David Sirota: Was Ross Perot right about NAFTA?

May/June 2004

NAFTA's Hung Jury
After ten years, an honest verdict is hard to find
By Roger Bybee

A decade ago, major U.S. media joined corporate and political elites in steamrolling the public's overwhelming 64 percent opposition to the North American Free Trade Agreement (Gallup, 8/8/93), and NAFTA was signed into law by President Bill Clinton.

Major U.S. media almost uniformly dismissed NAFTA's opponents as backward-looking "protectionists." Mean-while, editorial writers and pundits almost unanimously predicted substantial economic and social gains in the U.S., Canada and Mexico. Even news articles reflected this heavy-handed bias; one study found the New York Times and Washington Post quoted more than three times as many pro-NAFTA sources as critics (Extra! Update, 10/93).

Ironically, only the business-oriented press would frankly admit that the central attraction behind NAFTA was legally locking in the profits to be reaped from a system built on a vast low-wage labor market in "maquiladora" plants along the U.S./Mexican border. "U.S. Companies Pour Into Mexico, Drawn Primarily by One Factor: Low Wages," a Wall Street Journal headline (9/24/92) brazenly proclaimed.

After a full decade of experience under NAFTA, much of the mainstream media has been reluctant to label the trade deal they had lobbied for so heavily a failure. "Ten years later, the jury is still out," reported the St. Louis Post-Dispatch's Jon Sawyer (12/28/03), in an article that actually supplied plenty of damning evidence and testimony. In coverage of NAFTA's 10-year anniversary, the tendency in news articles was to avoid drawing conclusions from the evidence and to claim that "NAFTA's Effect on State Hard to Gauge" (Biloxi [Miss.] Sun-Herald, 11/30/03) and "NAFTA's Impact, Future Unclear After 10 Years" (Detroit News, 1/1/04).

A few publications dared to draw critical lessons. The Cincinnati Enquirer (12/26/03), interviewing Mexican workers, frankly discussed their plight in low-wage, "no-exit, unstable jobs" in danger of being exported to China. The Atlanta Journal-Constitution (12/26/03) also sharply challenged the conventional wisdom that NAFTA has generated real development in Mexico.

There were only scattered references, though, to a major report by the Economic Policy Institute (11/03) that calculated that there's been a net loss of almost 900,000 U.S. manufacturing jobs to Mexico. Also little discussed was the U.S. trade balance with Mexico, which has swung sharply from a pre-NAFTA surplus of $1.3 billion to a deficit of $37 billion in 2002. Nor has there been much coverage of the decline in real wages for manufacturing workers on both sides of the U.S./Mexican border, with maquiladora wages now running about 60 to 80 cents an hour (Dollars & Sense, 9-10/03).

Free-trade mantra

If the depth of analysis was generally shallow on the news side, the editorial coverage was even more superficial. Much of the mainstream media greeted NAFTA's 10th anniversary by simply re-stating their pre-NAFTA expressions of primitive, unquestioning faith in "free trade" without serious examination of the evidence. The Washington Post (1/9/04) patiently explained to doubters of the faith, "If a country excels at making bicycles and is bad at making shirts, it will be better off if it signs a trade deal that allows its workers to do what they are best at."

Yet for reasons that mystify the Post's editorialists, "demagogues" carp about the closing of factories (for both shirts and bicycles, as it has turned out): "It's almost like criticizing people who hand over their cash at the supermarket without noting the upside of their actions: bags of groceries to take home. The real question is whether the groceries are worth the price." The Post seemed utterly unable to imagine that a sizable group of people might be paying the entire price while a much tinier segment is taking home all the benefits.

Meanwhile, a Detroit News editorial (1/12/04) proved remarkably adept in turning a blind eye to the local consequences of job losses to Mexico in Michigan: "The treaty certainly did not produce the giant sucking sound predicted by Ross Perot as U.S. jobs moved south." In fact, the EPI study documented a NAFTA-related net loss of more than 50,000 jobs from Michigan between 1993 and 2001.

A number of other papers, like the Savannah Morning News (1/3/04), Albany Democrat-Herald (1/20/04) and Bangor Daily News (1/3/04), similarly pronounced NAFTA a success without delving into the local impact covered in the EPI study or citing even a single NAFTA critic.

Almost entirely ignored in mainstream press are the implications of NAFTA's little-known Chapter 11, which considers environmental and other public-interest laws that affect corporate profits to be "tantamount to expropriation," thus leaving governments vulnerable to costly penalties. For example, Chapter 11 permitted a U.S. waste-management firm to successfully sue Mexico for nearly $15 million when local citizens and elected officials rebelled against the placement of a waste dump in their community (The Nation, 10/15/01; NOW! with Bill Moyers, 2/5/02).

