors pushing Central Americans to migrate to the United States. 

Such promises already sounded hollow when they were voiced in 2005.  Today, as thousands of Central American children leave their homes and risk their lives to try to make it to the United States, CAFTA’s promises have proven tragically empty.  

When trying to secure passage for CAFTA’s expansion of the controversial North American Free Trade Agreement (NAFTA) model to five Central American nations and the Dominican Republic, the Bush administration and corporate lobbyists could not rely on the standard promises of job creation and deficit reduction that had proven false under NAFTA.  Instead, they launched a barrage of political arm-twisting and horse-trading to convince members of Congress to vote against the anti-CAFTA opinions of their constituents.  

Many CAFTA backers also resorted to selling the deal as a pathway to peace and prosperity for Central America.  Here is Representative Tom Davis (R-Va.) speaking on the House floor in favor of CAFTA on July 27, 2005:

“…we need to understand that CAFTA is more than just a trade pact. It's a signal of U.S. commitment to democracy and prosperity for our neighbors. And it's the best immigration, anti-gang, and anti-drug policy at our disposal…Want to fight the ever-more-violent MS-13 gang activity originating in El Salvador but prospering in Northern Virginia? Pass CAFTA …Want to begin to ebb the growing flow of illegal immigrants from Central America? Pass CAFTA.”

One day later, Congress passed CAFTA.

Nine years later, gang and drug-related violence in Central America has reached record highs and the “growing flow” of immigrants from Central America has surged.

On Wednesday, Miriam Miranda, coordinator of the Fraternal Black Organization of Honduras (OFRANEH) traveled to Washington, D.C. to speak to congressional staff about the rampant violence and unrelenting poverty in her home country and its neighbors. Miriam spoke not only of the skyrocketing homicides and widespread gang and paramilitary control in Honduras, but the economic instability undergirding such violence.

The issue is not theoretical for Miriam – just two weeks ago she survived an attempted kidnapping by armed men.

I asked Miriam what she would say, if given the opportunity, to the members of Congress who had promised CAFTA would spur development and reduce violence and migration pressures in Central America. She responded:

“It’s more than evident with what has happened in the last eight to nine months – this massive exit from Central America – that these policies that they have implemented are completely mistaken. They don’t respond to our needs…We have to question this model of development – development for whom?” 

Not only did CAFTA fail to stem violence and migration from Central America as Rep. Davis and other proponents promised. The deal appears to have actually contributed to the economic instability feeding the region’s increase in violence and forced migration.

That’s the conclusion reached by the 67 members of Congress’ Progressive Caucus, who included CAFTA in their recent summary of the root causes of the refugee crisis occurring along the U.S.-Mexico border: “free trade agreements, including the North American Free Trade Agreement (NAFTA) and the Central America Free Trade Agreement (CAFTA) have led to the displacement of workers and subsequent migration from these countries.”

How has CAFTA led to displacement and migration?  Under CAFTA, family farmers in Honduras, El Salvador, and Guatemala have been inundated with subsidized agricultural imports – mainly grains – from U.S. agribusinesses. Agricultural imports from the United States in those three CAFTA countries have risen 78 percent since the deal went into effect. 

While agricultural exports to Central America represent a small slice of U.S. agricultural corporations’ business, they present a large threat to the livelihoods of small-scale Central American farmers who cannot compete with highly subsidized and mechanized U.S. firms. When Mexico experienced a similar surge in agricultural imports under NAFTA, more than 2 million Mexican farmers and agricultural workers lost their livelihoods and migration to the United States doubled.  

In the lead-up to CAFTA, development groups like Oxfam warned of such displacement, stating that when considering the impacts on Central American rice production alone, CAFTA threatened the livelihoods of up to 1.5 million people in the region.  Central American immigrant advocacy groups like CARECEN, CONGUATE, and SANN also raised such concerns early in the CAFTA negotiating process, but were ignored by the Bush administration.

Certainly the economic instability and violence plaguing Central America, and the resulting surge in migration to the United States, cannot be pegged on CAFTA alone. The causes of the crisis are manifold, and many have been amply discussed.  But though CAFTA did not singlehandedly spark this fire, it appears to have contributed to the kindling.

And clearly, CAFTA has utterly failed to deliver on the far-fetched promises used by Rep. Davis and other proponents to sell the controversial deal to a skeptical Congress back in 2005.  I wish Representative Davis, and all those who voted for CAFTA, would have been there on Wednesday to hear Miriam’s words.  

I wish the same for the members of the Obama administration who are now pushing to expand the NAFTA/CAFTA trade model across the Pacific under the Trans-Pacific Partnership (TPP).  As with CAFTA, some are trying to sell that deal with rosy promises that it will spur development in TPP countries. 

In the words of Miriam, development for whom?  

Obama Mexico Visit Spotlights 20-Year Legacy of Job Loss from NAFTA, the Pact on Which Obama’s TPP Is Modeled

New Public Citizen Report Catalogs the Negative NAFTA Outcomes That Are Fueling Opposition to Obama Push to Fast Track TPP

The 20-year record of job loss and trade deficits from the North American Free Trade Agreement (NAFTA) is haunting President Barack Obama’s efforts to obtain special trade authority to fast track the Trans-Pacific Partnership (TPP), said Public Citizen as it released a new report that comprehensively documents NAFTA’s outcomes. Next week’s presidential trip to Mexico for a long-scheduled “Three Amigos” U.S.-Mexico-Canada summit will raise public attention to NAFTA, on which the TPP is modeled, which is not good news for Obama’s push for the TPP and Fast Track.

