Evaluating NAFTA, Research Paper Example

Little ambiguity exists in terms of evaluating the benefits and liabilities of NAFTA on the three nations impacted by the agreement. NAFTA has proven to be a disaster from the standpoint of labor, job-growth, and immigration. Although the agreement emerged out of a perceived economic threat by the European Union, NAFTA fell far short of attaining the accomplishments of the E.U. Instead, as the following discussion will clearly demonstrate, NAFTA proved to be of benefit only to small cadre of investors. For the mass populations of Canada, Mexico, and the United States, the policies of the agreement resulted in job-loss, devaluation of currency, inflation, and stagnation of wages. The agreement is therefore a complete failure when looked at from a populist point of view.

The irony is, of course, that NAFTA was sold as a panacea to the economic stagnation that faced the American agricultural industry. In “The Ten Year Track Record of the North American Free Trade Agreement” there is a direct reference to this promise as being part of the foundation of the political sales-pitch regarding the agreement. The fact is that “U.S. farmers and ranchers were promised that NAFTA would provide a lasting solution to their struggle for economic success by providing new access to the Mexican and Canadian markets for U.S. exports” (Ten Year, 1). Of course, what was unknown to most of the public was the fact that U.S. agriculture is not actually based on exports, but rather on domestic consumption.

This fact highlights one of the key reasons why NAFTA has been a failure, particularly, in regard to the economy and job forced of the United States. Most people are probably unaware of the fact that the agreement not only impacted the U.S. in profound ways, but actually ran counter to the interests of American agriculture from its very inception. Not only is American agriculture focused on domestic production and consumption, this focus is exceptionally narrow. As a matter of fact, “Less than a quarter of all U.S agricultural production is exported [and] NAFTA is designed to increase agricultural imports” (Ten Year, 2). This is a kind of political sleight-of-hand that resulted in the agreement being largely understood as a way to stimulate U.S. trade, grow jobs, and create a kind of firewall against the burgeoning influence of the EU.

What happened was, in fact, that the American agricultural base has shrunk in regard to exports with Mexico. Statistically, “U.S. agricultural trade surplus with Mexico has shrunk by over $ 1 billion under NAFTA” (Ten Year, 3). With this kind of profound impact happening in the first decade after the ratification of the treaty, the factual basis is established that NAFTA has had a negative impact on U.S. agriculture. Unfortunately, the model of loss that is present in this sphere extends to the general picture of labor in the United States, as well as in Mexico. Before taking a closer look at the specific ways in which NAFTA negatively impacted labor, it is crucial to fist establish a couple of fundamental principles about NAFTA itself, and the countries involved in the treaty. Two very important factors must be taken into consideration: the GDP and population of the NAFTA partners.

Graph # 1 shows that in terms of GNP, the United States towers over its partners Canada and Mexico in terms of value with close to $12 trillion in GDP. With this disparate proportion of economic power, the whole idea of creating a free-trade zone between the nations would seem to place the United States in the most risky position of the three. Because the U.S. economy is so much greater than the two economies of its partners, it almost gives the appearance that the United States is “carrying” the other two economies. Because, as previously mentioned, NAFTA was based not primarily in creating jobs but on eliminating regulations and tariffs that suppressed trade with a particular emphasis on exports, the comparative population sizes of the partners is a vital component of the agreement. It is important to keep in mind that there is a link, in terms of the agreement, between the comparative GNP and population of each of the trade-partners. Each nation’s GNP reflects the aggregate power of its resources and labor force, while its population indicates, to some extent, the degree of economic power that is necessary to sustain such a number of citizens. The stark economic facts that emerge in terms of trade-surplus and job-losses begin with the fundamental statistics of GNP and population.

In graph #2 there is an indication of the relative population of the three NAFTA partners. Again, as was the case with the comparison between the GNP numbers, the United States holds a massive lead over its partners in terms of population size. With nearly 300 million people, the U.S. obviously presents a massive potential market for exports. Without being too simplistic, the two components of GDP and population must be viewed as the primary foundations of NAFTA. By looking at them it is obvious to see without a great deal of reflection that policies which favor export seek to exploit the massive market-population of America. A big population with a huge GNP becomes, in a paradigm of free-trade with two smaller partners, a “big fish” letting itself be fed on by guppies.

