NAFTA: A POLICY MISCONSTRUED AND MISINTERPRETED IN THE FREE WORLD
NAFTA: A POLICY MISCONSTRUED AND MISINTERPRETED IN THE FREE WORLD
In discerning when any decade truly “began,” some often try to pinpoint a watershed moment that typified the rest of the decade. Looking back on the 1990s, there seems to be a consensus among economists that the policy of NAFTA ushered in the trans-formative decade of unfettered commerce, prosperity and controversy. Officially effective on January 1, 1994, this policy came together under the guise of reciprocal job growth, curtailment of illegal immigration, and long-term economic opulence among the principal countries in the agreement, namely Mexico and the United States. However, opinions among the leaders of these countries have shifted parallel to the perceived effects this policy has had on their nations.
In the United States, President Bill Clinton, facing immense pressure from a Republican-dominated Congress and hostility towards the bill from Democrats, embraced NAFTA despite raising concerns over the environment and labor. Subsequently, President Bush fully adopted the doctrine with no preconditions, believing that it was a vehicle by which diplomatic relations between the three countries could be strengthened. Currently, however, President Obama’s political position on this has been the polar opposite of Bush’s warm embracement, specifically citing that it has not safeguarded jobs in the United States, resulting in a mass exodus of jobs out of the country. In general, despite internal political strife over the issue, NAFTA has been accepted by members of both parties as vital to the continued growth of the United States.
Indeed, even in Mexico, which has witnessed an impressive economic transformation under this policy, appreciation for the agreement has waxed and waned. Although President Salinas supported NAFTA, it was at the tail-end of his administration, as Ernesto Zedillo would assume the office of the presidency from 1994-2000. During his presidency, he worked with America to further expand and invite countries into similar trade agreements, touting this as a vehicle for economical as well as societal advancement. In 2000, with the advent of President Fox, the NAFTA agreement has been preserved, although Fox was vociferous in his criticism of the agreement, stemming from selective implementation of NAFTA tariffs by the United States. Until recently, the United States and Mexico have desired to leave NAFTA in its purest form. Now, with the global financial malaise seeping into all economic realms, there is noticeable discussion between both countries on its future and how to alter it so it can continue to evolve fruitfully.
The North American Free-Trade Agreement was the culmination of years of debate and discussion among Canada, the United States and Mexico. In late 1993, the provisions of the agreement were solidified through a flurry of international conferences. It provided that there would be a systematic decrease of tariffs on 99% of traded goods between America and Mexico within a decade. Mexico believed that this agreement could propel its economy to new heights and engender higher-paying jobs, which would in turn slow down illegal migration into the United States (The Showdown, 1). Perceptibly, this agreement has incited protests and clamors for reform by multiple trade unions and other entities in both countries who believe it has deflated the wages of workers as well as made border security more porous in the process.
1994: The Genesis of NAFTA
During NAFTA negotiations, President Bill Clinton advocated for the decrease of trade barriers between the United States and Mexico, but he also pushed for environmental and labor standards. He wanted to safeguard jobs as well as protect the environment against burgeoning, pollution-ridden industry. In fact, he leveraged the deal by requiring Mexico to adopt these standards, threatening to rescind post-NAFTA tax rates. Additionally, the environmental provision was instated in order to placate the fears of vacillating Democrats, who feared negative economic and environmental consequences from this bill.
On the other hand, the Republican-dominated Congress compelled Clinton to proceed with negotiations, believing it would strike a favorable balance of trade between Mexico and the United States. It was perceived by many Republican congressmen that it would stimulate the kind of job growth necessary to advance the competitive and innovative nature of the American economy. Lastly, Clinton contended that this agreement would reduce the amount of illegal immigration in the United States, since Mexico’s economy would eventually thrive to the capacity that Mexican citizens would no longer have any impetus to illegally cross over into the United States (Marketing NAFTA 1-2).
President Clinton was also forced to sell the benefits of free trade to Americans who were skeptical about the suggested amount of jobs and concerned about potential environmental maladies that could surface given the extent of the agreement to propel industry. In response to these charges, Clinton contended that America’s exports to Mexico would significantly outweigh Mexico’s exports to America, causing an upsurge in job growth in America. Contemporaneously, Mexican minimum wage would be raised to further rein in illegal defection to the United States. Improved wages would deter Mexicans from choosing to illegally enter into the United States and remain in the country (How to sell NAFTA, 1-2). In November 1993, however, Clinton would be short of the amount of house seats necessary to pass the agreement, despite insulating various fruit and vegetable producers from job loss and low environmental standards (The Showdown, 1).
Undeterred, Clinton added provisions that would placate the fears of Democrats in the House of Representatives. He protected American farmers by limiting the amount of imports, thereby diffusing an opportunity for fierce agricultural competition. Moreover, a North American Development Bank was formulated to help expansion in Mexico (American President, 1). One of the motivating factors in Clinton’s indefatigable campaign for NAFTA was to win congressional points and establish his administration as bold, innovative and thriving. He was engrossed in the idea that America could enjoy windfall profits and unprecedented job growth from this agreement.
