Clinton, NAFTA and the Politics of U.S. Trade
Hansen-Kuhn, Karen
Clinton has taken some small steps to mollify trade unionists and environmentalists, but the primary focus of his trade policy has been to facilitate investment by U.S. corporations...
...As of May 1997, 127,000 workers had been certified under the NAFTA Trade Adjustment Assistance Program as having lost their jobs because of the agreement...
...House Minority Leader Richard Gephardt, for example, reporting on a trip that he and House Minority Whip David Bonior recently took to the U.S.Mexico border, wrote: "Rather than improving conditions, the NAFTA has validated Mexico's system of 25REPORT ON U.S...
...Many of the men he later appointed to key positions, such as Treasury Secretary Robert Rubin, Commerce Secretary Ron Brown and Deputy National Security Advisor Sandy Berger, came from Wall Street finance houses or corporate law firms whose clients stood to gain enormously from new protections for foreign investment and from a liberalization of the Mexican financial sector...
...This surprise announcement sparked panic among investors, leading to a further drop in foreign reserves...
...trade and international economic policy, a first step would be to open the process up to participation by labor unions, environmental, family-farm and other groups directly affected by economic integration...
...investors that the agreement had ushered in a period of high financial returns from Mexico was quickly shaken...
...On the environmental side, the situation is even worse...
...On the other hand, his campaign was heavily financed by large corporations and Wall Street firms...
...Between January 1990 and June 1994, $91.7 billion flowed into the country, 77% of which was portfolio investment, much of which can be shifted out of the country with the touch of a keyboard...
...The article deems it "inappropriate" for countries to lower those standards in order to attract investment-even though no penalties other than "consultations" would result from such VOL XXXI, No 2 SEPT/OCT 1997 transgressions...
...Beginning with the 1989 Extended Facility Agreement with the IMF, the Mexican government agreed to a thorough reform of its financial system...
...At the ITT Automotive plant in Michigan, for example, the company parked 13 tractor-tailors loaded with plastic shrink-wrapped production equipment in front of the plant during a union organizing drive...
...Barchefsky Seeks Flexible Treatment of Labor, Green Issues vs...
...This report generated considerable controversy within the Administration, which delayed its publication of the full report until June 1997...
...If countries cannot regulate foreign investment, they will be unable to implement a coordinated industrial or development strategy...
...On the contrary, he lauded the neoliberal economic reforms of the Salinas Administration and urged the establishment of a closer relationship with a Mexico, "now under better leadership than ever in my lifetime...
...jobs and wages, but some indicators do exist...
...This number probably understates the true number of job losses, as many workers do not know about the program or choose not to apply for its benefits...
...None of the environmental groups that had previously opposed NAFTA, however, changed their positions as a result of these environmental concessions...
...corporations overseas...
...Approval by the Senate, and by the Canadian Parliament and Mexican Congress, followed shortly afterwards, and the treaty was implemented as scheduled on January 1, 1994...
...foreign policy toward Latin America and the Caribbean was reori- ented toward the consolidation of neoliberal economic policies...
...It specifically forbids performance standards that would require a transnational corporation (even one not based in a NAFTA country) to give preference to domestic suppliers or to transfer technology to the host country...
...Americas will depend on it...
...Meanwhile, the North American Agreement on Labor Cooperation, the labor side agreement, divided laborrights violations into two categories...
...Treasury disclosed that the U.S...
...The depressed labor conditions and wages in Mexico, coupled with NAFTA's new protections for foreign investors, have made these threats all the more credible...
...23REPORT ON U.S...
...As the wars in Central America drew to a close at the end of the 1980s, U.S...
...Clinton, NAFTA and the Politics of U.S...
...Congress to authorize new funds for this purpose...
...VOL XXXI, No 2 SEPT/OCT 1997 t is difficult to know the full impact of NAFTA on U.S...
...Cases brought before the U.S...
...A Rebuttal to the Clinton Administration's Claims, (Chicago: Institute for Policy Studies and the Great Cities Institute, University of Illinois at Chicago, January 1997), p. 1. 10...
...Mexican government from regulating foreign investment in any effective way...
...environmental organizations that had been active in the debate over NAFTA, and cautious optimism among U.S...
...Gingrich agreeing to consider the inclusion of labor and environmental issues "directly related to trade...
...3.Alejandro Nadal, "The Micro-Economic Impact of IMF Structural Adjustment Policies in Mexico," unpublished paper, Mexico City, February 1997, p. 8. 4. Alberto Arroyo, "Hacia un diagn6stico de la crisis y propuestas de condiciones minimas para enfrentarla," unpublished paper, Mexico City, 1995, cited in Sarah Anderson, John Cavanagh and Dave Ranney, eds., NAFTA's First Two Years-The Myths and the Realities (Washington: Institute for Policy Studies, March 1996), p. 2. 5. Nora Lustig, "Mexico in Crisis, the U.S...