Numerous polls show that opposition to NAFTA is among few issues that unite Americans across partisan and regional divides. Public ire about NAFTA’s legacy of job loss and policymakers’ concerns about two decades of huge NAFTA trade deficits have plagued the administration’s efforts to obtain Fast Track trade authority for the TPP. The TPP would expand the NAFTA model to more nations, including ultra-low-wage Vietnam. In the U.S. House of Representatives, most Democrats and a bloc of GOP have indicated opposition to Fast Track, as has Senate Majority Leader Harry Reid (D-Nev.).

Public Citizen’s new report, "NAFTA’s 20-Year Legacy and the Fate of the Trans-Pacific Partnership", compiles government data on NAFTA outcomes to detail the empirical record underlying the public and policymaker sentiment. It also shows that warnings issued by NAFTA boosters that a failure to pass NAFTA would result in foreign policy crises – rising Mexican migration and a neighboring nation devolving into a troubled narco-state – actually came to fruition in part because of NAFTA provisions that destroyed millions of rural Mexican livelihoods.

“Outside of corporate boardrooms and D.C. think tanks, Americans view NAFTA as a symbol of job loss and a cancer on the middle class,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “If you are a president battling to overcome bipartisan congressional skepticism about giving you special trade authority to fast track a massive 12-nation NAFTA expansion, it is really not helpful to be visiting Mexico for a summit of NAFTA-nation leaders.”

The Public Citizen report shows that not only did projections and promises made by NAFTA proponents not materialize, but many results are exactly the opposite. Such outcomes include a staggering $177 billion U.S. trade deficit with NAFTA partners Mexico and Canada, one million net U.S. jobs lost in NAFTA’s first decade alone, slower U.S. manufacturing and services export growth to Mexico and Canada, a doubling of immigration from Mexico, larger agricultural trade deficits with Mexico and Canada, and more than $360 million paid to corporations after “investor-state” tribunal attacks on, and rollbacks of, domestic public interest policies.

“The data have disproved the promises of more jobs and better wages, so bizarrely now NAFTA defenders argue the pact was a success because it expanded the volume of U.S. trade with the two countries without mentioning that this resulted in a 556 percent increase in our trade deficit with those countries, with a flood of new NAFTA imports wiping out hundreds of thousands of American jobs,” said Wallach.

The study tracks specific promises made by U.S. corporations like Chrysler, GE and Caterpillar to create specific numbers of American jobs if NAFTA was approved, and reveals government data showing that instead, they fired U.S. workers and moved operations to Mexico.

“The White House and the corporate lobby sold NAFTA with promises of export growth and job creation, but the actual data show the projections were at best wrong,” said Wallach. “The gulf between the gains promised for NAFTA and the damage that ensued means that the public and policymakers are not buying the same sales pitch now being made for theTPP and Fast Track.”

The report also documents how post-NAFTA trade and investment trends have contributed to middle-class pay cuts, which in turn contributed to growing income inequality; how since NAFTA, U.S. trade deficit growth with Mexico and Canada has been 50 percent higher than with countries not party to a U.S. Free Trade Agreement, and how U.S. manufacturing and services exports to Canada and Mexico have grown at less than half the pre-NAFTA rate.

Among the study’s findings:

• Rather than creating in any year the 200,000 net jobs per year promised by former President Bill Clinton on the basis of Peterson Institute for International Economics projections, job loss from NAFTA began rapidly:

• American manufacturing jobs were lost as U.S. firms used NAFTA’s foreign investor privileges to relocate production to Mexico, and as a new flood of NAFTA imports swamped gains in exports, creating a massive new trade deficit that equated to an estimated net loss of one million U.S. jobs by 2004. A small pre-NAFTA U.S. trade surplus of $2.5 billion with Mexico turned into a huge new deficit, and a pre-NAFTA $29.6 billion deficit with Canada exploded. The 2013 NAFTA deficit was $177 billion, representing a more than six-fold increase in the NAFTA deficit.

• More than 845,000 specific U.S. workers, most in the manufacturing sector, have been certified for Trade Adjustment Assistance (TAA) since NAFTA because they lost their jobs due to offshoring to, or imports from, Canada and Mexico.The TAA program is narrow, covering only a subset of jobs lost at manufacturing facilities, and is difficult to qualify for. Thus, the TAA numbers significantly undercount NAFTA job loss. A TAA database searchable by congressional district, sector and more is available here.

• NAFTA has contributed to downward pressure on U.S. wages and growing income inequality.There is broad consensus among economists that recent trade flows have been a significant contributor to growing income inequality; the only debate is about the degree of trade’s responsibility. NAFTA’s broadest economic impact has been to fundamentally transform the types of jobs and wages available for the 63 percent of American workers without a college degree. Most of those who lost manufacturing jobs to NAFTA offshoring and import competition found reemployment in lower-wage service sector jobs. 

• According to the U.S. Bureau of Labor Statistics, two out of every three displaced manufacturing workers who were rehired in 2012 experienced a wage reduction, most of them taking a pay cut of greater than 20 percent.  

• As increasing numbers of workers displaced from manufacturing jobs have joined those competing for non-offshorable, low-skill jobs in sectors such as hospitality and food service, real wages have also fallen in these sectors under NAFTA. The resulting downward pressure on middle-class wages has fueled recent growth in income inequality.

• Scores of environmental and health laws have been challenged in foreign tribunals through NAFTA’s controversial investor-state dispute resolution system. More than $360 million in compensation to investors has been extracted from NAFTA governments via “investor-state” tribunal challenges against toxics bans, land-use rules, water and forestry policies, and more. More than $12.4 billion is pending in such NAFTA claims, including challenges of medicine patent policies, a fracking moratorium and a renewable energy program.