Although Clinton faced fierce objections from anti-NAFTA Mexican leaders, internal conflicts also materialized, as Governor Ross Perot of Texas vehemently downplayed the positive impact of NAFTA. Rather, like other skeptical Americans, Perot believed that lifting trade barriers with a country that is steeped in poverty and deregulation, like Mexico, was detrimental to the health of the United States. He argued it would lead to depreciation in the standard of living for the United States, undoing much of the progress that has been made and sustained it as a preeminent nation. However, detractors of these theories disregarded them as hyperbole, as American industry was entirely too complex and intricate to be subverted by a third world economy. In addition, it was believed that the American work ethic would not be supplanted by Mexicans, since the productivity level of Americans easily eclipsed that of Mexicans. (Eat your NAFTA, 1). Moreover, the looming language barrier and prevalence of corruption in Mexico provided additional assurance that this trade agreement would not injure the labor market. The United States was grappling with controversy internally and externally, resulting from contrasting interpretations about the agreement’s structure and effects. Moreover, Mexico, while exuberant about the deal from a foreign diplomatic standpoint, dealt with similar controversy born from this agreement.
At the same juncture, President Salinas of Mexico was under pressure by Mexican nationalists, who berated the former economic professor for being subservient to the United States. Salinas had hoped that the NAFTA agreement would slow down Mexico’s poverty rate. He was met with tough negotiations with Clinton, forcing him to make concessions in order to satisfy the United States’ standards on labor and the environment. In addition, some Mexicans were reticent to embrace a free market system, having been coddled by protectionist economic policies for many decades (Marketing NAFTA, 1). At the time, Mexico’s economy was less than 10% of the United States’ economy, a bellwether that suggested Mexico was falling behind in economic progress (The Showdown, 1). The Mexican exigency for economic change outweighed concerns raised about the agreement.
President Salinas would only be in office for several months after the inception of the agreement, as Ernesto Zedillo would assume the mantle and navigate Mexican diplomacy for the rest of the 1990s. Initially fearful that, with Clinton’s election, American attitudes towards the agreement may shift, his fears were later placated when Clinton supported the bill (Sallot, 1).
Both the United States and Mexican governments (or presidents at the time) fervently believed that this bill would stimulate a mutual growth in jobs, GDP, and in other financial yardsticks. America believed that the bill would halt illegal immigration and create a new consumerism economy in Mexico. Contemporaneously, Mexico entrusted its dilapidated economy to the provisions of this agreement, hoping that it would be the instrument to finally pull them out of third world society. It wished to enter the rank and file of global super powers, and felt that, with the backing of the United States, it could realize this in the span of a decade.
MID 1990’s: NAFTA’S SHORT TERM RESULTS
Unfortunately, a hallmark of NAFTA would encompass trivial though significant conflict over which tariff barriers should be slashed or sustained. In 1996, Zedillo was embroiled in a hotly-contested legal dispute with the United States, decrying its decision to regulate Mexican millet brooms. In response, the United States vehemently asserted that it was in light of safety for US manufacturers. Zedillo retaliated, immediately increasing duties on alcohol, notebooks and glass from the United States (Government Increases Duties, 1). This conflict and the friction produced from it illustrated one of the innate problems with NAFTA between the two countries. Issues associated with the deflation of trade barriers quickly regressed into financial stratagems, as each country tried to negotiate tariff levels that would benefit their constituents.
Oddly, despite Zedillo’s preconditioning towards Salinas’s political orthodoxy, which was of the Institutional Revolutionist Party (PRI), he remained steeped in the belief that NAFTA would eventually generate the level of trade world superpowers such as the United States and Japan enjoy (Robberson, 1). Historically, the PRI had been seen as a socialist party, but in truth had evolved towards center-right stances on a number of issues. However, this party would come to oppose NAFTA due to its socialistic roots and loss of political power. The PRI wielded substantial power of Mexico, controlling nearly every aspect of it. The party was debilitated though because of faulty elections, of which produced Salinas as the victor of the 1994 presidential elections, despite overwhelming evidence that placed an adversary as the winner. Furthermore, the adoption of NAFTA meant that the party would no longer have absolute control over trade, further weakening its influence over the country (PRI MSN Encarta). Like many Mexicans, Zedillo believed this agreement was necessary to modernize Mexico, recognizing that the country was falling behind in development (Smith, 1).
In 1997, three years removed from the implementation of NAFTA, assessments were made by the Clinton administration and economists. Clearly, the bill had benefited Mexico, as it saw a groundswell of job creation and enriched Mexico’s economy. Indeed, President Zedillo pointed that Mexico’s maquiladoras, plants which were situated along the American border, had risen by roughly 18% a year. American companies had begun expanding their interests in Mexico, securing factories or plants from which to produce goods or secure partially-finished goods to be shipped for final processing in the United States. Mexico enjoyed a stabilized peso as well, which had beleaguered the country in the early 1990s. Since factories were modernized, tariffs were lowered and several industries were de-unionized, prices in Mexico plummeted, allowing citizens to purchase goods and enhance their quality of life. Nonetheless, the side agreements that Clinton had labored so assiduously for, such as labor and environmental standards, proved ineffectual, as pollution and poor working conditions were magnified in Mexico (When Neighbors Embrace, 1-2). According to the Continental Pollutant Pathways report, there were instances of acid rain on the east coast of Mexico, whereas there had been no documentation of this environmental phenomenon prior to the initiation of NAFTA (McAndrew,1). Moreover, while more people were employed, there were fewer people working full time. In addition, thousands of small businesses in Mexico folded against multinational corporations (Economic Policy Institute).
