“Nafta is working…but I don’t think we have come to an understanding yet of what it means to be partners, or to an understanding that partnership is the key to the success of nafta. We should be concerned about one another. We should combine our resources and talents; we should work together to be competitive; we should see the future with the same vision. This is what it means to be partners.”
—Mexico’s President, Vicente Fox, September, 2002, remarks at the Institute for International Economics[i]
In late January, 2008, I was in
It was an interesting time to be there because, as you may recall from the news,
While this was happening, I was staying for a few days up in a small community named La Ceiba, just south of
Nikolas’ life and circumstances overwhelmed me. Coming from my nice, air conditioned, floored home, I couldn’t imagine his hard, unrelenting life. But I tried not to act like the patronizing, rich guy, and I asked him about his family. I showed him pictures of my grand children, and he smiled.
Later that evening we went to the town church for community worship, a common meal, numerous speeches and presentations, and then a party. And there at the front of the sanctuary I saw Nikolas, in front of everyone else, dancing!
I was stunned. He was halting on occasion, not always in time to the music, but there he was, along with others—in fact dozens of others—dancing, and dancing as though his life was, well, wonderful and full of joy. From my soft, North American consciousness, I couldn’t imagine how he could do such a thing. If I were in his shoes I’d be in incalculable grief. I turned to a young woman named Gladys, who was the consultant for the local co-op that Nikolas’ community sells its coffee to, and shared my amazement. She laughed at me with a sound of real merriment, but I could tell that she was wondering how I could ask such a thing. “You don’t know much about us, do you?” she said.
There’s no clear, direct, line of cause and effect between Nikolas dancing and the protests of nafta, but there does seem to be an emotional one, perhaps even a theological one. In its fifteen years of existence, the “North American Free Trade Agreement” had created some staggering winners and staggering losers. And Nikolas and his family and community were among the worst of the losers.
To understand the depth of what so many people were protesting that week we need to step back twenty years and survey again the debt-and-trade-related crises of the 1980s, and see how the pain and fear in those crises drove successive Mexican governments to accept an agreement that was ultimately destructive to its many of its poorest citizens, especially farmers. In many ways nafta was sold as a way out of the weight of external debt that has plagued
The big increase took place during the early 70s when private banks in wealthy countries (mainly the
The balancing act lasted for about a decade until the beginning of the 1980s. At that time three things happened: the price of petroleum fell, taking with it
Dozens of other developing countries had also gotten deep in debt, but
Unsurprisingly, within a year
That may, in fact, have been the result that the IMF and the other financial powers were trying to achieve. According to the free market ideology behind most of the prescriptions given in crises like this, Plato’s “highest good” for humanity is no longer happiness, but a neo-liberal market system and a shrunken national government. As we noted in chapter one, Milton Friedman, the patron saint of modern free market theory believed that governments should consist of little more than the military and fire departments, and nothing can shrink a government more than unpayable debts. They force the government to sell off its basic functions to the private sector, which according to the theory, can always runs things better than a government. Many critics have accused the IMF and others of intentionally giving the governments of various countries the kind of financial advice that ultimately (and intentionally) destroys the state’s ability to govern.
All of this forced a complete rethinking of the role and size and meaning of government. No one would argue that before this time
Four years later
The double crashes so close together in the eighties left Mexico reeling and dizzy, and at the same time perfectly poised to accept the requirements of structural adjustment bailouts and the nafta “trade” deal that were biased toward the northern countries and had inequality at their heart. Journalist, Naomi Klein has labeled this kind of intervention, “Disaster Capitalism” because it occurs most often whenever there is a disaster (natural as well as economic) and the population feels temporarily stunned, powerless, and pliable to outside suggestion. When that happens the economic doctors of the far right rush in with financial “aid” that is conditioned on the acceptance of radical free market policies like privatization of water, education, electricity, and health care—policies which drive some people into extreme poverty and some into extreme wealth. When people have experienced a major hurricane, or a revolution, or—in
Back in 1988, as the new structural adjustment package was being signed and negotiations for nafta were beginning, I was living with a family in
I asked him how he was making out during the difficult times. Not well, he said, but he was getting by. Of more concerned to him, however, was the future.
