By Anna Daniels
On January 1, 1994, a trilateral free trade zone was established in North America. This treaty between the United States, Mexico and Canada resulted in the mass relocation of factories and capital south of the Mexican border.
At the same time as the United States is involved in negotiating a Trans-Pacific Partnership that lacks transparency and provides enormous corporate giveaways and protections, fifty-three percent of Americans believe the United States should “do whatever is necessary” to “renegotiate” or “leave” NAFTA. Once again citizens are being hoodwinked into believing that jobs will be created and the standard of living will rise without adverse environmental impacts.
It’s important to revisit the promises that were made twenty years ago when NAFTA was signed.
NAFTA was an experiment, establishing a radically new “trade” agreement model. It exploded the boundaries of past trade pacts, which had focused narrowly on cutting tariffs and quotas. In contrast, NAFTA contained chapters that created new privileges and protections for foreign investors; required the three countries to waive domestic procurement preferences, such as Buy American; limited regulation of services, such as trucking and banking; extended medicine patent monopolies and limited food and product safety standards and border inspection. Public Citizen
This same report details what actually happened.
After nineteen years of NAFTA, we can measure its actual outcomes. The grand promises made by proponents remain unfulfilled. Many outcomes are exactly the opposite of what was promised. Many U.S. firms used the new investor protections to relocate production to Mexico to take advantage of its low wages and weak environmental standards and to attack NAFTA countries’ environmental and health laws in foreign tribunals. Over $340 million in compensation to investors has been extracted from NAFTA governments via these “investor-state” challenges.
A few days ago, a group of artists planted twenty flags at the border state park as “A Future Memorial for NAFTA” as a poetic resistance to extractive capitalism that has left whole towns and cities hollowed out economically, their inhabitants struggling and natural environments compromised and toxic.
Anna Daniels
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In your article you say ” In Mexico, NAFTA agribusinesses raising corn for ethanol displaced farmers raising corn to feed the people, creating a food crisis that further immiserated the poor there.” In Mexico we do not grow corn for ethanol. In fact, it was specifically prohibited in the Calderon Administration. Between 1993, the year before NAFTA went into effect and 2012 corn production increased by 21.8 percent. Yes, this is not enough to satisfy total domestic demand, but except for the year of the frost, Mexico is essentially selfsufficient in white corn for food and what we import in mostly yellow corn for industry. NAFTA was neither the problem nor the solution. Agriculture’s performance over the last 20 years was the result of agricultural policies that were largely disarticulated from the reality of both NAFTA’s potential benefits and costs.
The use of corn for ethanol does not directly compete with the use of corn for tortillas. As you note, ethanol is made with yellow corn not white corn as are tortillas. But raising demand (NAFTA) and the price of yellow corn had impacts on how much of a field would be used to raise white corn . Raising yellow corn was more lucrative in an aggregate sense. Reducing the supply of white corn raised its price and a food crisis resulted.
Excellent article, and love the title and the memorial. What a shameful result with the companies making the money while the people suffer. These trade agreements are wrong.
Thanks, Anna, for another informative article.
Then when labor costs rose in Mexico, the corporatists abandoned Mexico for Indonesia or Vietnam. They are still playing the game of moving their assets around to wherever in the world labor is cheapest. As soon as workers in one location start moving out of poverty, it’s time to move to another location. Thanks for shedding light on this issue, Anna. Not many people are aware of the TPP and the fact that it’s “NAFTA on steroids.”
You are quite right about global capital abandoning Mexico when cheaper labor was available in Southeast Asia, Indonesia and China. This is the nature of global capital. It does not exist to raise standards of living, equalize wages and solve policy problems regarding immigration or environmental protection. Our own government must stop delivering a sales pitch to the American people that conflates the two. It is a lie.
I think you are taking about the U.S. and not Mexico. Because we do not plan yellow corn for ethanol, it is not a problem. It does not displace white corn. Yellow corn is only a small part of production. Of the 21.9 million tonnes in 2012 only 1.77 million were yellow corn. This reflects, among other reasons, the higher prices for white corn. In 2012 the average national rural price for white corn was MX$4,029, 7% more than the average national rural price for yellow corn. Unfortunately, the difference wasn’t enough to alleviate rural poverty. Policy, well before NAFTA, has favored urban consumers over rural producers. As a result, the poorest and most malnourished are in rural Mexico.
If the U.S. were to plant more white corn it could flood our market further impoverishing the country’s smallest farmers.
As long as we keep letting corporations manipulate our government into signing these “free trade” agreements they will keep getting richer and gain more power. Under the TPP the corporations will have more power than the governments do. Citizens United and NAFTA did enough damage already. Contact your representative and let them know to stop the fast track by the President of the TPP and the TAFTA trade agreements.
Very well documented argument Anna. This is very timely and crucial issue for discussion ebcasue what you are discussing applies not just to corn but to many other items of transnational exchange. It would be interesting to map that multi product equation and see how the bottom line turns up.