This naked comparison of hard, if simple, statistics, shows without a doubt that the U.S. economy was placed in a position of losing its inherently more dominant position. However, the influence of NAFTA goes beyond that of pure economics. The reality is that the influence of the treaty reached into cultural and social dimensions. The most important of these social and cultural consequences was a weakening of territorial and cultural boundaries that is visibly manifested in an immigration crisis. In other words, the ratification of NAFTA has led directly to a massive increase in immigrants both legal and illegal that have crossed from Mexico into the U.S. and Canada. The ratification of NAFTA has, in short, created a set of interdependencies that diminish the possibility of maintaining secure borders and cultural identities. Those who view NAFTA as predominantly impacting economics are, of course, factually correct. To make this claim, however, is to miss an almost more significant point, which is that of massive immigration.   According to Ferandez-Kelly and Massey in: “Borders for Whom? The Role of NAFTA in Mexico-U.S. Migration” (2007) the economic conditions that developed after the ratification of NAFTA encouraged a cultural and social collision between the nations that resulted in a weakening of the U.S./Mexican border.

The authors note that the idea of a free trade agreement between the United States and Mexico actually runs counter the simultaneous pursuit of secure borders. It is an exaggeration, perhaps, to assert that NAFTA was designed with this purpose in mind. Nevertheless, as Ferandez-Kelly and Massey observe: “The voluminous stock of social links between Mexicans and Americans combined with heightened economic integration, presents a formidable obstacle for U.S. attempts to seal the border selectively.” (Fernandez Kelly, 109) Whether or not such a result was intended by those who drafted the agreement, an increase in illegal immigration has taken place in the years following the enactment of NAFTA. Therefore, the treaty has impacted areas beyond those which can be easily described by statistics. Issues of cultural identity and the continuance and expansion of social programs hang in the balance due to the way that NAFTA helps to promote cultural, as well as economic, interdependency among the three partners.

If the results of NAFTA were devastating to the American farmer due to the treaty being designed to favor exports, the natural assumption would, of course, be that the treaty helped Mexico’s agricultural; base and provided a boom for its farmers and ranchers. In fact, it might even be supposed that the opening of the massive U.S. market and the Canadian market would act as an overall stimulant to the Mexican economy, helping the average famer, and by extension, worker due to the huge potential of selling goods without tariffs to the U.S. The reality is that the ratification of NAFTA produced devastating results for Mexican farmers and, by extensions, average Mexican consumers. According to “NAFTA’S Legacy for Mexico: Economic Displacement, Lower Wages for Most, Increased Immigration” prices for commodities plummeted, while the cost of food shot skyward.

The true numbers are startling: “The price paid to Mexican farmers for corn plummeted after NAFTA, the deregulated retail price of tortillas – Mexico’s staple food – shot up 279 percent in the pact’s first 10 years” (“NAFTA’S Legacy, 1). The duel impact of plummeting export prices and exponentially increasing costs for basic foodstuffs can only be described as an economic disaster for Mexico. This, combined with the previously cited statistics regarding the negative impact of NAFTA on the U.S. would seem to indict NAFTA beyond any means of vindication. What the evidence cited so far in this examination has shown is that NAFTA exerted a negative influence on exports and profit, agriculture, inflation, and immigration. While those are extremely important areas of concern, NAFTA’s influence has also held a negative sway over another crucial social and political area: labor. In fact, this area of influence may be NAFTA’s most important, and most deceptively harmless.