How will all of this affect you in the future? I asked him.
I don’t know, he said. “I will be very good. When money comes back into
So, What is Nafta?
Specifically, nafta is the acronym for the “North American Free Trade Agreement.” It is a three-country trade agreement between
From the beginning there was tremendous opposition to the agreement in all three countries. Protests followed by violent reprisals broke out in
Many analysts believe that it would never have passed had then-candidate Bill Clinton not taken it up in his 1992 presidential campaign as a way of attracting Republican votes, and then when in office felt compelled to make it a legislative priority. Faced with enormous opposition from both Democrats and Republicans in Congress, he agreed to negotiate with his Mexican and Canadian counterparts, two additional “side agreements” one on labor rights and the other on the environment. (They were added as “side” agreements because the Bush administration had signed the treaty under the “fast track” authority, so no amendments or changes were allowed to be made to the core treaty.)
The fact that the original agreement made no reference to protecting the planet or workers says much about the philosophies of those who put it together. They evidently did not see protecting people and the planet as part of their job description. This is reminiscent of the observation made by John Williamson (author of the famous article on the “consensus” of opinions by establishment Washington economists) that he left out any reference to poverty alleviation in his list because in the eighties poverty was not something policy makers were interested in.
Under the two agreements added by the
The side agreement on labor has fared no better. It established the North American Agreement on Labor Cooperation (NAALC) to monitor and work on labor protections, and it too has had little impact in the cases brought under it so far. On the plus side, trade unionists in
Lifting Trade Barriers
Although there were hundreds of provisions in the agreement, the most publicly discussed and debated were those concerning the eliminations of tariffs, quotas, and other barriers to exports and imports between the three countries. These items were to be phased out gradually and were finally eliminated on January 1, 2008 (just before the protests that I had witnessed while in
Before nafta, each of our three countries established tariffs to make foreign imports more expensive and subsidies to make domestic producers stronger. Both of these broad policies evolved over decades as ways of protecting local farmers and local industries. With nafta, both tariffs and subsidies were to be phased out so that producers from one country could compete with producers in another on what was called an “even playing field.” The standard trade theory behind this is that with the demise of tariff barriers, one country could flourish through its “comparative advantage” in efficiency or cost of production over another country.
One problem with the theory was that in reality, there never could be an authentic “level playing field,” when giant US corporations such as Cargill, ADM, or Monsanto were allowed compete with smaller labor intensive factories or farms in Mexico—unless, of course, the factory was US owned and operated, something that happened frequently.
Another problem was that the lowering of subsidies and tariffs was not uniform across all three countries. Perhaps, if these measures had been implemented equally across all borders, the theory that free and equal competition would foster more efficient production and greater increases in incomes would have held true, or at least would have had a better testing. But, under the provisions of nafta, each nation had a different phase-out plan for subsidies and tariffs and a different list of products that may be protected.[xii]
Mexican farmers were being undersold in their own local markets. Each year, small plot Mexican farmers found that they were spending more on growing their crops than what they could eventually sell them for, and then they had to borrow money to make ends meet, often then falling deep into debt poverty. It is a downward cycle that has driven tens of thousands off of their land and into the cities or over the border into the
A few years ago I was touring a market in
Other Contributing Factors:
Nafta was not the only factor that put a negative economic pressure on small farmers like Alberto. One is the simple growth in the number of young people looking for work. Ironically the US had funded hundreds of rural health clinics throughout Latin America in the sixties as a way of lifting their standard of living (and making Cuba look less appealing), and as a result it allowed an increase in population that by the nineties was reaching adulthood and looking for jobs. A second factor was the chronic indifference of successive Mexican governments to the plight of rural areas. One of the government’s frequent promises has been for aid to retrain, relocate, or rebuild those who have been harmed by trade policies such as those in nafta, but little has come of it. In fact, in the years since nafta was signed, the government all but terminated its rural assistance programs (possibly as a way of insuring a steady stream of poor hungry people into the cities to work in the US-owned, assembly plants). There were clauses built into nafta which, if implemented, would have safeguarded vulnerable farm products for 14 years, but they were never invoked. A third factor was yet another savage financial crisis that hit
However, the biggest non-nafta-related factor negatively affecting
At the same time
