Julia's World Attitude

NAFTA- Free Trade Always Has a Cost

 

NAFTA—the Bad, the Worse, and the Ugly

*** Disclaimer*** this article was written in response to a prompt where I was given the anti-NAFTA stance. The following opinions do not reflect the author’s opinions.

The North American Free Trade Agreement, or NAFTA, is a treaty between the United States, Canada and Mexico.  Based on the premise of mutually-beneficial free trade within North America, NAFTA’s original goal was to eliminate barriers of trade and investment between the three countries, with hopes to stimulate each nations’ economy, promote GDP growth, and facilitate the development of a positive relationship between Mexico, the U.S., and Canada. Entered into force on January 1, 1994, NAFTA’s intent towards greater globalization has had over twenty years to effect the local and international level. Some of the main provisions of NAFTA included an immediate lifting of tariffs on most goods produced by the signatory nations, provisions for the protection of intellectual property, and a body for the international resolution of trade disputes. However, even prior to NAFTA’s inception, various groups and lobbies had expressed major concerns with aspects of NAFTA. Labor unions, the environmental lobby, workers in the manufacturing industry and citizens concerned about immigration from Mexico have petitioned an end to NAFTA. Despite this, public opinion of NAFTA is relatively positive. A Chicago Council Survey conducted in 2017 found that 53% of people surveyed believe that NAFTA is good for the U.S. economy. However, American public opinion, as expected, reflects the partisan divide. Democrats are 71% in favor of NAFTA, compared with only 34% of Republicans. Yet the complexities of NAFTA make it difficult to truly assess one-dimensionally. Although NAFTA liberalizes trade and promotes the opening of markets in the U.S., Canada, and Mexico, it is harmful to American interests at home and abroad because it does not provide adequate safeguards for the environment, simultaneously hurts American jobs and undercuts labor unions’ ability to bargain effectively, and leads to the entrapment of Mexican workers and business owners into an economy in which they are unable to compete, driving them to migrate to the U.S.

Tar sands refining plant in Alberta, Canada

Virtually ignored in the initial negotiations of NAFTA in 1990, the issue of the environment has become more dominant as the effects of NAFTA over twenty years have been observed and analyzed. The looming fear of environmental advocates was that disparities in enforcement between the two highly developed countries of the U.S. and the developing country of Mexico would mean worsened environmental protection in all three countries.[1] Much of this concern was directed at the less stringent environmental regulations in Mexico at maquiladora plants, export-oriented factories run by foreign companies that are notorious for poor working conditions and low wages. A 2014 Sierra Club report found that the environment had already been negatively impacted from NAFTA. The report cited “the expansion of large-scale, export-oriented farming that relies heavily on fossil fuels, pesticides, and genetically modified organisms; a boom in environmentally destructive mining activities in Mexico; [an undermining of] Canada’s ability to regulate its tar sands industry; [and] failure to safeguard against the increase in air and water pollution.”[2] Each of these environmental concerns is significant to the overall degradation of the land and has severe implications for individuals and the global population.

NAFTA’s impact on small-scale farming and business in Mexico is one of the most concerning trends. The deregulation of the economy and abandonment of agricultural subsidies that small farmers depended on, particularly in corn production, had the effect of promoting large-scale agribusiness that has a much more harmful environmental footprint. Spending on the importation of pesticides alone gives evidence to this claim. Before NAFTA, Mexico spent around $104 million, and in 2012, that number had grown to $545 million.[3] Another environmental consequence has been widespread deforestation in Mexico, caused by small farmers trying to increase production clearing forests as much as 1.1 million hectares per year to create more farmland, leading to decreased biodiversity and the heightening of global warming trends. Further environmental impacts in Mexico include the expansion of mining by North American companies on Mexican land, and elevated air pollution due to more cross-border truck traffic. Sierra Club data reveals that mining in Mexico has released 43,000 tons of pollutants into the environment between 2004 and 2010, many of which are known carcinogens. Statistics show a doubling of industrial air pollution in Mexico between 1994 and 2000, and a correlation between increased air pollution and increased respiratory problems and infant deaths related to respiratory illness in areas along the U.S.-Mexico border.[4] Not only has NAFTA policy eroded the environment, its affects pose a threat to the health of anyone in proximity to these affected areas.