Changing Times

There does seem to be a growing willingness to admit that NAFTA has been less than effective in promoting broadly based development and a sharing of income gains. Business Week, although calling NAFTA "a great success" (12/22/03), painted a daunting picture of the pact's serious shortcomings in promoting adequate development of Mexico's education, health and transportation capacities. Other avid NAFTA cheerleaders, like the Boston Globe (1/5/04) and the New York Times' Thomas Friedman (4/4/04), are also finally acknowledging that more low-wage jobs are not equivalent to genuine development, and some are even urging a European Union-style program of massive investments to lift living standards and modernize Mexico's infrastructure.

The biggest surprise in NAFTA's 10th anniversary coverage, though, was provided by the New York Times' news staff. Given the paper's all-out blitzkrieg in support of NAFTA's passage in 1993, it provided a remarkably unflinching evaluation on the treaty's 10-year anniversary (12/27/03), written by Tim Weiner and a team of reporters. The piece soberly documented how the agreement has failed to measure up to its giddy promises to create "millions of good jobs, curb illegal immigration, and raise living standards from the Yukon to the Yucatan." But "a decade later, the verdict, even among NAFTA's strongest supporters, is that for those goals, free trade is not enough."

While NAFTA's supporters cite impressive-sounding gains in trade between the U.S. and Mexico as evidence of benefits to both countries, these figures actually indicate mainly increased "intra-firm transfers" within U.S.-owned corporations. The Times pointed out: "The maquiladoras produced $78 billion in exports, nearly two-thirds of that sum from American parts assembled in Mexico and re-exported to the United States."

"By every measurable standard, the gap between rich and poor in Mexico has widened," and "real wages, eroded by a collapse of the peso in 1995, are flat or down for many millions of workers," reported the Times. As a result, "When you argue that free trade benefits poor people, no one believes you," admitted a disconsolate Luis de la Called, one of Mexico's top negotiators for NAFTA.

Losers close to home

What accounts for this willingness for some media like the Times to hesitantly begin a reconsideration of the free-trade faith? First, a number of high-profile free-trade initiatives have been scuttled recently. "Part of the reason this year has not been kind to these trade pacts is the advocates of free trade are too fundamentalist in their approach," the New York Times (12/18/03) quoted Julia Sweig of the Council on Foreign Relations. "They don't give the same level of priority to human capital—immigration and labor rights—as they do to inanimate issues like property rights and goods and services."

Second, during George W. Bush's "jobless recovery," Americans have witnessed the continuing and massive loss of factory jobs and the visible crumbling of manufacturing-based communities. But now the outflow of factory work has been joined by a new stream of "outsourced" high-tech jobs to India and China. With U.S. information-technology job losses estimated at between 300,000 and 600,000 annually (Business Week, 3/1/04; Newsweek, 3/1/04), the search for cheap labor overseas is now stalking the jobs occupied by the highly educated and well-paid.

Free-trade defender Michael Kinsley (Slate, 1/8/04) ruefully observed that "the losers in the new-style trade are more likely to be people that U.S. senators and fancy economic consultants actually know." He could have included elite journalists in that circle of acquaintance.

Much as Kinsley fears, the reaction against NAFTA-style globalization has clearly advanced up the socioeconomic ladder. Support for active promotion of more free trade agreements plummeted from 57 percent to 28 percent between 1999 and 2004 among Americans earning at least $100,000, according to a University of Maryland poll (USA Today, 2/24/04).

The flight of jobs out of the U.S. also coincides with a raft of publicity about Enron-style corporate misconduct and enormous CEO pay levels. So even the pro-NAFTA Findlay (Ohio) Courier (1/12/04) felt obliged to warn, "A privileged few cannot expect to reap all the profits of the global economy."

Finally, Mexico's low-wage labor markets have lost much of their allure as China has entered the picture since passage of Permanent Normalization of Trade Relations, also heavily promoted by mainstream media (Extra!, 9-10/00). China's authoritarian rulers at least had the foresight to invest in education, transportation and communication infrastructure, all of which Mexico lacks outside the border area. And with even more brutal repression of independent unions than Mexico practices, China can offer wages of 20 to 30 cents an hour.

While there is a new willingness to question some aspects of the free-trade faith, the mainstream media of the U.S. remain unable to contemplate that critics of NAFTA want anything other than to entirely wall off the U.S. The genuine alternatives offered by globalization's critics—full worker rights in all nations, environmental protection and democratic control over the economic direction of the nations involved—remain outside the frame of acceptable media discourse.

Roger Bybee is a Milwaukee-based anti-globalization activist, writer and speaker.

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