‘New NAFTA’ is an old story, a lousy one

Bill Knight column for 9-26, 27 or 28, 2019

Another fight about another trade deal can seem hopeless – at least until you realize that lousy pacts such as the North American Free Trade Agreement (NAFTA, in effect since 1994) resulted in more than 950,000 U.S. jobs lost, according to the U.S. Labor Department, and for those still employed, it held down pay.

The Economic Policy Institute reports that “trade flows with low-wage nations were reducing wages for workers without a four-year college degree by roughly 5.6 percent. For a non-college-degreed worker making the median hourly wage and working full time, for a full year, this translates into just under $2,000 annually.”

Labor opposes such deals, like the proposed “NAFTA 2.0” (USMCA, negotiated in 2017-18).

Signed by President Trump and leaders of Mexico and Canada last November, the 1,809-page draft document still must be ratified by each nation’s legislature, and though Mexico ratified it in June, neither Canada nor the United States has.

The administration wants to submit USMCA to the House of Representatives this month, according to White House National Economic Council Director Larry Kudlow, who said they’re waiting for House Speaker Nancy Pelosi to schedule a vote.

“Our hope is in September she will give us a green light,” Kudlow told Bloomberg News.

USMCA arguably has some improvements over NAFTA, which it could replace: Country of Origin rules require autos to have 75 percent of their parts made in the U.S., Canada or Mexico (up from NAFTA’s 62.5 percent); Canada will open up its Dairy market to U.S. producers; a Sunset Clause sets expiration at 16 years, and Labor language provides that 40 percent of auto parts must be made by workers earning $16 an hour or more, and workers could unionize.

However, unions and Democratic allies want tougher enforcement of labor and environmental standards.

“Wages in Mexico have been virtually flat since NAFTA took effect in 1994,” said recently retired Steelworkers President Leo Gerard. “American manufacturing workers should not be put in the position of competing for jobs with Mexican manufacturing workers laboring for $2.30 an hour. [The USMCA] is better than NAFTA, but not good enough.”

AFL-CIO President Richard Trumka this month met with Mexico President Andres Manuel Lopez Obrador to clarify Mexico’s leader’s commitment to workers.

“The proposed new NAFTA is simply not enforceable,” Trumka said. “Mexico has yet to demonstrate that it has the resources and infrastructure to follow through on its promised reforms. Trade without enforcement is a windfall for corporations and a disaster for workers. If Mexico can’t ensure workers’ ability to bargain for higher wages through real unions, the entire deal is a non-starter.

“We need Obrador to show us how Mexico will guarantee the right to raise wages through free and democratic unions,” he continued. “If that doesn’t happen, working people across North America will suffer. It’s clear that without the support of the labor movement – in the United States, Mexico and Canada – the new NAFTA will meet the same fate as the Trans-Pacific Partnership” (which wasn’t ratified in the United States).

Besides having no mechanism to enforce labor rights, the USMCA has other problems. Food that doesn’t meet U.S. standards can still be imported; the pharmaceutical industry gained 10 years of monopoly protections from generic competition beyond U.S. patent laws’ 20-year price-setting exclusivity, and Big Oil retains the controversial “Investor-State Dispute Settlement” boards that can circumvent local, state and federal governments. These tribunals could override health and environmental regulations, for example.

Opposition may be weakening.

U.S. Rep. Cheri Bustos (D-East Moline) told the Associated Press that Pelosi “understands the sense of urgency. The hope is that we can get to yes.”

That may indicate a willingness to compromise, but Trumka argues that there’s no reason to surrender to a stampede mentality.

“The U.S. Trade Representative’s emphasis should be on making the new NAFTA enforceable rather than creating a rush to a finish line that is little more than an illusion.”

The USMCA is just one economic obstacle out of many, Trumka said in August.

“While we can’t fix the economic rules if we don’t fix NAFTA, we also can’t fix the rules if we only fix NAFTA,” he said. “America’s workers aren’t interested in slivers of change. We’re not interested in gestures.  Working people are rising to meet this moment in history because we know something is deeply wrong.”