...The conditions for the $52 billion multilateral loan package were set out in an "Economic Policy Memorandum" that committed the Mexican government to carry out a new stand-by arrangement with the IME In addition to the austerity conditions contained in that package, U.S...
...No union withdrew its opposition to NAFTA as a result of the NAALC...
...Clinton's efforts have included a num- ber of far-reaching initiatives that have opened economies to foreign investment and trade, and locked in the structural adjustment programs first implemented in the 1980s...
...workers...
...There were rumors of a heated debate within the campaign team on the issue and, in fact, it was not until October that candidate Clinton announced his support for NAFTA...
...Environmentalists had fought for and won a side agreement to NAFTA called the North American Agreement on Environmental Cooperation (NAAEC), which established a mechanism for the settlement of environmental disputes and set up the North American Development Bank (NADBank) to provide loans for border cleanup projects...
...Their only option, given the current structure of most Latin American economies, will be to continue to depress wages, working conditions and environmental regulations in increasingly desperate moves to attract mobile international capital...
...In Mexico, January 1 marked not only the implementation of NAFTA, but the armed uprising of indigenous Zapatista rebels in the southeastern state of Chiapas, who blamed NAFFA for the deepening of the region's poverty...
...The year also saw two high-profile political assassinations, and ended with the collapse of the peso and the flight of billions of dollars of portfolio capital out of the country...
...Of all these initiatives, the North American Free Trade Agreement (NAFTA) and the plans for its expansion provide the most vivid illustra- tion of his trade policy in Latin America...
...Kate Bronfenbrenner, "The Effect of Plant Closing or Threat of Plant Closing on the Right of Workers to Organize," report submitted to the Labor Secretariat of the North American Commission for Labor Cooperation, September 30, 1996, p. 11...
...firms both increased exports to Mexico and cut jobs at their U.S...
...Fearing further economic collapse and a possible default on its debt and bond obligations, the Clinton Administration put together a "bailout" package...
...The President has taken some small steps toward the inclusion of labor and environmental issues in trade and economic policy in order to satisfy these two key Democratic Party constituencies, but his primary focus has been on facilitating investment by U.S...
...Toward this end, his administration has worked to create optimal conditions for low-cost, globKaren Hansen-Kuhn works on trade and structural adjustment issues as Latin American Program Coordinator for the Development GAP in Washington, D.C...
...At the same time, however, the Administration appears to be backing away from its previous insistence on the inclusion of those issues in "fast-track" authority (where they would not be subject to amendment or a separate vote), offering to include negotiating objectives instead, in an accompanying non-binding presidential statement that would not be subject to Congressional approval.12 The Administration has indicated that it will formally request fast-track authority in September...
...The goods from chapter in the agreement on investment, for abroad...
...In 1994, Clinton told Latin Cases brought under NAFTA's labor side agreement have served to highlight laborrights abuses, but they have not resulted in direct remedies for any of the workers involved...
...Provisions ;n thnoP a rrPPmPntc inrhlrlPA rAuntlnno in public expenditures, tax reform, restriction of credit, wage "restraint," privatization of stateowned enterprises, and trade liberalization...
...POLICY Treasury through the World Bank and International Monetary Fund (IMF) since the early 1980s...
...3 Mexico's trade deficit skyrocketed in the 1990s as cheap imports flooded the country, undermining local producers...
...A series of agreements with the IMF and the World Bank followed over the next decade...
...If President Clinton were to chart a new course for U.S...
...These provisions have serious implications for Mexico and any other country that joins NAFTA under these terms...
...ptimism among U.S...
...Trade," AmericasTrade, June 12, 1997, p. 1...
...A study conducted by economist Dave Ranney found that many U.S...
...6 The impact of these policies on small and mediumscale producers and workers in Mexico has been devastating...
...In fully half of all unionizing drives since NAFTA, employers have threatened to close the plant if a union were organized...
...Because Mexico lacked a long-term strategy to develop its competitiveness, this simply opened the door to increased financial vulnerability...
...This, in turn, will continue to contribute to job and wage losses and to economic insecurity in the United States...
...corpora- tions overseas...
...4 As investors began to get nervous during 1994 about the apparent political instability and the overvalued exchange rate-maintained in large part to hold down inflation and I bolster me RIK s electoral cnances as well as Carlos Salinas' candidacy to head the World Trade Organization-the Mexican government raised interest rates and issued "Tesobonos," short-term, dollardenominated bonds, in a futile attempt to forestall a devaluation and the capital flight that would ensue...