• The average annual U.S. agricultural trade deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. U.S. beef imports from Mexico and Canada, for example, have risen 133 percent. Over the past decade,  total U.S. food exports to Mexico and Canada have actually fallen slightly while U.S. food imports from Mexico and Canada have more than doubled. This stands in stark contrast to projections that NAFTA would allow U.S. farmers to export their way to newfound wealth and farm income stability. Despite a 239 percent rise in food imports from Canada and Mexico under NAFTA, the average nominal U.S. price of food in the United States has jumped 67 percent since NAFTA.

• The reductions in consumer goods prices that have materialized have not been sufficient to offset the losses to wages under NAFTA; U.S. workers without college degrees (63 percent of the workforce) likely have lost a net amount equal to 12.2 percent of their wages even after accounting for gains from cheaper goods.This net loss means a loss of more than $3,300 per year for a worker earning the median annual wage of $27,500.

• The export of subsidized U.S. corn did increase under NAFTA’s first decade, destroying the livelihoods of more than one million Mexican campesino farmers and about 1.4 million additional Mexican workers whose livelihoods depended on agriculture. The desperate migration of those displaced from Mexico’s rural economy pushed down wages in Mexico’s border maquiladora factory zone and contributed to a doubling of Mexican immigration to the United States following NAFTA’s implementation.

• Facing displacement, rising prices and stagnant wages, more than half the Mexican population, and more than 60 percent of the rural population, still falls below the poverty line, despite the promises that NAFTA would bring broad prosperity to Mexicans. 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 than 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. Though the price paid to Mexican farmers for corn plummeted after NAFTA, the deregulated retail price of tortillas – Mexico’s staple food – shot up 279 percent in the pact’s first 10 years.

“Given NAFTA’s damaging outcomes, few of the corporations or think tanks that sold it as a boon for all of us in the 1990s like to talk about it, but the reality is that their promises failed, the opposite occurred and millions of people were severely harmed and now this legacy is derailing President Obama’s misguided push to expand NAFTA through the TPP,” said Wallach.

Wikileaks blows lid on Panamanian corruption

As Washington debates the NAFTA-style deal with Panama, Wikileaks has released a treasure trove of damning documents about the current Panamanian administration.

One of the major talking points that the trade deal's proponents utilize is that we must pass the trade deal to reward a key friend in the region. (See here and here.)

But with friends like Panamanian President Martinelli, who needs enemies?

In January 2009, the Embassy expressed concern that Panama's authorities supposedly in charge of providing the U.S. with intelligence "failed to provide" information about drug-related money laundering "to the Attorney General as required by law. Ambassador stressed that the credibility and efficacy of the UAF were crucial in fight against money laundering."

It gets worse. The man behind the money - David Murcia Guzman - has links to former Colombian president Alvaro Uribe, and current Panamanian president Ricardo Martinelli. According to this cable from March 2009, Martinelli's network of Super 99 stores may have been a "service provider" to Guzman, and may have laundered illicit proceeds.

The Embassy wrote, "This scandal is a huge black eye for Panama, and could do serious damage to its international reputation as a safe place to do business. And the worst is far from over."

Cola Wars Beat Drug Wars

The award in agribusiness giant Cargill's NAFTA investor-state attack on Mexico's jobs program was published last week.

The short version: a tribunal of three unelected judges determined that Mexico's efforts to save or create jobs for campesinos in the sugar sector were a violation of NAFTA. Mexico's taxpayers were ordered to cough up over $77 million plus interest, all the judges' and court fees, and to even pay Cargill $2 million for Cargill's own lawyers' costs.

Here's the longer version:

For years, large agribusiness groups have been pushing the use of high fructose corn syrup in soda drinks, despite concerns about the environmental and public health impact. Not only is HFCS opposed on health grounds, it's also opposed by some foodies on taste grounds: witness the growing demand for Mexican Coca Cola, much of which is made with sugar and is said to therefore taste better.

By the late 1990s, Mexico had a whole lot of excess sugar in its market that it hoped to be able to export to the U.S.This pile-up was driving down prices and hurting Mexico's farmers, who were generally getting battered by NAFTA-style rules and in turn driving displacement into drug trafficking or immigration, as President Obama himself noted during the campaign.

Candidates of color running and winning on fair trade

Anytime you force an ad-man to compress a difficult policy problem into a 30-second soundbyte, you're going to lose some complexity.

That's why I was surprised at the push back on politicians on so-called "China bashing." (See for instance, Reihan Salam here, and Matt Yglesias here.)

I watched about 800 political ads for the 2010 cycle, and most of the China-related ads I that I saw were not bashing Chinese people - they're bashing unfair trade deals and policies, voted on in Washington, that had the effect of offshoring jobs to other countries. In other words, the reason things aren't made in America is because of policies that were. You can see the full pantheon of ads and analysis in our new report here.)

For what it's worth, candidates of color (including a number of South Indian Americans and Asian Americans) in both parties have launched some of the strongest attacks on job offshoring this election cycle.

This includes Rep. David Wu (D-Ore.) in Portland, who bears the distinction not only of being an Asian-American campaigning for fair trade, but also a Democrat showing that you can campaign and win on fair trade in the Pacific Northwest, where the (incorrect) conventional wisdom is that this message doesn't play.