Not only has NAFTA’s policy deteriorated the environment of Mexico, but Canada and the United States have experienced pollution and obstacles to environmental protection. The example of Canada’s tar sands industry reveals the harmful effects of liberalized trade on progress. NAFTA’s “proportionality clause” requires Canada to maintain a certain amount of fossil fuel production. This prevents Canada from redirecting energy into more renewable forms, such as wind and solar, therefore miring them in the outdated industry of dirty energy at the expense of green alternatives. Attempts by Canada to regulate its tar sands industry, which is a major contributor to greenhouse gas production, have been prohibited under NAFTA, despite recent discoveries that it increased sulfur dioxide emissions by 66 million pounds, carbon monoxide emissions by 39 million pounds, and industrial water pollution by 138 million pounds.[5] Similar effects are seen in the United States, and unless some action is taken to alter NAFTA’s restrictions on pollution-producing industry, the entire western hemisphere will face irreversible averse changes to its landscape that will pose a threat to the future economy and the health of all its inhabitants.

Not only do the effects of NAFTA endanger the environment, but the manipulation of NAFTA’s Chapter 11, the investment protection clause by private corporations has allowed egregious environmental violations to take place. Chapter 11 lets investors challenge government policy about environmental regulations by suing the government for posing “unfair” obstacles for them to do business. Some notable challenges include the U.S. firm Metalclad that was denied a permit to build a toxic waste dump suing Mexico, the company S.D. Myers suing Canada for banning PCB-contaminated waste, and Lone Pine Resources, (oil and gas producers) suing Canada for issuing a partial moratorium on fracking.[6] The implications for this are enormous—as Allen suggests, it has the potential of imposing major financial and societal costs to the host country, and could lead to a regulatory “chill” where government officials are unwilling to rigorously enforce existing environmental laws or create any new regulations for fear that they would be challenged.[7] This creates a dangerous power dynamic, in effect promoting corporations nearly to the status of a nation-state with unchecked power to do whatever they so choose in their target country. The main administrative failure of NAFTA is that there are no binding environmental rules, merely non-binding suggestions and recommendations of the NAAEC (North American Agreement on Environmental Cooperation) in a side agreement of NAFTA. The fear of a challenge to the government plus a “toothless” mechanism created to ensure enforcement of environmental regulations have led to a complete lack of environmental protection and set a dangerous precedent allowing dirty industry to destroy the planet.

Not only does NAFTA harm our interests abroad, but it hurts workers at home in the U.S. as well. The provisions of NAFTA take away American jobs from American workers, and undercuts labor unions’ ability to negotiate effectively. Liberalization of trade has made it easy for American firms to relocate operations to Mexico where labor is cheap, and worker’s rights are loose. It is unlikely that Mexican regulatory norms would rise to American levels, thus posing a challenge to unions seeking improved wages or benefits from companies with laborers not making these demands in Mexico.[8] Not only is there decreased bargaining power awarded to unions, but there are fewer jobs in general. As it became more cost-efficient to outsource production to Mexico, manufacturing jobs moved there as well, leaving insufficient alternatives back home. Data drawn from the number of potential dislocated workers who would be eligible for training and income replacement reveals that between January 1, 1994 and September 28, 1999, approximately 259,618 workers were certified as suffering NAFTA-related job losses. Further analysis concludes that of all the workers displaced, after a period of three years, less than 23% had found new full-time wage and salary jobs earning the same or higher salary, meaning that most of the remainder, 64%, were either unemployed, earning lower wages, at part-time jobs, became self-employed, or left the labor force.[9] The effects of this job loss has been felt across America as once-prosperous towns and cities centered around manufacturing have experienced high unemployment and decline. From small-town manufacturing workers to the working poor, Americans are losing out.

Those most drastically affected by NAFTA are the working poor, who are typically people in U.S. minority groups in low-end, mainly unskilled or semi-skilled jobs. Robert M. Dunn Jr. asks, “Who are the people who work in the garment factories of California, New York and elsewhere? Primarily Latin Americans living in the United States, legally or otherwise.”[10] While traditionally blue-collar workers are certainly losing their jobs to plants moving to Mexico, those who will experience the most significant wage drops are minority workers in urban areas who never even enjoyed a middle-class income. With fewer regulations on working conditions or opportunities for improved wages, the “race to the bottom” is evident for workers in the U.S. as well as in Mexico.

For Mexicans, trade liberalization has turned their economy and livelihood on its head. The reality of NAFTA in Mexico is that farmers, and local producers were unable to compete with large-scale Canadian and American companies after NAFTA eliminated subsidies. As a result, they had to abandon their businesses and farms and search for work elsewhere, often in the United States. Thanks to NAFTA, companies like Walmart can impose themselves on

Mexican farms could not compete with cheap agriculture being imported from the U.S. and Canada

Mexican markets without restriction. From there, there is no chance that a small business owner could contend with that level of production, supply, or cheap price levels. It is estimated that over 28,000 small businesses in Mexico have been lost.[11] Unable to make a living in Mexico, many Mexicans immigrate to the U.S. in search of jobs. Thus, the tightening of immigration policy in the U.S. is counterproductive. Rather than serving as a deterrent to move to the U.S., strict border control means that migrants are hesitant to return to their home country for fear that they will not be able to get back into the United States. The perceived “immigration problem” therefore stems from several factors: namely that there is a significant disconnect between the economic integration of Mexico and U.S. and the lack of labor integration.[12] In order to decrease the influx of migrants into the United States, opportunities for a decent living need to be available in Mexico, which is exactly the opposite of what NAFTA created.