...22 alized production, and to remove all barriers to the movement of goods and capital across national borders...
...In a speech delivered at North Carolina State University, he insisted that problems in the agreement could be addressed without renegotiating the text, by expanding trade adjustment-assistance programs for displaced workers, implementing a more aggressive NACILA REPORT ON THE AMERICASREPORT ON U.S...
...to the Rescue...
...government was lent at market interest rates and was guaranteed by Mexican oil-export receipts which flowed into a special account at the U.S...
...unions and labor activists...
...8. Anderson, Cavanagh and Ranney, NAFTA's First Two Years, p. 7. 9. David C. Ranney and Robert R. Naiman, Does "Free Trade" Create Good Jobs...
...Nearly two million Mexican jobs have disappeared, even counting the hundreds of thousands of new jobs created in the foreignowned maquiladora sector...
...On the one hand, the Clinton team was strongly influenced by both the populist appeal of Ross Perot's opposition to NAFTA and the broad-based labor and environmentalist campaign against the accord...
...This deficit was financed by a deluge of foreign investment...
...Noncompliance with child-labor, minimum wage, and health and safety standards could be subjected to a slow process that could eventually result in sanctions...
...Letter from Richard Gephardt to Democratic Colleagues, February 26, 1997...
...ll Republican leaders, on the other had, have flatly rejected the inclusion of labor and environmental issues in any negotiating authority granted to the President, causing the stalemate that has existed on the issue since 1995...
...While candidate Clinton may have been tentative and qualified in his support of NAFTA, President Clinton waged an all-out battle for the agreement's passage in Congress...
...Treasury as long as the loans were outstanding...
...The final NAFTA text and the accompanying side agreements on labor and the environment were released in August 1993 to lukewarm public support...
...He concluded that he is, "unwilling to support new trade negotiations that do not address these fundamental flaws by including labor rights and the environment as chapters in the core of the agreement equal in stature and force and linked to provisions on investment and trade...
...By December 22, the Mexican government felt it had no choice but to allow the peso to float (or sink) to less than half of its pre-crisis value...
...Over 28,000 Mexican businesses have gone 24 NACIA REPORT ON THE AMERICAS CREPORT ON U.S...
...There appears to have been some softening of this position recently, with Rep...
...Nearly two instance, ensures that foreign investors are million Mexican treated no differently jobs have than national investors, thereby prohibiting the disappeared...
...In the wake of the 1982 debt crisis, the Mexican government signed an agreement with the IMF that provided access to foreign currency in exchange for the implementation of a strict stabilization and adjustment program...
...Ranney notes that, "[i]n the new global economy, mobile multinational corporations have no incentive or requirement to use the benefits from exports to create jobs or raise wages of U.S...
...Violations of such rights as freedom of association and collective bargaining, on the other hand, were termed "industrial relations" issues and could only result in consultations among the member governments...
...Rather, it comdrop in domestic pounded the profound problems created by demand, and the these structural adjustment policies...
...2. For more information on the origins of the economic crisis in Mexico, see Carlos A. Heredia and Mary E. Purcell, The Polarization of Mexican Society: A Grassroots View of World Bank Economic Adjustment Policies, (Washington: The Development GAP, 1994...
...Trade 1. "Expanding Trade and Creating American Jobs," remarks by Governor Bill Clinton, North Carolina State University, Raleigh, NC, October 4, 1992...
...Even if it does address the labor and environmental standards in its request, it is likely that they would be negotiated once again as side agreements...
...5 The $13.5 billion from the U.S...
...This was one of the most momentous policy decisions in Mexico's recent economic history," says Mexican economist Alejandro Nadal...
...The Bush Administration had refused to even consider negotiating environmental or labor issues within the context of NAFTA, so Clinton's proposals seemed to be a step forward...
...7 of the high cost of It is true that NAFTA itself did not cause the their loans, the crisis...
...8 There is also no proof that increased exports automatically lead to employment creation...
...9 Perhaps even more significant than the precise figures on employment is the "blackmail" effect on American workers, as companies use the threat of moving production to Mexico to undermine union organizing or bargaining efforts in the United States...
...trade policy and treaties like NAFTA must be fundamentally reoriented to serve as tools The future stability of the Americas will depend on it...
...6. Monthly Report of the Secretary of the Treasury Pursuant to the Mexican Debt Disclosure Act of 1995, October 1996, p. 3. 7. "Evaluaci6n macroecon6mica del TLCAN," in Espejismo y realidad: el TLCAN tres ahros despues (Mexico City: RMALC, 1997), p.51...