Democrats and Indian-Americans Manan Trivedi in Pennsylvania and Raj Goyle in Kansas also posted credible showings in GOP-leaning districts. Both campaigned extensively on fair trade themes. As an NPR column argued:

The trick for these candidates is to never let voters forget you are running to represent Sacramento, or Wichita - not Bangalore.

Raj Goyle does this by campaigning very hard on fighting outsourcing of Kansas jobs.  Ami Bera agrees, "we have to keep those jobs here because we have over 12 percent unemployment."

(Bera ran in against Dan Lungren in California.)

In Hawaii, Democratic candidate Colleen Hanabusa criticized job offshoring in paid television ads, and was successful in her effort to unseat GOP incumbent Charles Djou, who ran the campaign's only television ad in favor of the Korea FTA. Both candidates are Asian American.

Democrat and Congressional Hispanic Caucus member Loretta Sanchez fought back a challenge from Vietnamese-American GOP candidate Van Tran in this heavily Latino and Asian district. She campaigned against unfair trade with Vietnam, and against other anti-worker trade deals.

In Louisiana, African-American candidate Cedric Richmond beat Vietnamese-American GOP incumbent Anh Cao. Richmond ran paid television ads against unfair trade deals, while Cao attacked unfair trade with Vietnam (even though he had supported the Bush-initiated Trans-Pacific Partnership while in office).

In Georgia, Democratic incumbent and African-American Sanford Bishop won re-election in his majority White-American, deep South district, and ran paid television ads attacking NAFTA and China trade policy. (Bishop has had complicated trade policy history - voting for the WTO and China's entry into it, while voting against NAFTA and cosponsoring the fair trade TRADE Act.) Meanwhile, his fellow Democratic incumbent Jim Marshall did not campaign on his fair trade record, and lost to Austin Scott, a Republican that emphasized Buy America themes. (Both Marshall and Scott are white.)

Ryan Frazier, an African-American GOP candidate in Colorado, criticized the fact that the stimulus bill was not used to buy only U.S.-made goods. Allen West, an African-American GOP candidate in Florida, criticized the job offshoring impact of cap-and-trade. Their Democratic opponents approached these candidates in different ways: Ed Perlmutter in Colorado ran anti-offshoring ads of his own and won, while Ron Klein in Florida was mum on trade and lost.

And Latino voters in California and Nevada strongly backed Democratic Senate incumbents Barbara Boxer and Harry Reid, who both campaigned against policies that send jobs to Mexico and other countries.

Finally, 75 percent of the Congressional Black Caucus, nearly half of the Congressional Hispanic Caucus, and Asian-American members like Reps. Mazie Hirono (D-Hawaii) and Judy Chu (D-Calif.) have endorsed the TRADE Act, which simultaneously pushes for good jobs here at home, while prioritizing stronger environmental justice, workers rights and democratic protections for our trading partners. Not to mention a fellow named Barack Obama, who also campaigned and won on these themes - winning not only communities of color but making serious inroads into the white working class.

In sum, elected officials don't seem to have much difficulty reconciling justice for communities of color at home and abroad with a strong working class message of standing up for job creation in the United States. They know as well as anyone what my colleagues John Schmitt and Nicole Woo (and other CEPR folks) have found: that the quality of manufacturing and other jobs here at home is a major reason that families from Asian-Pacific, African-American and Latino-American communities have ascended to the middle class.

Follow the Climate Reality Tour!

We’re pleased to unveil an exciting new project: the Climate Reality Tour.

You may have caught an earlier post, but in case you didn't, let's fill you in The Climate Reality Tour is a movement-building road trip to promote global economic policies that are fair for workers and shift away from the climate- and job-destroying status quo. The destination? The United Nations Climate Negotiations in Cancun in late November. And to bring home the sustainability point, we decided to go by bike. Yep, by bike!

With the world in the grips of overlapping global crises – food, economic/financial and climate – the stakes are high indeed. To save the planet requires confronting these crises simultaneously, and that means overcoming the false jobs vs. environment trade-off. In truth, corporations benefit from exploiting both while human beings and the earth suffer.

But this requires political will and resolve far beyond what we’ve seen from either political party, and even many leading civil society organizations. At Public Citizen, we’ve long believed our unsustainable global economic order, as etched in the tomes of the WTO and NAFTA-type trade deals, unfairly pits workers and ecosystems against one another. We’ve decried how the status quo sanctifies the rights or multinational corporations to exploit and destroy – even above the democratic rights of a people determine their own economic and eological futures.

Clinton Reversal on NAFTA Model?

While former President Clinton was visiting Haiti last week, he revealed that his views on trade policy have undergone some transformation since leaving office:    

At a news conference in Port-au-Prince Monday, Clinton said when he helped Haitian President Jean Bertrand Aristide return to power in 1994, Clinton also signed legislation that increased the flow of cheap American rice into Haiti.

But now, he says, "I think it was a mistake. I think it was part of a global trend that was wrong-headed."

Clinton says the theory behind that global trend was that wealthy countries could provide poorer countries with cheaper food than their farmers could grow.  That would lead poor countries to skip directly to industrialization. But Clinton says, once he left office and saw the effects of that policy on farmers in developing countries, he changed his mind.

"It is unrealistic to expect that a country can totally obliterate its capacity to feed itself and just skip a stage of development," he says. "It seems almost laughable now that we ever thought it."

It’s heartening to see one of the strongest proponents of the neoliberal economic model come to realize just how damaging that model has been. For Mexico, though, this realization has come about 16 years too late.

