COMMENTARY | The controversial trade agreement is set for renegotiation. Could this be the year we finally put our foot down?
The North American Free Trade Agreement is unpopular with many people who correctly blame it for encouraging capital flight, job loss, deindustrialization and wage suppression. President Donald Trump triggered the agreement’s renegotiation, and talks between the governments of Mexico, Canada and the U.S. about NAFTA’s future will likely conclude sometime this year.
To this point, most unions and activist trade groups have been reluctant to call for NAFTA’s termination, and that is regrettable. Instead, they have pressed to modify the agreement. Unfortunately, this stance encourages people to believe that a few key changes in the agreement can make it an acceptable vehicle for advancing “national” interests and that the Trump administration, when offered good ideas, will do the “right thing.” Neither is true. It is time to just say no to NAFTA.
The truth about free-trade agreements
Free-trade agreements such as NAFTA are designed to promote the power and profitability of multinational corporations. The phrase “free trade agreement” calls to mind a world in which “neutral” market forces ensure that the trading activity of national firms leads to a balanced international exchange of goods and services. But that is not the world we live in.
Approximately 50 percent of all goods imported to the U.S. are intra-firm, meaning they are bought by one unit of a multinational corporation from another unit of the same multinational. The percentage is considerably higher for imports of manufactures, especially in key sectors like electrical, machinery, transportation, and chemicals. Approximately one-third of all goods exported from the U.S. are sold by one unit of a multinational corporation to another unit of the same company. The percentage of U.S. service trade that is intra-firm is even higher, almost 70 percent. And these percentages do not include trade between multinationals and their “independent” subcontractors.
In short, most trade is organized within multinational-corporate-controlled networks. Multinational corporations want these free trade agreements because they provide stability and security for their global operations, operations that are structured to serve corporate, not national interests.
These agreements also include dozens of chapters that have little to do with trade as we commonly think of it. For example, they include chapters that restrict the ability of governments to:
• Set national food and environmental safety standards.
• Regulate the extraction and use of national resources.
• Use public purchasing to reward firms with good labor or environmental records.
• Regulate financial institutions and their cross-border capital flows.
• Operate publicly owned health and insurance services.
• Control the gathering and use of private data.
They also include a variety of dispute settlement systems, including one that allows foreign investors to sue host governments in secret tribunals that trump national laws if these investors believe that government actions threaten their expected profits. Not surprisingly, the national media tells us little about the true scope of these agreements and the interests they serve.
The NAFTA debate
Trump has won high marks from many people for his public criticism of NAFTA and other trade agreements. The perception that he stands with working people is strengthened by media stories about his demand for changes to the current agreement. For example, he has called for:
• Modifications to NAFTA’s investor-state dispute settlement system.
• A tightening of the rules on the origins of car parts.
• A sunset clause that would allow any of the participating countries to terminate NAFTA after five years.
• An end to government procurement restrictions on preferential treatment for domestic firms.
Canadian and Mexican officials have rejected these changes. The U.S. corporate community has called them “poison pills” that could doom the renegotiating process, possibly leading to a termination of the agreement. Corporate lobbyists are hard at work, trying to convince members of Congress to use their influence to get them withdrawn, but so far with little success.
Most unions and trade groups have joined the debate by voicing their support for these proposed changes, although with some modifications. For instance, while Trump would like to give governments the freedom to opt out of the investor-state dispute settlement system, the unions and trade groups would like to do away with it completely. Unions and trade groups have also pressed for other changes. The two most important are new enforceable labor standards to help Mexican workers raise wages and improve working conditions and enforceable rules against currency manipulation.
These organizations have stated that if the renegotiated NAFTA doesn’t include real improvements in their priority areas, they will call for its rejection. Unfortunately, this largely wait-and-see strategy has allowed Trump to shape the public discussion around the renegotiations and present himself as a defender of worker interests.
The rest of the story
Of course, NAFTA negotiations are not limited to these few contentious issues. In fact, trade negotiators have made great progress in reaching agreements in many other areas. However, because of the lack of disagreement between corporations and the Trump administration on the relevant issues, the media have said little about them, leaving the public largely ignorant about the overall pace and scope of the renegotiation process.