...During much of the 1992 presidential campaign, Clinton appeared undecided as to whether or not to actively support the NAFTA negotiated by the Bush Administration...
...Little of the promised border clean-up has materialized, and by May, 1997, the NADBank, established for precisely that purpose, had approved only four loans...
...National Administrative Office under NAFTA's labor side agreement have resulted in public consultations and have thus served to highlight labor-rights abuses, but they have not resulted in direct remedies for any of the workers involved...
...Some mainstream environmental organizations lauded the inclusion of an environmental standards article in the Agreement's Chapter on Investment...
...investors...
...This effort was led by Clinton's then-Under Secretary for International Affairs at the U.S...
...POLICY labor relations, wage-setting mechanisms and environmental enforcement that has damaged the standard of living, health and safety of the Mexican people...
...I American and Caribbean political leaders that through a hemisphere-wide free-trade area, "we can create a partnership for prosperity where freedom and trade and economic opportunity become the common property of the people of the Americas...
...facilities...
...These documented job losses have occurred disproportionately in rural areas and in such sectors as textiles and electronics that tend to employ women and minorities...
...In its desperaOver 28,000 tion to attract foreign investment, the MexMexican businesses ican government has also passed legal have gone reforms to relax already poorly enforced bankrupt because environmental regulations...
...In reality, the evolution of the Mexican economic crisis illustrates the connection between NAFTA and the neoliberal economic policies promoted by the U.S...
...POLICY interpretation of existing trade remedies and establishing parallel agreements to resolve environmental and labor disputes.' The commitments made in this speech sparked considerable enthusiasm among many of the large U.S...
...In 1990 George Bush proposed and launched the Enterprise for the Americas initiative, with its vision of a free trade zone stretching from Anchorage to Tierra del Fuego, and in 1993, Bill Clinton began an all- out effort to liberalize national economies throughout the hemisphere...
...In its 1996 Country Assistance Strategy for Mexico, the World Bank mentioned that several large World Bank loans designated for environmental cleanup along the border-loans promised with much fanfare just weeks before the NAFTA vote-had been canceled and the funding reassigned to "higher priority" areas, including financial-sector reform...
...A study conducted by Kate Bronfenbrenner for the Labor Secretariat of the North American Commission for Labor Cooperation found that complaints made before the National Labor Relations Board about plants shutting down just after a successful unionizing drive had tripled since NAFTA's implementation...
...But while Clinton did propose a new approach to labor and environmental matters, he did not question the basic doctrine of free trade...
...for democratic development...
...It also brought employees from its plant in Mexico to videotape workers at the Michigan plant on a production line the company claimed it was considering moving to Mexico.10 The fact that the promises made during the NAFTA debate have not materialized has not been lost on Congress...
...funds lent to the Mexican government had been used to redeem the Tesobonos, a large portion of which were held by U.S...
...On December 20, 1994, facing a situation of declining reserves and payments owed on the Tesobonos and the rest of the dollar-denominated debt, the administration of Mexico's new president, Ernesto Zedillo, ordered a 15% devaluation of the peso...
...By the summer of 1993, a full-scale publicrelations campaign was well underway, and on November 17, 1993, after a good deal of wheeling, dealing and arm twisting by the Administration, NAFTA was approved in the House by a vote of 234200...
...But influx of cheap NAFTA seriously limits Mexico's options...
...More than 10% of the union organizers interviewed for the study reported that employers had made direct threats to relocate production to Mexico if the union campaign was successful...
...The Financial Assistance Packages of 1982 and 1995," Brookings Discussion Papers (Washington: Brookings institution, June 1996), p. 36...
...authorities insisted that the Mexican government raise domestic interest rates in order to shore up the peso...
...POLICY bankrupt because of the high cost of their loans (most of which carry variable interest rates), the drop in domestic demand (caused by the austerity measures and a 27% decline in real wages), and the influx of cheap goods from abroad...
...While the NAFTA side agreements represented an important first step in the establishment of a formal link between trade and the observance of labor and environmental rights, they have proven to be inadequate...
...In its October 1996 report to Congress on the results of the bailout package, the U.S...
...This included a reduction of restrictions on foreign investment, as well as further trade liberalization...
...If that partnership is ever to address the concerns of all of the hemisphere's peoples, and not just a small, well-connected group of investors, then U.S...
...Treasury, former World Bank Chief Economist Lawrence Summers, following the refusal by the U.S...
...Like the environmental side agreements, the labor agreements require compliance with national laws in each country, not international standards...
...2 The Clinton Administration has asserted that the Mexican peso crisis had nothing to do with NAFTA and that the agreement and the subsequent bailout package saved Mexico from a deeper crisis...
Vol. 31 • September 1997 • No. 2