When NAFTA entered into force in 1994, cheap subsidized American corn from corporate farms flooded the Mexican economy, forcing hundreds of thousands of small corn farmers to leave their farms.  Many of these farmers, faced with corn prices below their cost of production, often had no choice but to emigrate to the U.S. to escape economic disaster.  During the 2007-2008 global food price crisis, poor Mexicans found out exactly how costly the destruction of the Mexican corn industry could be when tortilla prices, propelled by U.S. corn prices, skyrocketed by 60 percent within a few months.  

Now that Clinton has seen the flaws of the unfair trade model epitomized by NAFTA, could he press Obama to renegotiate NAFTA to make it fair for consumers, workers, and farmers in all three NAFTA countries?

(Thanks to Flickr user talkradionews for the photo)

FTAs = Destabilization

Fair traders have long maintained that NAFTA-style trade deals promote instability.

The case of Mexico clearly showed this, with massive amounts of post-NAFTA rural displacement leading to sharp increases in immigration and narcotrafficking, leading the country to the brink of failed statehood.

Earlier this month, the thesis was proved again in Peru. In 2007, Peruvian fair-traders warned against signing the FTA, arguing that it would incentivize further rainforest destruction. Sure enough, within months of the deal going into effect, huge parcels of the Amazon were sold off to developers, and indigenous forest-dwellers were locked in a life-or-death battle with the government.

Now, over the weekend, fair trader Manuel Zelaya (president of Honduras) was ousted in the region's first military coup since the Cold War. Opposition to CAFTA ran high in Honduras, but local elites signed the deal anyway. This led to a groundswell of support for a president that kept getting more and more progressive, most recently signing onto the Bolivarian Alternative of the Americas, an alternative to NAFTA-style FTAs. The country's elites wanted to block these changes, so pushed a coup. (More information on how you can take action is available here.)

Looking ahead, as the debate continues in the United States over the Panama FTA, some comments made by that country's peasant leaders are worth considering. He said of the FTA:

In Panama, the poverty rate is nearly 40 percent, and it is even higher for the rural areas (65 percent) and indigenous communities (95 percent). If we experience even a fraction of what happened to Mexico in terms of the flood of subsidized U.S. agricultural products, our rural population will disintegrate and look for any survival option – including immigration to the United States.

This kind of trade agreement will only increase hunger and misery in the indigenous and peasant sectors of Latin America, pushing our countries even faster into the arms of leftist governments, which has already happened in South America proper.

The message is clear: if you want increase in desperation and polarization, push FTAs. If you want preservation of democracy and stability, choose fair trade.

Obama campaign fights back on Fortune interview

(Disclosure: Global Trade Watch has no preference among the candidates.)

Say what you will about Obama's trade positions, but you can't deny that they learned the lesson of Al Gore and John Kerry that you must fight back when attacked or misquoted. The Obama campaign has established a Fact Check operation to respond to absolutely everything, including what they claim is a  misrepresentation of Obama's trade views in a Fortune Magazine interview. Particularly interesting was his statement to Nina Easton on NAFTA and immigration, which I don't think has ever been said by a major party candidate:

And by the way, just going back to NAFTA for a second, I don't dispute that there may have been some modest aggregate benefit in terms of lowering prices on consumer goods for example. But I would also argue that not only did it have an adverse affect on certain communities that saw jobs move down to Mexico but for example our agricultural section pretty much devastated a much less efficient Mexican farming system. But from a pure economic, you know if you're just an economist looking at this in an abstract way you would say well a more efficient producer displaced a less efficient producer in Mexico, there's nothing wrong with that. As a practical matter those are millions of people in Mexico who are displaced. Many of whom now are moving up to the United States, contributing to the immigration concerns that people are feeling. And so, those human factors should be taken into account. They may not override or every single decision that we make in respect to trade, but to pretend those costs aren't there, that those costs aren't real, and my job as president to take those into account, I think, does no service to free trade. And its part of what has fed the protection incentive and the anti-immigration incentive that is out there in both parts and you know I think that if we manage trade more effectively, if we're better partners, if we are thinking about the dislocations that occurs as a consequence of it, if were true to our belief that labor and environmental standards should be a part of raising living standards around the world instead of a race to the bottom, then we can have free trade and it will be sustainable and we will have political support over the long run.

Bhagwati channels Dean Baker on immigration

I knew this day would come. My friend and former boss Dean Baker has been taunting the neoliberals to embrace his idea of free trade in health care and immigration. This was good politics, so long as no neoliberals did so. It served to show their hypocrisy for subjecting steelworkers to unrelenting low-wage competition, while not opening up the immigration floodgates to low-wage doctors. It also showed that our trade policy is not a random inevitability, but structured by real people to benefit real favored interests at the expense of others.

The problem with the strategy is that neoliberals have actually long been much warmer to this idea than Dean let on. As early as the 1970s, corporate lobbyists were trying to figure out ways to put immigration and social services under emerging neoliberal institutions. By 1994, the Clinton administration offered up health insurance and our H-1B visa programs to WTO General Agreement on Trade in Services coverage. And as our report shows, this move by Clinton has hurt the prospects for his wife's health care package.

Many corporate lobbyists (and some WTO nations) want to create a GATS visa that would put the whole of U.S. immigration policy under WTO jurisdiction. This pretty much the gist of the Bhagwati and Madan piece in the WSJ that Dean praised today:

Mode 4 concerns doctors and other medical providers going where the patients are. It offers substantial cost savings, since the earnings of foreign doctors are typically lower than those of comparable suppliers in the U.S.

Now, while it may be interesting to think about the economics of liberalizing immigration, it is something altogether different to think about the constitutionality and institutional aspects of doing so through the WTO. We've found that those in favor of more...

