Renegotiating NAFTA: Trump could make bad deal worse

Now that President Trump has ordered that the North American Trade Agreement (NAFTA) be renegotiated it is important to note that labor and many others are deeply concerned that he could actually end up making a bad deal worse.

When NAFTA was first negotiated, the Left in all three countries was strongly against it. So was organized labor in the U.S. and Canada. In Mexico, the strongest opposition came from independent unions and small farmers.

NAFTA called for Mexico to gradually eliminate its import tariffs on U.S. and Canadian grain and other agricultural products. The promoters of NAFTA stated that the goal was to push millions of Mexican farmers off the land by lowering the price of food imports. They said that it was more efficient to import grain from the U.S. and Canada than for Mexican small farmers to grow it for domestic use.

The grain industry in the U.S. is subsidized by American taxpayers.

Meanwhile, it was hoped that under NAFTA the U.S. and other foreign businesses would be attracted to move their industrial production to Mexico.

The displaced Mexican grain farmers would get jobs in the new factories and be paid a fraction of the wages U.S. workers earn.

U.S. workers losing their jobs because of U.S. corporations switching them to Mexico would be “re-trained” for new employment.

Furthermore, the United States and Canada would lower their tariffs on “specialty foods and vegetables” coming from Mexico, which would make it easier for some Mexican farmers to export their goods. The Mexican constitution was modified to permit the privatization of community owned land.

This scheme created indignation and anger among workers in all three countries, but especially among indigenous small farmers in Southern Mexico, who staged the Zapatista rebellion in the state of Chiapas beginning the day NAFTA took effect, January 1, 1994. The Mexican government was only deterred from using terror to put down the rebellion by a great outpouring of public sympathy for the farmers.

NAFTA went ahead on schedule.

Mexico’s tariffs on imported foodstuffs were phased out. Up to five million Mexicans were driven off their farms because they could not compete with the imported products of giant transnational agribusiness monopolies.

Moreover, the Mexican government eliminated price supports and the CONASUPO system of price subsidized food depots that used to be helpful both to the farmers and low income consumers.

Failed promises

However, the promise that NAFTA would create new prosperity was never fulfilled.

NAFTA was supposed to lower food prices in Mexico, but they have risen. And Mexico continues to become less and less food self-sufficient. Forty-five percent of basic foodstuffs are now imported.

U.S., Canadian and other foreign manufacturers indeed set up shop in Mexico, where they could take advantage of low wage labor and then export their industrial products back to the United States and other countries under the liberal tariff regime of NAFTA.

As feared, jobs were lost in the U.S. including high paying jobs in the auto industry. But the jobs that replaced them tended to be lower paid.

NAFTA is not the cause of all Mexico’s woes, but it certainly has not made Mexico into a “first world country” as then-president Carlos Salinas promised during the negotiations. In fact, Mexico has lagged in development behind most of the larger Latin American countries that have avoided being sucked into deals such as NAFTA.

Furthermore, the jobs created by the movement of production from the industrial countries to Mexico have not been sufficient to absorb the millions of Mexicans who have been driven out of farming. Also, Mexican workers have learned that if they demand better wages and working conditions, corporations will simply move their operations out of Mexico and into countries where wages are even lower.

What’s more, the idea that Mexican farmers displaced by NAFTA could prosper through the production of “specialty fruits and vegetables” for export has turned out to be a cruel joke.

Major corporations are reaping huge profits from growing and exporting certain agricultural products, but agricultural workers suffer under conditions that in some cases approach slavery.

Immediately after NAFTA came into force, there was a jump in Mexican undocumented immigration to the United States; undocumented because the United States does not give visas to Mexican grain farmers displaced by NAFTA. There was also the beginning of a massive crime wave involving drug cartels, which continues unabated and has cost tens of thousands of lives.

Not everybody in Mexico has been a loser under NAFTA. For example, Jaime Serra Puche, who negotiated the NAFTA deal on behalf of Mexico and shortly thereafter left government service, set up a high priced consultancy firm that guides foreign corporations that wish to invest in Mexico. Other politically connected Mexican businessmen who have been able to take advantage of the privatizations that NAFTA and related measures promoted have also made out like bandits.

From bad to worse?

Yet, as bad as NAFTA has been for Mexican workers and small farmers, what Trump is threatening to do could be even worse. In the 23 years that NAFTA has been in force, the U.S. and Mexican economies have become intricately entwined, with Mexico in much the weaker position in the relationship. Currently, 81 percent of Mexico’s exports go to the United States, but only 15 percent of U.S. exports go to Mexico. Exports to the United States constitute more than 25 percent of Mexico’s Gross Domestic Product.

Action to block Mexican imports to the United States would lead to an economic disaster, yet President-elect Trump has threatened to do just that if Mexico refuses to pay for his “beautiful wall.”

Trump has also threatened to make Mexico pay for the border wall by seizing or taxing the remittances that Mexican workers in the United States send back to their families. Interfering with those remittances, which total nearly $25 billion annually, could do serious damage to the Mexican economy.

Moreover, if Trump carries out his threat to deport millions of immigrant workers back to Mexico the negative impact would be dire.

The Mexican government is now moving to negotiate with Trump, who has been cozying up to Mexico’s one percenters.

For example, after his election, Trump had dinner at his Mar-a-Lago estate with Carlos Slim Helu, the richest man in Mexico.

And in August, Trump was invited to speak in Mexico, appearing on a podium together with President Peña Nieto. Now Peña Nieto has appointed Luis Videgaray, the man who was excoriated for setting up the invitation to Trump, to be his new foreign minister.

The U.S. Left and labor have criticized NAFTA from the start, and many progressives and Leftists in Mexico agree that it should be renegotiated. But what Trump is proposing would force on Mexico concessions that will increase the burden on workers and farmers.

Furthermore, by making Mexican workers poorer, it will force them to go north of the border to find better lives. No wall, no matter how “beautiful,” is going to stop such labor migration.

The impoverishment of workers in Mexico is not in the interests of the working class in the United States; it will only intensify a dynamic of playing off workers against each other that is already harmful on both sides of the border.

Any renegotiation of NAFTA must have workers and small farmers from all three countries at the table and must not be cooked up by the likes of Carlos Slim, Donald Trump and their ilk. Only that way can we be sure that the “renegotiation” does not make the situation even worse.