NAFTA, as it was originally conceived, was not an entirely bad idea. In fact, the logic behind it was rather sound. The problems have been in the implementation of the accord, and in the parties’ non-insistence on adhering to the standards set forth in the NAFTA.
The biggest problem when the agreement was signed was that Mexico was so far behind the US and Canada economically, developmentally, technologically, etc. The level of education of the average Mexican was far behind that of an American or Canadian. They knew this going in, and they knew that it would take time for Mexico to catch up. So they put some provisions into the NAFTA that would temporarily exempt Mexico from some of the requirements while they invested in their own infrastructure and brought their own nation up to be more in line with it’s counterparts.
It worked, to an extent. Mexico is well ahead of where it was when the NAFTA was first signed, when it was still considered a third world nation. If I recall correctly, Mexico was given 15 years to make the kinds of investments necessary in their education system, their economy, their infrastructure, their environmental regulations, and workplace standards in order to be fully in compliance with the NAFTA. The theory was that a fully level playing field would benefit all three countries.
The problem is that Mexico never fully held up its own end of the bargain, and the US and Canada never fully held them to it. Corporations liked the way that they were able to get cheap labor with few regulations placed on them in Mexico, and so they lobbied against the US and Canada from fully enforcing NAFTA’s requirements, which has kept the playing field anything but level. And Mexico has no incentive to invest to the level they were supposed to.
The NAFTA is a flawed treaty, but mostly due to the way it has been enforced. Which is to say that it hasn’t, at least not in the ways that really matter to American and Canadian workers. And the major corporate interests, because of what they’ve learned with NAFTA, now know how to game the system to their benefit, which is what we’re seeing with the TPP.
These free trade agreements are not in and of themselves evil and destructive. It’s the way they’re enforced that is destructive to the American economy and American worker. It’s the built in advantages that the developing nation participants have codified into the agreements over the US that are detrimental to our own national interests, but not to the corporate interests who are pushing for the lax provisions.
Your argument that NAFTA in theory was fundamentally sound and that its failure lies in faulty implementation simply contradicts the facts regarding what was was baked into the bread from its inception. NAFTA explicitly granted multinational corporations new privileges, protections and an extreme enforcement process. “NAFTA elevates foreign investors to the level of sovereign signatory governments, uniquely empowering individual corporations to skirt domestic laws and courts and privately enforce the terms of the public treaty by directly challenging governments’ public interest policies before World Bank and U.N. tribunals…This process is called “investor-state” enforcement. Only commercial interests have standing to challenge government policy, not unions or consumer groups. Despite being embedded in a “trade” agreement, NAFTA’s sweeping investor privileges have nothing to do with the flow of goods across borders. ”
NAFTA is a success for foreign investors and corporations. It has been so successful that these same entities are hot to trot on TPP. All the rest-the promise of jobs, the rise in the standard of living was just trickle down happy talk. It’s a real head scratcher that you would be defending this magical thinking. NAFTA was not “established to really matter to American and Canadian workers.” It was created to give multinational corporations the legal standing of sovereign signatory governments.
Anna are you calling the tuna embargo that supports an oligoplistic market structure a U.S. government public interest policy? Are the other impediments designed to keep Mexican products out of the U.S. also public interest policies?
The option for WTO-type dispute resolutions existed before NAFTA. As such, it was not a concern, per se, when negotiating the NAFTA.
What NAFTA particularly did, and was designed to alleviate investor concerns about Mexico, was guarantee the protection and free movement of capital.
Andy, you said that “the problem is that Mexico never fully held up its own end of the bargain, and the US and Canada never fully held them to it.” The problem is that the U.S. also never fully held up its end of the bargain, and Mexico did not fully hold the U.S. up to it. The government has been repeatedly criticized for giving into the U.S.
Ken, are you saying that you support giving multinational corporations the legal standing of sovereign signatory governments, because they are a check against protectionist policies by a given nation state? If so, how has this NAFTA element helped Mexico?
NAFTA is clearly the spawn of WTO and GATT. It’s protections and privileges aren’t something new, but rather a further refinement of policies that benefit multi-national corporations.
This recourse is the option against policies that protect special interests and work to perpetuate poverty.
And even this isn’t, at the end of the day, an option. There is the ability to essentially “buy” your way out of a ruling. Or legislate around the ruling as the U.S. has recently done with the revised blatantly protectionist COOL regulations.
The exact argument is being made that this special status for multinationals protects special interests (the multinationals) and perpetuates poverty. The investor-state model is breathtakingly undemocratic- “only commercial interests have standing to challenge government policy, not unions or consumer groups.” Free trade should not be confused with fair trade. NAFTA is neither free nor fair.
Apropos of the Trans-Pacific Partnership (TPP), Juan Vargas has signed on to Rosa DeLauro’s letter opposing fast track status for the TPP. As far as I know, Senators Feinstein and Boxer have not taken a position on fast track status for this treaty.