Most of us who watch the economies of the US and Mexico closely were concerned back in 1994 that, with the signing of nafta and Mexican salaries being one tenth of what they were in the US, companies would move rapidly and permanently to Mexico. Little did we know at the time that soon
The movement of industry from
The market, as we noted in chapter one, is the shark in the movie “Jaws.” It is a feeding machine that just does what it does, with no conscience and no reflection. Insofar as the market has a conscience at all it is because people of faith and conscience lobbied, cajoled, and pushed it to acquire one. We can push hard, for example, for our national leaders to only sign a “free trade” agreement with
Investor Protection Provisions
But trade is not the only part of nafta that has come under scrutiny. In fact, its critics sometimes put the words “free trade” in quotes, or question the use of the words “free trade” at all, because the concepts of “freedom” or “trade” constitute a relatively minor portion of the agreement. Of the over 900-pages of rules and provisions, the majority concern the changing of, or potentially overriding of, domestic laws within each of the three countries. According to Nobel Economics prize winner, Joseph Stiglitz, these provisions give an inordinate amount of rights and privileges to business, which are in effect taken away from individuals, which he believes “potentially weakened democracy throughout
One of the most contentious of those new rules were the Chapter 11 “Investor Protection” provisions, which allow a corporation from one country to sue one of the other countries in special tribunals if it believes that a law or judicial decision will adversely affect its potential profits. The tribunal is closed, nontransparent, and literally has the authority to override and force changes in laws passed by the legislative bodies of the three countries. If a company is successful, it will receive compensation directly from the federal government. Over the years of its enforcement, the nafta tribunal has heard suits attacking environmental, health, and safety regulations, and worker rights. By the year 2008, over $14 billion in claims had been filed. One of the things seldom noticed about the nafta tribunal system is that only companies (and their host countries) can file a complaint. That is, if a corporation feels that its future profits will be harmed by this or that labor law or environmental protection regulation, the tribunal will hear them. But if my friend Nikolas and his local Tzeltal community in southern
One of the early and most famous examples of this was between a
Specifically, it cited Chapter 11, section 1105, which required “fair and equitable treatment” of investments, and section 1110, which prohibited a local government from “expropriating investments without due compensation.” It argued that Guadalcazar had violated these chapters by denying the company the right to build the toxic waste site. The dispute went to nafta’s three-person dispute arbitration panel, and the panel found in favor of Metalclad. The panel said that the democratically elected municipality of Guadalcazar (and by extension the government of Mexico) did not have the authority to ban construction of the waste dump that could have made a profit for the Delaware company, and that the government was required to pay Metalclad $15.6 million in future damages.
The Case for Changing Nafta
During the presidential primaries, candidates Barack Obama and Hilary Clinton both campaigned against nafta, as it now stands, pledging to make significant changes to it if elected. During the February 26, 2008, debate Obama told Tim Russert, “I think we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced.” This resonated strongly in the old industrial states like
Nevertheless, a case can be made for people of faith and conscience being concerned about, and being involved in, the struggle to adapt the treaty even with these considerations. First, the argument that we should not be too concerned about it because it actually affects our jobs and wages very little is probably accurate but essentially irrelevant. It is true, because in the US and Canada over all job loss and wage suppression (where workers take pay cuts out of fear of job loss) has affected us not nearly as much as in Mexico—one to two percent for the US and ten to fifteen percent for Mexico. And the jobs we have lost to
However, it is irrelevant if we are truly people of a global God. If we see ourselves as brothers and sisters in a global family of spirit and holiness, then the difference between the suffering of Mexican families in
Second, even if it is true, as many economists now assert, that the basic structure of free trade is so embedded in the trade and life of our three countries that we can never go back—the toothpaste can never be put back into the tube—nevertheless, re-envisioning the basic principles and practices of nafta could set an important precedent for future treaties. Even without re-writing its core chapters, a new administration could put teeth into its two side agreements on labor and the environment, it could establish a continental development fund to help build the economic infrastructure of Mexico (much like Europe did with the EU), it could correct the secretive tribunal system that presently has the authority to override laws passed by democratically elected representatives. All of these would not radically alter the integrated economies that we have created since the advent of nafta, but they could create an important and positive model for future agreements negotiated under a new progressive
There are so many ways that so many people can see the campaign to re-envision nafta as an expression of their faith, that even if the campaign fails it could potentially raise our consciousness and be a model for the next generation(s) to follow through on.
