NAFTA, CAFTA Not Working

by James Parks, Sep 12, 2006

They are the twin pillars of recent U.S. trade policy—NAFTA and DR-CAFTA. And neither of them is working.

After 12 years, NAFTA (North American Free Trade Agreement) has not brought prosperity to working people in Mexico, Canada and United States, as promised.

And like NAFTA and other bad U.S. trade agreements, DR-CAFTA (Dominican Republic—Central American Free Trade Agreement) does not contain enforceable workers’ rights or environmental protections. The agreement, which went into effect in January, is already failing after just eight months, according to a report released Tuesday.

In testimony submitted Sept. 11 to the Senate Finance Subcommittee on International Trade for NAFTA hearings, AFL-CIO Policy Director Thea Lee noted that “rather than encouraging sustainable and equitable growth, NAFTA has contributed to the loss of jobs and incomes of workers, while enriching the very few.”

NAFTA’s main outcome has been to strengthen the clout and bargaining power of multinational corporations, to limit the scope of governments to regulate in the public interest and to force workers into more direct competition with each other, while assuring them fewer rights and protections. The increased capital mobility afforded by NAFTA has hurt workers, the environment and communities in all three NAFTA countries.

Since 1994, the U.S. combined trade deficit with Mexico and Canada has ballooned from $9 billion to $127 billion, Lee says. The Department of Labor has certified that well over half a million U.S. workers lost their jobs due to NAFTA, and the nonprofit Economic Policy Institute (EPI) estimates the skyrocketing NAFTA trade deficit contributed to the loss of more than 1 million jobs and job opportunities.

Mexican workers haven’t fared any better. Real wages in Mexico are actually lower today than before NAFTA went into effect in 1994, and the number of people in poverty grew from 62 million to 69 million through 2003, Lee says.

The NAFTA model was the starting point for CAFTA. In Monitoring Report: DR-CAFTA in Year One, prepared by the Stop CAFTA Coalition, Katherine Hoyt of the Nicaragua Network, one of the members of the coalition, says CAFTA has fueled the deterioration of workers’ rights. For example, according to the report:

• Few collective bargaining agreements exist with noncompany unions in the free-trade zones of Central America, and corporations continue to fire union leadership in order to quash organizing efforts.
• Despite promises from the El Salvadoran government and the Bush administration, the cost of living is increasing, including the price of food. The White House had assured Salvadoran farmers that increased food exports from the United States would lead to lower food prices.
• In Nicaragua, funds from a program to support farmers are going to rich, powerful large producers, not to small farmers who desperately need them.
• Using a section of CAFTA, El Salvador’s government is preparing a new law to privatize the nation’s water system, an action that traditionally leads to huge cost increases and the loss of water by poor farmers and workers.

With Congress poised to consider new NAFTA-type trade agreements with Peru and Colombia, lawmakers need to take a look at what has happened in Central America and Mexico, Lee says:

Trade agreements must include enforceable protections for workers’ core rights and must preserve our ability to use our domestic trade laws effectively. They must protect our government’s ability to regulate in the public interest, to use procurement dollars to promote economic development and other legitimate social goals, and to provide high-quality public services. Finally, it is essential that workers, their unions and other civil society organizations be able to participate meaningfully in our government’s trade policy process, on an equal footing with corporate interests.

The success or failure of any future trade and investment agreements will hinge on governments’ willingness and ability to negotiate agreements that appropriately address all of the social, economic and political dimensions of trade and investment, not just those of concern to corporations. Unfortunately, NAFTA is precisely the wrong starting point.

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