12 Years Later: NAFTA Fails Workers in U.S., Mexico and Canada

by James Parks, Oct 5, 2006

In the early 1990s, Big Business, politicians on both sides of the aisle and economists who supported the North American Free Trade Agreement (NAFTA) assured us the deal would create good jobs here in the United States and contribute to growth and development in Mexico. Supporters argued that NAFTA would improve the U.S. trade balance with Mexico, resulting in a net gain of about 200,000 jobs in the United States. 

Now, 12 years later, a new study shows the agreement has not lived up to its promise of better jobs and shared prosperity for Mexico, Canada or the United States. Instead, inequality is growing and real wages are stagnating in all three countries, while the U.S.–NAFTA trade deficit has skyrocketed, costing 1 million jobs nationwide, with losses in every state.  

Revisiting NAFTA, released Sept. 28 by the Economic Policy Institute (EPI), details how NAFTA has benefited the rich and powerful, while making life worse for ordinary working people.

In 2005, the U.S. trade deficit with Mexico and Canada was $127 billion, compared with only $9 billion in 1993. This rapidly growing trade deficit pushed workers out of higher-wage jobs and into low-wage positions in non-trade-related service industries, EPI reports. Two of the biggest job losers were California (124,000 jobs) and Texas (72,000 jobs). The hardest hit in terms of share of the workforce affected were Michigan, where 1.4 percent of workers lost jobs, Indiana (1.2 percent) and Mississippi (1 percent). 

Robert Scott, EPI’s director of international programs and one of three co-authors of the report, says those hit the hardest were the least able to find comparable work:

Growing trade deficits with Mexico and Canada under NAFTA contributed to inequality in wages and falling demand for workers without a post-secondary education, males in trade-related production, and minorities.

Despite the evidence that NAFTA has not worked for everybody, the Bush administration and Congress keep pushing bad U.S. trade agreements based on the NAFTA model, such as the Central American-Dominican Republic Free Trade Agreement (CAFTA) and proposed agreements with Peru, South Korea and Colombia.

EPI Distinguished Fellow Jeff Faux, author of The Global Class War, says:

NAFTA rules protect the interests of large corporate investors while undercutting workers’ rights, environmental protections, and democratic accountability.…The time for a continent-wide debate over the future of this agreement, which was negotiated by and for the rich and powerful in all three countries, is now overdue.

Mexican workers haven’t fared any better than U.S. workers under NAFTA. Real wages in Mexico are 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, AFL-CIO Policy Director Thea Lee told a congressional committee last month. Of all new salaried positions generated between the second quarter of 2000 and the second quarter of 2004, only 37 percent have full benefits, and 23 percent have no benefits at all.

NAFTA also initially increased employment in the low-wage maquilas industries along the Mexican border, with the benefits flowing mainly to large companies, the financial sector and a few administrative and professional workers earning high salaries. The maquilas are notorious for forcing workers to toil long hours for low pay and in poor conditions to produce products for export. Many of the maquila jobs left Mexico for even lower wages and worse working conditions in China in recent years.

Co-author of the report, Carlos Salas, an economics professor and co-editor of the 2006 version of The State of Working in Mexico, says:

Mexico’s experience should serve as a warning concerning the dangers of any trade agreement, bilateral or multilateral, which is similar to NAFTA.

In Canada, real incomes have virtually stagnated since NAFTA began in 1994, except for those at the top, the study shows. From 1990 to 2000, the average Canadian’s wage grew just 8 percent, according to the study. Meanwhile, the average wage for the top 1 percent of earners shot up 64 percent, and among the top 0.1 percent it doubled.

Bruce Campbell, the third co-author and executive director of the Canadian Center for Policy Alternatives, an independent research organization, says:

At its core, NAFTA is about shifting the power in the economy from government to corporations, from workers to corporations. Without a rebalancing of power in the continental economy, these problems will worsen.

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