‘Free Trade’ Proves Costly to U.S. Jobs : A somber look at NAFTA shows a boom for businesses on both sides, a bust for workers.
For most Americans, good economic news is something they hear about on the nightly news rather than see in their paycheck. While corporate profits are up and productivity is growing, real wages continue to slip. Families are working harder and earning less, and they are angry and frustrated and want to know why.
These passions exploded a few years ago during the debate over the North American Free Trade Agreement. Editorial writers, economists and the economic elite tried to convince America that NAFTA would create jobs and boost pay. But the life experiences of too many working families told them otherwise. They couldn’t understand how it was fair to ask American workers to compete directly with workers who earn less than a dollar an hour.
The $12-billion bailout of Mexico didn’t help convince them. Neither have the collapse of the peso, the further flight of U.S. jobs or the growing economic instability in Mexico. The arguments in favor of NAFTA seem even less tenable today than they did two years ago. As we recognize the second anniversary of NAFTA, we must resist the “free trade or no trade” characterizations that marked the original NAFTA debate. If we don’t use this opportunity to honestly study and address the lessons of NAFTA, we will never come to a clear understanding of what’s happening to the paychecks of America’s working families.
Ironically, the arguments that ensured NAFTA’s passage are rarely heard today. Remember the notion that a burgeoning U.S. trade surplus with Mexico would create jobs or that NAFTA would provide needed support for President Carlos Salinas and his political reforms? Perhaps we haven’t heard these arguments lately because the $5.4-billion U.S. trade surplus with Mexico in 1992 became a deficit topping $11 billion in the first nine months of 1995, and Salinas and his reforms have proved difficult to locate. Instead of a promised 200,000 jobs by the end of last year, 42,000 Americans are already collecting assistance because of NAFTA and this, by all accounts, is only a small fraction of those displaced.
Aren’t the dismal trade and job numbers a simple reflection of the implosion of the Mexican economy? Not really. Mexico’s current economic traumas have accentuated but did not originate two underlying realities: Mexico has continued its trajectory toward becoming a high-tech exporter to the U.S., and Mexico’s artificially depressed wages, made much worse by the government’s recovery program, are becoming one of its leading and least desirable exports.
Mexico’s increasing industrial sophistication could be very good news for both Mexico and the United States except for one salient economic reality: While Mexican productivity heads north, wages continue to head south.
Now, in the wake of the economic crash, Mexican manufacturing wages are approaching half their 1980 levels. This combination of First World productivity at Third World pay creates a windfall for corporations. Prices for industrial real estate in Tijuana have doubled in the last two years as corporations rush in. Although Mexico’s economic troubles have caused the evaporation of 1 million Mexican jobs since last year, Mexico’s export assembly plants or maquiladoras have added more than 84,000 jobs since NAFTA’s passage--more than 30,000 in 1995 alone--to a record 634,000 in June.
In an integrated economy, holding down wages in Mexico will be felt in the Midwest. Consider the 600 workers at Halo Lighting in Elk Grove Village, Ill., who averaged $11.67 an hour in the beginning of 1995. Last March, the company announced that it was moving 200 jobs to Mexico, where the falling peso meant it could pay 70 cents an hour. While the news was surely devastating to those who lost their jobs, the 400 workers who remain likely aren’t likely to ask for a pay raise anytime soon. The same goes for Fruit of the Loom, which recently announced it was slashing 3,200 American jobs and shifting production to Mexico, where it can pay workers less than $1 an hour.
We all know that America’s future is inexorably linked to trade, as are the wages of American workers. NAFTA is supposed to be the model on which future agreements are based. Too much of the discussion, both during the NAFTA debate and now, is locked into a false choice between free trade and no trade at all. The real issue is the rules of the game that will ensure that ordinary people on both sides of the border benefit from trade, and we must take steps to address these concerns. If we continue to sign weak trade agreements that ignore wages, labor rights and environmental standards, America’s working families are going to continue to pay the price. We can do better, and we must.
