Distorting NAFTA on Both Sides : Effects of the pact are exaggerated; its main fault is that it protects investors, not labor.

As with so many momentous economic debates, the fight over the North American Free Trade Agreement is mostly about something that already happened.

Jobs have been going south for decades. Ask any older worker from the shoe or apparel industries in New Hampshire and Massachusetts. Cheap assembly with low-cost Mexican labor has been going full-tilt for years now in the maquiladora plants along the U.S.-Mexican border.

The effects of ratification of NAFTA are similarly being exaggerated. NAFTA will not resolve the problems of the U.S. economy, even though lurid prophecies are issued on a daily basis about the horrors or blessings contingent upon its passage.

The Canadian experience offers a vivid illustration of the folly of seeing everything through a NAFTA perspective.

Conflating the 1988 trade agreement between Canada and the United States with the poor performance of the Canadian economy, voters north of the border recently destroyed the Conservative Party, which they held responsible for signing the agreement.

But the real dagger plunged in the heart of the Canadian economy is not wielded by the signatories to the trade treaty; the assailant is John Crow, who has run Canada’s central bank since 1987.

Like his U.S. counterpart, Alan Greenspan, who chairs the Federal Reserve Board, Crow is a zero-inflation zealot, and has held to a tight-money policy with catastrophic consequences for Canadian employment. NAFTA has certainly contributed to economic hard times in Canada, but Crow is the major villain of the piece.

Whichever way the vote on NAFTA goes, the same faulty deductions will be drawn here. The main event in the U.S. economy is not NAFTA but monetary policy and the deflationary strategy of the Federal Reserve.

Much of the NAFTA debate has been shadowboxing or misrepresentation. How many jobs will the United States lose or gain? Line up the various models and it’s obvious that economists are dealing in wildly varying assumptions, based on predictions verging on necromancy.

From the U.S. point of view, the job loss may well be negligible. Trade agreements always favor the stronger party. From the Mexican perspective, the prospect is more certain.

With cheap corn imports from the United States and Canada, Mexican peasants by the million face the prospect of ruin and displacement from the countryside to the cities, there to swell the cheap labor pool or to head north.

Divide Mexico into three income categories and you have a third reasonably well-off, a third poor and a third poor to the level of destitution. NAFTA will favor the top third, and indeed here is where the true long-term effects of NAFTA would be felt most--in the cultural-economic annexation of the Mexican middle class, watching English-language TV, shopping in look-alikes of U.S. and Canadian malls, running the local outposts of the northern businesses.

NAFTA is centrally about protecting the rights of U.S. and Canadian investors in Mexico, locking Mexico into a dependency path, foreclosing radical options.

Indeed, some Mexican leftists argue that Mexico got locked onto that course amid its debt crisis of the 1980s. It was then that U.S. banks forced the privatization of Mexico’s state enterprises. Wages fell with the ensuing attacks on labor rights. The stage was set then for the Salinas-NAFTA model. Mexico must get the investment or perish. There’s no going back.

Here in the North, pro-NAFTA forces charge the left with narrow nationalism and a Fortress America vision, courtesy of Ross Perot.

But this has not been the left’s argument. The left says not that all trade or trade agreements are bad, but that NAFTA is bad. It protects investors but not labor. It favors low-cost assembly but not the environment. It ratchets working rates and conditions in three countries not up but down. It is not about free trade but the protection of the North American economy from Germany and Japan.

The left says that this is a political battle about sovereign democratic rights. In it the lines are clearly drawn between progressive coalitions anchored in the labor movement against the Fortune 500 with their representative in the White House, who have mounted one of the most expensive lobbying campaigns in U.S. history.

Defeat of the big-business alliance would be a momentous political victory in whose wake a more just agreement could be written.