If immigration and deregulation are primary aspects of the reason that NAFTA’s economic influences actually spread to cultural areas, the influence of NAFTA over labor shows that such an influence functions in a cross-cultural way that is an indication of NAFTA’s weak structuring. The only other viable interpretation of the evidence is that NAFTA was actually intended to fail to account for fluctuations and development in the sphere of labor. Ferandez-Kelly and Massey note that NAFTA took no precautions in regard the impact that the treaty might have on labor. The authors write that “NAFTA utterly ignored international labor mobility and took no steps to equalize different levels of economic development among the participating countries” (Fernandez Kelly, 105). In other words, NAFTA not only made it possible for one country to use the others as steeping-stones to its own economic development and the evolution of its labor force, it encourages this kind of inter-partner competition.

Obviously, as was stated at the opening of this examination, the premise of NAFTA was to create a treaty that appeared to support the popular concerns of labor and economic stability, but which in reality worked to undermine agriculture and labor. If the foregoing considerations were not convincing enough, there is the fact that NAFTA facilitated the consolidation of all markets in its sphere of influence. As Ferandez-Kelly and Massey put it, “Under NAFTA, the United States has moved forcefully to fuse to fuse all markets save one – that for labor…”  (Fernandez Kelly, 108). This means one thing if it is viewed as an oversight and quite another thing altogether if it is understood to be an act of design. Of course, it is the contention of the present argument that the blow against labor was, in fact, calculated with the intention of weakening the labor forces in all of the partner-nations in order to drive down wages and benefits and create a wider profit-margin for the ownership/investor class.

If this is the case, then NAFTA must be viewed not as a treaty that was meant to grant greater opportunity and mobility for the working-class or the common citizen of any of the partner nations. Instead, the treaty must be viewed as a calculated effort to tighten the economic supremacy of the wealthy-elite while simultaneously diminishing the power of labor unions and established regulations and labor-standards. Most casual observers would fail to realize that these consequences might even be associated with NAFTA let alone being at the heart of its purpose and creation. That said, once it is granted as a fact that NAFTA was designed to create an even greater divide between the wealthy classes and the working classes in the partner nations, it is much easier to say that the treaty has been successful. It has been successful for a small cadre of wealthy investors who have benefited from the elimination of tariffs and regulations.

A close examination of NAFTA’s contents indicates that labor was never a priority in the creation of the treaty. According to Jaime Serra and J. Enrique Espinosa in their article “The Proof is in the Paycheck,” the stated objectives of the treaty were based primarily on creating a comfortable climate for investment. Two primary concerns of the treaty were to “increase substantially investment opportunities in the territories of the parties” and to “provide adequate and effective protection and enforcement of intellectual property rights in each Party’s territory” (Cavanaugh, 61). These two concerns are void of any concern for workers or labor-rights. It is the absence of any explicit prescription about the securing of wages of worker’s regulations that makes NAFTA anti-labor as much as it is pro-export.

The bottom line to any capitalist enterprise is profit. In the case of NAFTA, the way in which profit was guaranteed for the      wealthy investors who backed the treaty and helped push it politically was through the suppression of taxes, tariffs, regulations, and worker’s wages. The treaty fails to provide any help or support for workers’ organizations. Due to this fact, “disappointing wage levels in all NAFTA countries are partly due to the agreement’s failure to protect the right to organize independent unions” (Cavanaugh, 62). Again, just as the failure of NAFTA to take into account the needs of American agriculture was by design, the overall spurning of worker’s needs in the treaty is also written in to the agreement deliberately and with purpose. The purpose of weakening the stability of unions was to drive a wedge between the ownership and labor classes in the three nations of the treaties.

According to Shefner in the article, “Rethinking Civil Society in the age of NAFTA: The Case of Mexico” (2007) the weakening of Mexico was something that took place across the board. Shefner writes that NAFTA “policies left Mexicans with lower wages, limited access to social welfare benefits, lower physical quality of life, fewer jobs, and increasing levels of inequality” (Shefner, 191). All that is necessary to understand the purpose of NAFTA is to match the end-results of the treaty in action with its expressed intentions. Where the two meet up, it is plain to see that the true goal of NAFTA was to create an environment that was highly conducive to making profit through investment and trade. What is crucial to keep in mind is that nothing about the treaty suggests that its goal is to create a stronger work-force or more stable infrastructure in any of the partner nations. This means that almost by default NAFTA’s only goal could be to maximize the financial returns for an elite class of global investors.