The WTO has no mandate to negotiate migration policy, nor should it... We reject the guest worker model, which inevitably ties migrant workers' right to stay and work in a country to employment with a specific employer, making them vulnerable to extensive abuse that sometimes borders on indentured servitude and undermines domestic and international labor standards.

...and of less immigration...

A WTO-imposed guest-worker scheme would be even more devastating as the global bureaucrats would have sanctioning ability to force our submission to their sovereignty-destroying whims.

...prefer to duke it out on the national stage, where with power comes accountability, rather than at the WTO, where there is no popular accountability. I hope that Dean will clarify that he means he is for free trade for professionals in theory, not in WTO practice.

Corporate takeover of everything department

And the food crisis roils on, thanks to NAFTA and WTO's neoliberalization of the food supply. Mexican farmers continue to be displaced in the wake of NAFTA:

“We migrate because we don’t think there are options,” Mr. León said. “The important thing is to give options for a better life.”

Viewed against the backdrop of rising food prices in a global marketplace, Mr. León’s fight to keep farmers from abandoning their land is much more than a refusal to give up a millennial way of life.

As Mexico imports more corn from the United States, the country’s reliance on outside supplies is drawing protests among nationalists, farmers’ groups and leftist critics of Mexico’s free trade economy. Earlier this year, as the last tariffs to corn imports were lifted under the North American Free Trade Agreement, farmers’ groups marched against the accord in Mexico, asking for more aid.

And the few that made it across the border are now getting slammed by ICE stings. And has anybody noticed that the destruction of Mexico's traditional economy and import substitution schemes have not led the way to more efficiency, but greater instances of narcotrafficking and narcoterrorism? I mean, seriously, we seem close to having a failed state on our borders.

In other news, apparently the Supreme Court is so taken over with corporate concerns that they can't even hear international human rights cases any more, most recently in the case of apartheid in South Africa. And though it's not directly trade related, I thought this piece on the Senate compromising on banning menthol cigarettes showed an outrageous form of health and environmental racism:

Menthol is particularly controversial because public health authorities have worried about its health effects on African-Americans. Nearly 75 percent of black smokers use menthol brands, compared with only about one in four white smokers.

That is why one former public health official says the legislation’s menthol exemption is a “cave-in to the industry,” an opinion shared by some other public health advocates.

“I think we can say definitively that menthol induces smoking in the African-American community and subsequently serves as a direct link to African-American death and disease,” said the former official, Robert G. Robinson, who retired two years ago as an associate director in the office of smoking and health at the Centers for Disease Control and Prevention.

McCain self censors from telling Americans what polls say they want to hear

Pew Center has a new poll out in response to this question (hat tip to Deborah James for the link):

In general, do you think that free trade agreements—like NAFTA, and the policies of the World Trade Organization—have been a good thing or a bad thing for the United States?

Bad thing: 48%

Good thing: 35%

In other news, Sen. John McCain (R-Ariz.) has come out in favor of punitive tariffs on climate change laggards, but according to the NYT:

In the prepared text of his speech, e-mailed to reporters on Sunday night and Monday morning, Mr. McCain went so far as to call for punitive tariffs against China and India if they evaded international standards on emissions, but he omitted the threat in his delivered remarks. Aides said he had decided to soften his language because he thought he could be misinterpreted as being opposed to free trade, a central tenet of his campaign and Republican orthodoxy.

As we noted a couple of months ago, McCain's (and Obama's and Clinton's) climate change policies are seriously limited by his beloved "free trade" deals.

Standing tall

Here's what's hot:

• We make the Hill's Standing Tall in the Grassroots list, along with Grover Norquist.
• Our boys Kevin Gallagher and Tim Wise pull it off yet again, slamming the Doha Round of the WTO.
• IPE Zone has the latest on the WTO's global guest worker program, Mode 4.
• Does El-P, currently on tour with London's Dizzee Rascal, have a solution for the deindustrialized Midwest?

Rain on the scarecrow as the border blockaded

January 3rd, you know what that means? Only 40 more days until the Dee-Cee presidential primary vote! I can't wait! D.C. has always had a unique role in the nation for our role in the presidential primary process. Sure, there's SOMETHING happening in Iowa today, but it's not until a candidate wins the D.C. primary that they're truly considered anointed.

In all seriousness, voting in America's last inland colony is not today's top news. No, just wanted to remind everyone about the Iowa Fair Trade Campaign's excellent web resource on the candidates' positions on trade, available here.

There's been a lot of paeans to corn ethanol during this season, and with good reason: Iowa's farmers are taking it on the nose. As we've written before,

While the volume of U.S. corn and soybean exported increased as predicted by NAFTA’s proponents, the prices received by American farmers declined to the lowest levels in recent memory. While American farmers received $12.64 per bushel of soybeans (in inflation-adjusted terms) when the NAFTA predecessor Canada FTA went into place in 1988, that price halved to $6.30 by 2006. In inflation-adjusted dollars, farmers received $4.29 a bushel for corn in 1995, the year the WTO went into effect and a year after NAFTA went into effect. But a decade later in 2005, the bushel price was at a low of $2.06, and only started increasing with the recent ethanol boom  – a development that is threatened with derailment as Brazil and other agricultural exporters plot WTO challenges against U.S. corn ethanol subsidies. 

But don't take my word for it... after all, there's a reason that John Cougar Mellencamp is a political figure on par with Oprah in Iowa.

