NORTH AMERICAN FREE TRADE AGREEMENT

NORTH AMERICAN FREE TRADE AGREEMENT

(Associated Press, Mark Stevenson, Edward J. Chambers, Peter Smith, Red Abbott)

(Jeff Faux, Lee Hudson Tesilk, Economic Policy Institute, Robert E. Scott, Carlos Salas)

(Bruce Campbell, Josh Bivens, Bob Davis, John J. Audley, Demetrious G. Papademetriou)

(John Audley, Jared Bernstine, Bob Blecker, Dave Ratner Edward J. Chambers, Frazer Chronicle)

Twenty years and a day has come and gone since the North American Free Trade Agreement, (NAFTA) was enacted. I suppose there’s been some good that has been realized from the trilateral (U.S. Canada and Mexico,) agreement, but right out of the gate, back in 1992 one word made the success of the agreement a tough row to hoe, that word, FREE, absolutely nothing is ever free especially when connected to governments.

Governments aren’t in business to favor other countries; they are in whatever project might be on the table to garner the best deal for their people, constituents, their industries, and their personal interests. These multi facetted arrangements always favor the most powerful country, kind of like a pecking order.

NAFTA had been in the works diplomatically since 1986, and was completed with the signing of the formal agreement on December 17, 1992. President George H.W. Bush, Canadian Prime Minister Brian Mulroney, and Mexican President Carlos Salinas, each had been responsible for spearheading and promoting the agreement and ceremonially signed the document.

Before the agreement became law, Bush had been replaced by President Bill Clinton, and Kim Campbell, short term, in Canada, and before the agreement became law, Jean Chretien had taken over as Prime Minister in Canada.

Initially the proposed Canada-U.S. trade agreement, which was including Mexico, had been very controversial and divisive in Canada, and actually cost Prime Minister(s) Mulroney and Campbell their political seats and careers. However after the smoke and talk had cleared…..and stopped, cooler heads prevailed, and the agreement became the law of the three countries with regards to trades, tariffs, duties, and hopefully creating jobs, and better pay.

The goal of NAFTA was to eliminate barriers to trade and investment between the U.S., Canada and Mexico. The implementation of the law on January 1, 1994 brought the immediate elimination of tariffs on more than half of Mexico’s exports to the U.S. and a third of U.S. exports to Mexico. Within ten years of the agreement, all U.S.-Mexico tariffs would be eliminated except for some U.S. agricultural exports to Mexico that were to be phased out within fifteen years. Most U.S.-Canadian trade was already duty free.

NAFTA also seeks to eliminate non-tariff trade barriers and to protect the intellectual property right of products. Chapter 52 provides a procedure for the interstate resolution of disputes over the application and interpretation of NAFTA.

THE CENTRAL THRUST OF THE AGREEMENT IN LAYMENS TERMS

Complicated is a word commonly used to describe relationships between two countries, however more than two countries, and the word complicated takes on a whole new meaning, and becomes much more, like byzantine, arduous, knotty, labyrinthine, or the old can of worms. NAFTA was no different, as the agreement in its simplest form was to eliminate the vast majority of tariffs on products traded among the United States, Mexico and Canada. The agreement mapped out a schedule of when these tariffs would be taken out of the business equation between all three countries by 2008.

NAFTA was designed to promote economic growth by spurring competition in domestic markets and promoting investment from both domestic and foreign sources and that part has worked. Trade blocs are relatively new in North America, but have worked out well in other parts of the world over the long haul.

However, measuring the impact of specific trade deals on a country’s labor market, namely the United States, wages have not kept pace with labor productivity and that income equality has risen over the past ten years or so. This fact in part here in the U.S. is due to pressure on the U.S. manufacturing base, and to some extent, trade deals have hastened the pace of lower wages that have been reinforced by the globalization of the American economy.

Some economists say that job loss, and lower wages here in the U.S. are part of a structural shift of the U.S. economy away from a focus on heavy manufacturing and towards a focus on light manufacturing and high-end services.

Mexico has realized more jobs created from NAFTA, but there too, wages have lagged way behind product manufacturing numbers. Canada of the three nations has fared the best, although few jobs have been created, those jobs that have been established are usually at the higher end of that country’s pay scale.

The simple thrust of the act…..NAFTA, has actually worked not only in the area that it was meant to accomplish, (lower or no tariffs) and create a competitive trade bloc, but there’s been a bonus, almost a million jobs in Mexico. 90% of these created jobs are lower than low pay, many of these jobs have driven Mexicans across the border into the United States to work as illegal immigrants, and further deplete American jobs.

What NAFTA absolutely has done here in the United States is to displace some 660,000 manufacturing jobs, and about 1.1 million manufacturing related jobs. Export growth since 1994 supported an additional 1 million U.S. jobs, while imports displaced domestic production that would support 2 million jobs. All told, the U.S. had been gouged out of close to 3.5 million jobs.

There are times that statistics do not lie, no matter how you weld them around the room, and this is one of those times. NAFTA has worked…..for major manufacturers, but not so much for the little guy, who’s backs industry has used once again to attain their profit margins.

HAVE A NICE DAY!