This means that NAFTA’s emphasis on exports and deregulation led not only to the collapse of agricultural prices and the rise of inflation, but on the increase of pressure and adversity on medium and small businesses. The realities of how NAFTA adversely impacted middle-class industry and business are reflected in the fact that Mexican businesses were sacrificed en masse to huge multinational corporations. The bottom line is that “NAFTA’s export-driven model benefited large multinational corporations while generally decimating small and medium-sized Mexican businesses” (Ten Year, 3). In some ways NAFTA not only ignored labor and the middle-class but moved in earnest to weaken labor and the middle-class. The effect was like a steamroller that demolished all opposition and potential competition to multinational corporate dominance.

This last assertion is among the most significant in relation to the entire issue of NAFTA. This is because the benefactors of NAFTA were not the people of the partner nations, the world economy as a whole, or specific industries such as technology, communications or agriculture. The benefactors of NAFTA were global conglomerates who owed allegiance to no specific nation and held only the bottom line of profit as any concern whatsoever. Because multinational investors are the ones who actually derive the greatest benefit from NAFTA, it is logical to assume that the aspects of the treaty that weaken each of the partner nations is done in order to increase the relative power of global corporations. The basic goal of this kind of oligarchical power is to eliminate taxes, regulations, workers’ rights, and tariffs in order to facilitate their single-minded march to spectacular economic gain. Nothing else is of any consideration: not workers, nations, cultures, or the world itself.

One testament to this reality is the fact that, despite the initial promises made on behalf of the treaty, NAFTA has actually increased damages to the environment that are being done in the partner nations. For example, in relation to Mexico, although many politicians argued that the money that was made through the treaty would help to fund for cleanup of environmental waste, the real-world result has been the opposite. Studies have shown that “it is clear that NAFTA-related business activity has increased air and water pollution and generated tons of hazardous waste which is being dumped.” (Ten Year, 3). The wanton disregard for workers, cultures, wages, public health, and environmental safety indicates that NAFTA, rather than being a stimulus to popular growth, has been an agent of worker suppression and environmental destruction. Clearly the populist ideas that were part of the initial description of NAFTA by spokespeople and politicians who were committed to selling the treaty to the public were merely included as a smokescreen.

The most innovative aspects of the treaty were, in fact, those elements which wholeheartedly placed the concerns of multinational business above those of the population and workers. The way that this was accomplished was through a multilayered strategy that included the radical restructuring of regulations. As pointed out by Isidro Morales in “The Mexican crisis and the Weakness of the NAFTA Consensus” (1997), the regulatory ideas forwarded under NAFTA were meant to ease restrictions on big-business, and particularly to encourage and enable global investment. Morales writes that “NAFTA sets the framework for the founding of a radically new business environment in which the major goal is to attract foreign direct investment by guaranteeing foreign investors their property rights and the reduction of transaction costs” (Morales, 135). Does this mean that NAFTA was actually a “scam” perpetrated by the rich against workers? Is it something that was cooked up by a cabal of wealthy elites with the intention of weakening the national laws that had been put in place to limit the power of their corporations?

The answer to these questions I, obviously: yes. NAFTA was not only designed to protect multinational investments and corporate interest, it can actually be viewed as a treaty that “surreptitiously” grants a greater priority and power to multinational corporations than to individual nations and their citizens. The negative impact of NAFTA on wages, workers’ rights, the value of currency, the rate of value in agriculture and the ability to control border security to limit illegal immigration is one that stands as a deliberate counterpart to the economic aspects of the treaty that grant enormous benefits to global corporations. The acquisition of profit is the main target of NAFTA. The fallout from its policies such as a degraded standard of living for the common worker and the destruction of secure borders are useful for those who are interested in imposing corporate power above that of government power.