The types of jobs that were outsourced to Mexico exemplifies another dimension to the problem—poor working conditions, and wages barely high enough to scrape by. Although the laws protecting worker’s rights exist in Mexico, they are either undermined by government forces seeking to quell labor independence or by feeble enforcement. The maquiladora sweatshops are the epitome of terrible working conditions and have exposed thousands of people to hazardous chemicals and mind-numbing work. Unless changes can be made to this industry, it is reasonable to conclude that NAFTA has promoted the erosion of basic human rights and protections and made way for firms to move in that do not believe that it is necessary to comply with regulations governing employee rights.

On the fronts of the environment, harm to American workers and labor unions, and increased immigration due to abuse to workers in Mexico, NAFTA’s idealist goals of liberalizing trade have caused more ill than good. More open markets may mean lower prices for consumers, but at what cost? As the environment is degraded, American jobs are lost, and worker’s rights are trampled on, NAFTA is doing little more than allowing companies to exploit people and the environment alike.

[1] Allen, Linda J. “The Environment and Nafta Policy Debate Redux: Separating Rhetoric from Reality.” William & Mary Environmental Law & Policy Review, vol. 42, no. 3, Spring 2018, pp. 965-1024

[2] Dan Byrnes, (2014). “New Report Reveals Environmental Costs of North American Free Trade Agreement” [Online]. Available: https://content.sierraclub.org/press-releases/2014/03/new-report-reveals-environmental-costs-north-american-free-trade-agreement [2018, November].

[3] Sierra Club, (2014). “NAFTA: 20 Years of Costs to Communities and the Environment” [Online]. Available: https://content.sierraclub.org/creative-archive/sites/content.sierraclub.org.creative-archive/files/pdfs/0642-NAFTA%20Report_05_low.pdf [2018, November].

[4] Sierra Club, (2014). “NAFTA: 20 Years of Costs to Communities and the Environment” [Online]. Available: https://content.sierraclub.org/creative-archive/sites/content.sierraclub.org.creative-archive/files/pdfs/0642-NAFTA%20Report_05_low.pdf [2018, November].

[5] Sierra Club, (2014). “NAFTA: 20 Years of Costs to Communities and the Environment” [Online]. Available: https://content.sierraclub.org/creative-archive/sites/content.sierraclub.org.creative-archive/files/pdfs/0642-NAFTA%20Report_05_low.pdf [2018, November].

[6] Gary Clyde Hufbauer, NAFTA and the Environment: Seven Years Later. (Washington D.C.: Institute for International Economics, 2000), 10-11

[7] Allen, Linda J. “The Environment and Nafta Policy Debate Redux: Separating Rhetoric from Reality.” William & Mary Environmental Law & Policy Review, vol. 42, no. 3, Spring 2018, pp. 965-1024

[8] William A. Orme, Understanding NAFTA: Mexico, Free Trade, and the New North America (Austin: University of Texas Press, 1996), 124

[9] Data compiled by Mary Jane Bolle. Numbers include potential dislocated workers because imports from Mexico and Canada “contributed importantly” to their job loss. Hence, certified NAFTA job losses are a subset of total job losses from NAFTA; they include only the losses for which the displaced worker applied for benefits and may exclude workers who did not apply for NAFTA-TAA benefits, were rejected, or trade contributed “somewhat” as opposed to “importantly” to their job loss. C. V. Anderson, NAFTA Revisited (Hauppauge, N.Y.: Nova Science Publishers, 2003), 86

[10] Robert M. Dunn Jr., “Winners and Losers from NAFTA”, cited in A.R. Riggs, Beyond NAFTA: an economic, political and sociological perspective:  (Vancouver: Fraser Institute, 1993), 91-92

[11] Roger Bybee, (2006). “Immigration Floor Unleashed by NAFTA’s Disastrous Impact on Mexican Economy” [Online]. Available: https://www.commondreams.org/views06/0425-30.htm  [2018, November].

[12] Patricia Fernandez-Kelly and Douglas S. Massey, “Borders for Whom? The Role of NAFTA in Mexico-U.S. Migration,” The Annals of the American Academy of Political and Social Science, Vol. 610 (March, 2007), 105-106.

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1 thought on “NAFTA- Free Trade Always Has a Cost”

  1. Dearest Julia. As usual you’re right on target. Keep up your informative blogs so we learn the real news behind the headlines.

    Love you always,

    Papa

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