But none of this can happen unless our faith and trust in the global spirit of God brings us to a sense of unity and oneness with other fellow strugglers in all three countries. Too often the struggle in
A few years ago Mexican farmers held a nation-wide protest against nafta, even storming the doors of the Mexican Congress. However, dedicated opponents of nafta in the
[i] Cited in Carlos Salas, “
[ii] For more on the problems in international coffee production, see, “Victor and Hugo: Life and Faith and the Price of Coffee.”
[iii] Interestingly, little of this was covered in the
[iv] Carlos Marichal, “The Vicious Cycles of Mexican Debt,” NACLA Report on the
[v] Walden Bello, “Manufacturing a Food Crisis,” The Nation Magazine (Vol. 286, No. 21, June 2, 2008), p. 16.
[vi] In addition to these loans, US Treasury Secretary Nicholas Brady was wiring together a scheme by which some of the larger Mexican loans would be repackaged as discounted U.S.-backed bonds, guaranteeing income for buyers and lower interest payments for
[vii] “How the International Monetary Fund and the World Bank Undermine Democracy and Erode Human Rights: Five Case Studies” (
[viii] Noreena Hertz, The Debt Threat: How Debt is Destroying the Developing World (
[ix] See examples in Lee Hudson Teslik, “NAFTA’s Economic Impact,” Council on Foreign Relations Backgrounder, March 21, 2008 www.cfr.org/publication/15790/naftas_economic_impact.html?breadcrumb=%2Fregion%2F262%2Fnafta.
[x] NAFTA Ten Years After: The Legacy of the North American Commission for Environmental Cooperation, Roberto Sanchez- Rodriguez (Dept. of Environmental Sciences,
[xi] The Wall Street Journal 10/15/1997, cited in Kevin P. Gallagher, “Tracking the Economy: Paying for nafta,” Nacla: Report on the Americas (July/August, 2004), p. 47.
[xii] nafta Part Two: “Trade In Goods,” Ch. 3: “National Treatment and Market Access for Goods,” Annex 302.2 , www.nafta-sec-alena.org/DefaultSite/index_e.aspx?DetailID=103#An302.2
[xiii] David Bacon, “Displaced People: NAFTA’s Most Important Product,” NACLA: Report of the Americas, Sep 3 2008. Also see Bacon, Illegal People: How Globalization creates migration and criminalizes immigrants (
[xiv] Anne Vigna, “NAFTA hurts
[xv] Julie Jette, “NAFTA at Ten: Did it Work?” (
[xvi] William Grieder, “A New Giant Sucking Sound,” The Nation (December 31, 2001)
[xvii] Noreena Hertz, in researching for her book, the Debt Threat, interviewed day traders in the midst of their work. She asked one of them if he was concerned that their cumulative decisions affect the well being of countries and people all over the world. He said no. “The thing is,” he told her, “capital has no soul.” Op. Cit., p. 77.
[xviii] “The Broken Promise of NAFTA,” New York Times, January 6, 2004.
[xix] Adam Liptak, “Review of U.S. Rulings by Nafta Tribunals Stirs Worries” The New York Times, April 18, 2004.
[xxi] “Review of