There is a very simple motivation for why any group would want to establish the power of business over that of government and that is because a democratic government is meant to protect its people from being exploited or harmed. By contrast a multinational corporation that is focused on profit aspired specifically to exploit people and gain through using them even if it causes personal or environmental harm. Seen from this perspective it would seem obvious that government and corporate interests stand in opposition to one-another at the deepest levels. This idea brings about another consideration of NAFTA that it is propagandistic in that it appears to bridge that gap between democracy and economics, but in actuality leans more toward the suppression of democracy in order to increase corporate freedom and corporate power.

The fact remains that NAFTA’s primary function was to create a favorable environment for big business to flourish. This means also that a corresponding “bad” environment would be created for small and medium businesses. The idea behind many of NAFTA’s regulations and tariff policies was to encourage the proliferation of investment and ownership by foreign conglomerates. Morales mentions that the impact of such policies has been particularly devastating in Mexico where, prior to the ratification of the treaty, the majority of Mexican businesses were controlled by small to medium business owners. In the years after NAFTA, the outlook in Mexico dramatically changed. Morales writes that “Big industries, most of them foreign owned or with foreign capital participation, are those that dominate not only industrial output in Mexico but also the core of foreign trade” (Morales, 143). Stated simply, what NAFTA has done is to create an environment where it is very easy for “big fish” to gobble up “little fish” and where local business is cast aside in favor of foreign industry.

One of the other damaging aspects of NAFTA is that its combined suppression of workers’ wages and the growth of small business will ultimately lead to the diminishing of the marketplace as a whole as innovation and new products are squeezed  out of existence. It goes almost without saying that a similar dynamic is at work in regard to degrading of the living standards and opportunities extended to average people. Many of those who might invent, design, or refine new technologies and products will never receive an education or opportunity to employ their talents.  Therefore, the push toward corporate absolutism may result in a constricted marketplace, one which will ultimately collapse under the weight of its own greed.

Such considerations may seem far removed from the current examination of NAFTA and its recent impact. However, when the influence of NAFTA is granted as extending to economic, cultural, and environmental issue such as those described in the preceding argument, it is obvious that NAFTA’s influence and scope extends far beyond simple matters of economic policy and trade. The true purpose of the treaty is to create optimum condition for the growth of multinational corporations and the maximization of their potential profit margins. The obvious alarming concern for workers, for cultures, for national border, and for the natural environment itself that is evidenced by NAFTA is an indication that the corporate elites who created and enacted the treaty have little consideration for anything other than the increase and consolidation of oligarchical power. In this sense, NAFTA may be looked at as an attempt to actually subvert the power of individual governments in order to create a kind of global corporate hegemony.

Works Cited

Cavanaugh, John; Anderson, Sarah; Serra, Jaime; Espinosa, J. Enrique. “Happily Ever NAFTA?” Foreign Policy No. 132; pp. 58-65

Fernandez-Kelly, Patricia and Massey, Douglas S. “Borders for Whom? The Role of NAFTA in Mexico-U.S. Migration. Annals of the American Academy of Political and Social Science. Vol. 610, NAFTA and Beyond: Alternative Perspectives in the Study of Global Trade and    Development (March 2007) pp. 98-118

Morales, Isidro. The Mexican crisis and the Weakness of the NAFTA Consensus. Annals of the American Academy of Political and Social Science, Vol. 550: NAFTA Revisited: Expectations and Realities (March 1997) pp. 130-152.

Mumme, Stepehen P. “Trade Integration, Neoliberal Reform, and Environmental Protection in Mexico: Lessons for the Americas.” Latin American Perspectives Vo. 34 No. 3 Contested Transformation (May, 2007) pp. 91-107

NAFTA’s Legacy for Mexico: Economic Displacement, Lower Wages for Most, Increased Immigration.

Shefner, John. Rethinking Civil Society in the age of NAFTA: The Case of Mexico. Annals of the American Academy of Political and Social Science. Vol. 610, NAFTA and Beyond: Alternative Perspectives in the Study of Global Trade and Development (March 2007) pp182-200.

“The Ten Year Track Record of the North American free Trade Agreement” U.S., Mexican and Canadian Farmers and Agriculture.