The corn issue in Iowa is connected to the corn issue in Mexico, which has been a lot in the news recently. (See our fact sheet for more.) In particular, the final phasing in of NAFTA tariff cuts in Mexico happened, and folks in Mexico were none too happy about it. (video in spanish)

As we've written about before, Latino civil rights groups are calling attention to NAFTA-style policies, which are destroying the Mexican countryside, which has led to massive displacement of people towards the United States.

As the AP reported,

Mexico's Roman Catholic Church has warned that the changes could spark an exodus to the U.S.

"It is clear that many farmers will have a difficult time competing in the domestic market, and that could cause a large number of farmers to leave their farms," the archdiocese said in a statement issued on New Year's Day.

Dozens of farm activists in Ciudad Juarez blocked one lane of the border bridge leading into El Paso, Texas, to protest the unrestricted imports of U.S. corn, as part of a 36-hour demonstration that started in the first minutes of the New Year.

They had pledged not to allow any U.S. grain into the country...

"The open battle against NAFTA begins," read a banner headline in the daily La Jornada.

In Mexico City, activists announced plans to march through the capital and hold a nationwide conference on Jan. 14 to plan further protests.

"This is going to be a complicated year, and there will certainly be a lot of demonstrations," said Enrique Perez, a spokesman for the National Association of Farm Distributors, one of the groups organizing the marches.

Mexico, the birthplace of corn, obtained a 15-year protection for sensitive farm crops when NAFTA was negotiated in 1993. That protection period ran out on Jan. 1. Mexico still grows almost all of the corn consumed here by humans, but imports corn to feed animals.

Mexican politicians from all major parties agree that a NAFTA renegotiation needs to happen. An area where there might be some common ground with the candidates for president, many who are talking about doing something that sounds an awful lot like renegotiation of NAFTA.

National Latino Congreso to Congress: Oppose Bush's NAFTA Expansions!

NEWS RELEASE, October 7, 2007

National Latino Congress Unanimously Passes Resolution Calling on U.S. Congress to Stop Signing New Trade Agreements

Latino Leaders Say U.S. Cannot Address Immigration without Changing Course on Failed Trade Policy

Los Angeles, CA – Reflecting on the root causes of poverty and migration in Latin America, the National Latino Congreso has unanimously approved a resolution rejecting new trade agreements based on the North America Free Trade Agreement (NAFTA), and calling on the U.S. to change its international economic policies, which so far are largely to be blamed for producing wealth and income inequalities abroad, as well as at home. In the case of Latin America, policies promoted by the U.S. have also resulted in the impoverishment and displacement of millions of rural inhabitants.

The resolution adopted on Saturday Oct. 6 by delegates of the Second National Latino Congreso , comes at a moment in which the U.S. Congress considers a new trade agreement with Peru, which largely mirrors NAFTA. The adopted resolution reads, in part:

“Therefore, be it resolved that the organizations present at the 2007 Latino Congreso, are strongly opposed to expanding the failed NAFTA and CAFTA through the “free trade” agreements between the United States and Peru, Colombia, and Panama, and will mobilize our constituencies to work in vehement opposition to their passage, and call on the U.S. Congress directly to reject these agreements.”

The resolution specifically condemns national lawmakers who are attempting to push anti-immigrant legislation while continuing to push for expansion of trade and economic policies that force families to emigrate in the first place. More than 1,000 Latino leaders present applauded the passage of the resolution, calling it an important step towards addressing the obvious link between current U.S. trade and economic policies, and migration.

Latino, immigrant and other groups tell Congress to reject Peru NAFTA expansion

OPEN LETTER TO THE UNITED STATES CONGRESS – OPPOSE U.S.-PERU FTA

Dear Members of the U.S. Congress:

We are concerned Peruvian-Americans, immigrant organizations and human rights advocates in the United States. We are writing to express our strong opposition to the Free Trade Agreement with Peru (FTA) and to request its further renegotiation for the following reasons:

Latino groups call for opposition to anti-Latino, Deathstar-ed deals

This from across the wires...

Members of Congress, Latino Civil Rights and Immigrant Groups Say NAFTA-Style Trade Pacts Fail Latinos in the U.S. and Abroad

Latino Organizations United in Opposition to NAFTA-expansions to Peru, Panama and Colombia; Call on Congress to Chart a New Course on Trade

Washington, DC — As the fight over immigration heats up in Washington, U.S. Congress must oppose proposed NAFTA expansion agreements with Peru, Panama and Colombia that are expected to increase pressure on millions of small farmers in those countries to attempt desperate migration to the United States, said Latino civil rights leaders and members of the Congressional Hispanic Caucus in a press conference today.

Major Latino organizations including the League of United Latin American Citizens (LULAC), the National Alliance of Latin American and Caribbean Communities (NALACC) and the Dolores Huerta Foundation today sent a letter to the U.S. Congress reiterating their opposition to the proposed trade agreements after the recent release of freshly re-negotiated texts of the agreements failed to address the key concerns of the Latino community in the United States and abroad.   

“It is unbelievable that in the middle of a contentious debate on immigration, Congress is being asked to pass trade agreements that are certain to increase the pressure on impoverished small farmers in Latin America to attempt to come to the United States,” said Brent Wilkes, the Executive Director of the League of United Latin American Citizens (LULAC), the nation’s oldest and largest Latino civil rights membership organization. “We wrote repeatedly to the U.S. Congress requesting that the agricultural provisions in the agreement be fixed, and we are disappointed that the new text released this week for the FTAs doesn’t fix them.”

