As NAFTA Nears 20 and the TPP Nears Birth, the Middle Class Nears Death

As the Obama administration continues to press for the ill-advised Trans-Pacific Partnership, it is worth taking a look at the repercussions of the North American Free Trade Agreement, nearing its 20th birthday on Jan. 1. The New York Times’ “Room for Debate” weekly battle of op-eds on Sunday trotted out the usual arguments from the free traders, who ignore the sufferings of American workers under NAFTA and focus instead on the amount of business that’s being done.

So yes, one could argue that NAFTA has been a success — for corporations. But not for workers and the communities in which they live — in the U.S. and Mexico. Laura Carlsen, Americas program director for the Center for International Policy, argued:

Nafta has cut a path of destruction through Mexico. Since the agreement went into force in 1994, the country’s annual per capita growth flat-lined to an average of just 1.2 percent — one of the lowest in the hemisphere. Its real wage has declined and unemployment is up.

As heavily subsidized U.S. corn and other staples poured into Mexico, producer prices dropped and small farmers found themselves unable to make a living. Some two million have been forced to leave their farms since Nafta. At the same time, consumer food prices rose, notably the cost of the omnipresent tortilla.

As a result, 20 million Mexicans live in “food poverty”. Twenty-five percent of the population does not have access to basic food and one-fifth of Mexican children suffer from malnutrition. Transnational industrial corridors in rural areas have contaminated rivers and sickened the population and typically, women bear the heaviest impact.

Against that backdrop, governments are trying to hammer out the details of the TPP, a massive gift to corporations at the expense of workers ringing the Pacific. Corporations are at the table during the secret negotiations, but workers’ representatives are not. And as we’ve been writing and posting, the secret discussions range far from basic trade to include erosions of basic democratic and civil liberties. Lori Wallach, director of Public Citizen’s Global Trade Watch, told “Democracy Now!” recently: “This is not mainly about trade. It is a corporate Trojan horse. The agreement has 29 chapters, and only five of them have to do with trade. The other 24 chapters either handcuff our domestic governments, limiting food safety, environmental standards, financial regulation, energy and climate policy, or establishing new powers for corporations.”

So what has the TPP’s ancestor, NAFTA, done for the U.S.? Increased trade, according to the experts, but led to massive cuts in manufacturing sector jobs, exacerbating the income gap and driving countless middle class families further down the economic ladder. The Economic Policy Institute’s Robert E. Scott wrote earlier this year, after Obama put his full weight behind TPP and other trade pacts during his State of the Union speech, that such agreements are “a fake solution” for fighting unemployment.

The issue is simple: it is trade balances — the net of exports and imports — that can affect jobs. Unless trade agreements promise to reduce our too-high trade deficit, they will have no positive effect on jobs. Even worse, past trade agreements have actually been associated with larger trade deficits in their aftermath. …

In the real world, FTAs [Free Trade Agreements] have hurt U.S. employment. The United States had a small trade surplus with Mexico in 1993, before the North American FTA took effect. In 2010, the U.S. trade deficit with Mexico totaled $97.2 billion, which displaced 682,900 jobs. The President claimed that the U.S. Korea FTA would “support 70,000 American jobs from increased exports alone.” That agreement took effect on March 15, 2012, and yet U.S. exports to Korea fell last year, and the trade deficit increased, meaning that Korea trade reduced demand for domestically produced goods in 2012 and cost the U.S. jobs.

And the permanent normalization of trading relations with China in 2001 led nearly instantly to a steep rise in the bilateral U.S./China trade deficit – interrupted only temporarily by the Great Recession. These deficits displaced 2.1 million jobs in U.S. manufacturing between 2001 and 2011, alone.

So why is the Obama administration — and the Bush administration before that, and the Clinton administration before that — so hot to trot for free trade agreements like the TPP?

Because Barack Obama, the former community organizer, is living in a new neighborhood now, and his new neighbors — corporate lobbyists — want them. Scott again:

U.S. and foreign MNCs carried out 68 percent of all U.S. goods trade in 2010 (the last year for which we have data), and globalization, the proliferation of FTAs, and the growth of outsourcing are three of the most important causes of the historically high share of corporate profits in U.S. GDP and flat U.S. wages over the past decade that the president bemoaned last night. MNCs and their allies, such as the Business Roundtable and the Chamber of Commerce, are big supporters of FTAs, and they have tremendous influence on the politics of trade.

It’s sad to see that President on the same side as the Republican Ignorance Caucus, which does its best to hide unpleasant truths from the public and to suppress research on issues ranging from global warming to the impacts of gun ownership to, yes, the economics of international trade.

More FTAs will only slow the already fragile recovery and further depress middle class wages.

That would be quite a legacy for a former community organizer.

—Posted by Scott Martelle.