NAFTA Unveiled

By: Leroy A. Binns Ph.D.

The North American Free Trade Agreement (NAFTA) proposed by President Ronald Reagan during his 1980 presidential campaign and executed by President William Clinton in January 1994 following the US-Canadian Agreement is intended to eliminate trading barriers, promote conditions for fair competition and increase investment opportunities among participating states.

In response to the European Economic Area the largest trade zone which includes the members of the European Union and European Free Trade Association and a growing Asia-Pacific Economic Corporation comprised of China the worlds most populated state and Japan the world’s second largest economy NAFTA is a similar three state economic pact (an alliance of Canada, Mexico and the United States of America) with 365 million consumers and a monetary value estimated at $6 trillion a year. In the years ahead the NAFTA is expected to produce 25% more commodities and services in comparison to its European counterpart, offer Americans concessions on goods and increase US exports on grounds of affordability. When fully operative the agreement is also expected to produce an additional 200, 000 new American jobs, reduce illegal immigration and drug trafficking and strengthen democracies and the economies of all parties involved.

With signs of hope and prosperity President Clinton has received endorsements from the US Congress and Latin American leaders from Chile, Argentina and Venezuela who have desperately sought solutions to reverse economic instability in their respective states. In fact in less than a year of its approval the president announced plans to expand the program to incorporate Chile while hinting at the admission of other nations of the Western Hemisphere. Nonetheless opponents of the trade measure provide a litany of improprieties that spell disaster.

Despite noble designs, labor, human rights, consumer and environmental advocates are convinced NAFTA is a partnership that is destined to yield checkered results. Unlike the business community of Fortune 500 companies, many Latino organizations and to some extent academe the opposition is most vocal on issues pertinent to basic workers’ rights and is therefore in disagreement with job loss, wage inequality and undesirable working circumstances. Many share the opinion that without rules and regulations protecting Mexican employees US establishments will opt for relocating to the South in attempt to maximize profits creating unemployment at home and the manufacturing of inferior products abroad.

In addition in light of the fact that the gap between average US and Mexican earnings is about 8 to 1 which is twice as large as the wage gap between the European Union’s richest and poorest nations there is unwavering concern regarding appropriate pay for services rendered. A safe and secure work environment and health insurance commonly unknown to many businesses in Mexico coupled with the possibility of an immense flight of capital from the impoverished state in the absence of investment control mechanisms are likewise equally matters of contention.

In response to legitimate concerns aired prior to implementation of the treaty amendments in favor minimum wage, working conditions and environmental protection were tabled and later signed into agreement in 1993 but detractors have sustained vigilance.

An amicable liberalized market may only materialize with a realistic debt reduction plan to offset the Mexican economic crisis enabling the circulation of additional capital to augment salaries and enhance a working atmosphere subject to scrutiny and penalties whenever necessary and to attract foreign currency and encourage the utilization of a significant portion of its return locally. NAFTA’s North American Development Bank which is entrusted with the responsibility of arranging low interest loans to finance environmental projects along the US/Mexican frontier must also play a role by honoring its obligations within specified time periods to ensure progress while other US financial institutions must be committed to long term productive monetary infusions south of our territorial demarcation in order to achieve favorable objective.

This experiment with all its possibilities could fall prey to misconceptions that have weakened or destroyed comparable federations throughout Latin America such as the Latin American Free Trade Agreement, the Andean Pact and the Central American Common Market unless the equation is inclusive of all affected sectors of society – the corporate elites, labor unions, farm groups, consumer activists and others. The four year review of NAFTA’s addendum if methodically assessed and appropriately introduced could facilitate a new dawn to an intrinsic metamorphosis.