The agricultural rules included in the Peru, Colombian and Panama agreements mirror closely the agricultural rules from NAFTA that resulted in over 1.3 million lost jobs in Mexico’s rural sector.  Undocumented migration from Mexico to the United States has more than doubled since NAFTA was enacted in no small part due to failed trade policies.  In the case of the Peru, Colombia and Panama agreements, these same agricultural provisions will foreseeably result in the displacement of large numbers of peasant farmers — increasing hunger, social unrest, and desperate migration at a minimum; and according to a report of the Colombian Ministry of Agriculture, will lead to an increase in drug cultivation and violence. 

“We are calling on members of Congress today to realize that in order to fix the immigration problem of the United States, we need to look at the root cause.  If we don’t fix the failed NAFTA model of free trade, we’ll be fighting over immigration again and again,” said Gabriela Lemus, Executive Director of the Labor Council for Latin American Advancement.

UPDATE: Mark Drajem from Bloomberg reports on the pending Peru, Panama and Colombia FTAs:

Under the current fast-track treatment, Congress must accept or reject a trade agreement without change. Still, even with the changes worked out between the White House and House Ways and Means Committee Chairman Charles Rangel of New York, supporters from the U.S. Chamber of Commerce don't expect a majority of Democrats to support either of those agreements.

The accords were dealt a blow today as the largest U.S. Latino groups wrote members of Congress opposing them, arguing that a flood of subsidized U.S. agriculture exports would push farmers in those countries off the land.

"This deal would continue to generate economic inequality and a deterioration of social standards both at home and abroad, and continue to make migration to the United States the only option for many working families in Latin America,'' the League of United Latin American Citizens and other Latino groups wrote in their letter.

 

Deepa Fernandes on a real solution to immigration

WBAI radio host Deepa Fernandes comes across with some clear thinking on immigration:

I have spent years researching immigration policies and talking about immigration with citizens and migrants alike. While some immigrants certainly do aspire to stay permanently in the U.S., many wish they could have remained in their home country and earned a living wage there.

But trade policies like NAFTA, CAFTA and free trade agreements with many Caribbean and Asian countries, coupled with IMF and World Bank policies that have gutted social welfare programs in many of these countries have forced millions into migratory patterns to eek out a living. When their village or rural town becomes unviable, most people move to the nearest big city. Cities in all these countries are far from able to provide meaningful employment for the masses and the migration continues until a decent paying job can be found. In this part of the hemisphere, that place is the United States.

Simultaneously, U.S. workers have suffered because employers can hire, en-masse, a workforce that has few rights, no benefits and accepts paltry wages. But somehow, this exploitation of undocumented workers has been transformed into the idea that immigrants are the ones to blame for “taking” plum “American” jobs.

So here’s my solution. Let’s go to the root cause of the problem. Let’s deal with why people can’t stay in their home country and earn a fair wage, and lets then look at why there is a race to the bottom for wages and job conditions here in the U.S. In sum, the domestic immigration problem should be tackled through trade and labor policies...

Imagine if we could end, or at the very least massively reform, NAFTA, CAFTA and all the free trade agreements the U.S. has with other nations. Let’s push for fair trade or even take some of the huge budget that is spent on militarizing the southern border (because let’s be real, it hasn’t worked and more money for stadium lights, unmanned drones and border patrol agents is not going to stop people coming in search of work) and lets invest in jobs that will keep people where they want to be: in their home country. If one could earn $7-10 an hour in Mexico, Guatemala, Jamaica, Peru etc, you watch the flow of undocumented immigrants dry up. And while this may seem a pipe dream, with political will, it is possible.

Sanders, Grassley try to put the brakes on outsourcing

In the latest strange-bedfellows case, Sens. Bernie Sanders (I-Vt.) and Chuck Grassley (R-Iowa) have introduced an amendment (PDF) to the Senate immigration bill that would bar companies from hiring foreign workers with H-1B visas if they have made mass layoffs of U.S. workers within the past year. This would prevent companies from profiting by dumping U.S. labor in favor of cheaper international workers, while still allowing companies with genuine labor shortages to take advantage of the H-1B program.

This has been covered extensively by technology sites like Ars Technica, PC World and Information Week, and on Sirota's site, although it doesn't seem like it's gained much traction yet elsewhere (and I can't seem to find a statement from either senator). Maybe that's not too surprising given that there have already been over 100 proposed amendments to this bill. In any case, we're keeping our eyes on it.

Immigration debate over at the National Review

David Frum over at the National Review poses an interesting line of argument:

I am often asked: how can you support free trade while favoring curbs on immigration? If borders are open to goods and capital, should they not be open to people as well? This argument used to impress me a great deal. (In the next NRODT I tell the story of how I came to change my mind on immigration.)  But can we please note that from a distributional point of view, immigration functions more like protectionism than trade?

Protectionists always do well in Congress because the benefits of protectionism are tightly concentrated while the costs are broadly dispersed. The beneficiaries clamor for protection; the victims keep quiet.

Isn't that exactly what happens with immigration? The benefits of open borders are claimed by a few tightly organized groups; the costs fall on the American people as a whole.

Immigration is an odd issue that cuts in odd ways in the body politic. The left tends to emphasize the individual dimension of immigration (i.e. families that have suffered from ICE raids, border policing, etc.) as reason to have more open borders to immigration, while this right advances cultural arguments (who is dem America? what language do dem speak?) disguised as economic ones (labor supply concerns). Still others emphasize that we're importing the "wrong workers," and that there would be more payoff to American families if we imported doctors and lawyers rather than putting our lowly paid manufacturing workers in race to the bottom competition.