Perhaps the main reason for the rapid progress is that many U.S. proposals closely mirror those previously agreed to by the three NAFTA governments during the Transpacific Partnership negotiations. These include new labor and environmental standards as well as new rules to govern the trade of services like telecommunications and financial services, digital goods like music and e-books, and the collection and cross-border use of data itself.
Perhaps not surprisingly, the resulting agreements promote corporate interests. A case in point is the proposed change to the weak existing NAFTA side-agreement on labor rights.
Currently, sanctions on a government can only be applied – and only after a long period of consultations, investigations, and hearings – when there are proven violations of laws pertaining to minimum wages, child labor and occupational safety and health. Violations of the right to organize, bargain collectively, and strike are not subject to sanctions.
The labor standards agreement that the U.S. seeks to include in the new NAFTA says, “No Party shall fail to effectively enforce its labor laws through a sustained or recurring course of action or inaction in a manner affecting trade or investment between the Parties, after the date of entry into force of this Agreement for that Party.”
This labor standards agreement is part of the U.S.-Dominican-Central American Free Trade Agreement, and we now have an example of how it works, thanks to a case filed in 2011 by the U.S. against Guatemala after much prodding by the AFL-CIO.
The panel chosen to hear the case concluded, in June 2017, that the U.S. “did not prove that Guatemala failed to conform to its obligations.” The reason: the three-person panel made its own monetary calculations about whether Guatemalan labor violations were serious enough to affect trade or investment flows between the two countries and decided they were not.
In short, labor exploitation is likely to continue unchecked under a possible new NAFTA, which may well be more corporate friendly than the original agreement.
The need for a new progressive strategy of opposition
Trump has threatened to withdraw the U.S. from NAFTA if the other two countries do not agree to his demands for key NAFTA changes. While no one can predict the future with certainty, the odds are great that compromises will be reached allowing him to present a renegotiated NAFTA as a win for working people.
These compromises might even include some positive changes, such as a weakening of NAFTA’s dispute settlement system and an increase in the minimum required North American content for duty-free goods. But, no matter how positive these changes might be, it is a safe bet that they will do little to change the overall corporate nature of the agreement.
To this point, most trade unions and trade groups have concentrated on demonstrating the ways in which NAFTA has harmed workers, highlighting areas that they think are most in need of revision, offering suggestions for their improvement and mobilizing their constituencies to press the U.S. trade representative to adopt their desired changes.
But by focusing on a select few targeted areas, these groups have not done nearly as much as they should to educate the population about the ways in which the ongoing negotiations are creating new avenues for corporations to enhance their mobility and profits, especially in services, finance and e-commerce.
As noted above, trade union and trade group leaders have said that they plan to wait until they see the final agreement before deciding whether they will rally behind it or organize to get Congress to reject it. But this wait and see strategy is destined to fail, not only to build a movement capable of opposing a revised NAFTA agreement, but even more importantly to advance the creation of a working-class movement with the political awareness and vision required to push for a progressive transformation of U.S. economic dynamics.
Because agreements like NAFTA are complex and hard to interpret, it will be no simple matter for trade union and trade group leaders to help their constituencies truly understand whether a renegotiated NAFTA is better, worse or essentially unchanged from the original. As a result, people are more likely to be demobilized than energized to take action. And, if Trump actually decides to terminate the agreement, they will find themselves having to either praise Trump or else criticize him for not doing more to save NAFTA – neither outcome being desirable.
There is, in my opinion, a better strategy: Engage in popular education to show the ways that trade agreements like NAFTA are a direct extension of decades of domestic policies designed to break unions and roll-back wages and working conditions, privatize key social services, reduce regulations on corporate activity and slash corporate taxes.
Then, organize the most widespread movement possible, in concert with workers in Mexico and Canada, to demand termination of NAFTA.
Finally, build on that effort to block any government efforts to negotiate new free trade agreements, such as the one with the European Union that already has Trump’s support. Now is the time: Say no to NAFTA!
Martin Hart-Landsberg is a professor emeritus of economics at Lewis and Clark College.
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