Although America’s colossal economy had benefited from low tariffs for decades, it still experienced some impact, though not nearly as much as Mexico. Most significantly, this agreement has come to embody a resilient relationship between the United States and Mexico, who had a historically tempestuous rapport. This encouraged Mexico to invest resources into the war on drugs, which aided United States’ security. With GDP at 4.1%, unemployment just under 5% and inflation at a reasonable 2.2%, these statistics solidified the continuation of the agreement. President Clinton was enthusiastic about this relationship, as it reinforced his standing with Congress as a policy wonk who had advocated for this successful agreement. The prosperity of this bill did not go without notice from the international community.
As a result, Clinton began striking negotiations with other countries to have similarly-structured trade agreements, hoping to capitalize on what NAFTA had done for the United States and Mexican economies. Still, everything was not as benign as it was packaged to be. NAFTA also made Americans cognizant of their neighbors, some of which came here illegally or distributed illegal drugs, all of which was facilitated by this open-door agreement. According to the Economic Policy Institute, 80% of the cocaine illegally imported into the United States is from Mexico (Economic Policy Institute). Although it is nearly impossible to directly detect illicit behavior, the spike in the drug trade began when the amount of trucks shipped from Mexico were 50% above their 1993 levels. Lastly, with the influx of drugs coming from Mexico into the United States, the price of cocaine and heroin in the United States fell by 20% and 37%, respectively (Reform Party of California).
From a political standpoint, Clinton dealings with the Republican-dominated Congress alienated many Democrats, who admonished the president for not following up on labor and environmental standards that were initially agreed upon between both countries (When Neighbors Embrace, 2).
An additional trademark of the agreement were ancillary branch-offs of the bill and into the spheres of security and drug proliferation. In 1999, Zedillo and Clinton established an umbrella program to combat burgeoning drug wars through training police more effectively and implementing new technologies to improve defense strategies. For Mexico, this agreement was instituted on top of a $500 million dollar policy fighting against drug wars within the confines of Mexico (Chacon, 1).
At the end of the Clinton Administration, NAFTA was moving towards possessing a pejorative connotation because of the proliferation of illegal drugs and disruption of Mexico's agricultural industry among other malaise produced by the agreement. As a result, Clinton was unable to secure fast-track approval from Congress, which stymied his endeavors towards breaking new deals with other countries such as Chile (NAFTA’s loss, 1).
NAFTA continued to hold as much worldwide recognition for its success as it did for the blistering maelstrom of protests it provoked. For the United States, NAFTA was engineered to open them up to the global community, quickening the pace of commerce and giving them a cheap and accessible resource in Mexico’s industry. Equally, Mexico overall touted the agreement as a financial masterpiece, publicizing it as a core cause for its reemergence onto the international landscape.
2000 and Beyond: NAFTA'S FUTURE
In 2000, both President Fox and Bush were elected as President of Mexico and the United States. Although Fox shared Bush's unbridled euphoria for the agreement's purported success, he began advocating for a single North American currency as well as relaxing stringent immigration policies in order to allow more legal Mexicans to immigrate over. For the long term, Fox envisioned a union similar to the European Union, along with a currency that would consolidate North America (Watson, 1). It was Fox's belief that a more communal framework for the agreement would settle Mexico's longstanding problems with poverty, extreme income inequalities, and elevate it as a first world nation (Vincent Fox on Transition, 2-3). Hence, Fox was in support for the preservation and expansion of NAFTA in Mexico.
In 2003, Mexico decided to eliminate tariffs and tariff rate quotas in order to allow U.S. agricultural exports even greater access to the Mexican market. This was in response to the United States' demure at lowering tariffs for its own agricultural goods. As his tenure wore on, Fox became more concerned about the malaise NAFTA intensified in Mexico. He has outlined his concerns about how over 50% of the population is trapped in penury. Regrettably, in the eyes of some Mexicans, NAFTA has yet to substantially elevate the quality of their society (Margain, 1).
Even after the Fox administration in 2006, Fox remained upbeat about the economic prowess of NAFTA. He believed that, under it, Mexico evolved into a titanic international trading partner, stimulating jobs all over the world, though the bulk of it was concentrated in the United States (CNN-Transcripts). Five years after NAFTA, Mexico employment jumped 22%, creating 2.2 million jobs in Mexico (Zoellick,1). U.S. imports from Mexico significantly increased by 82%, improving the quality of the Mexican economy and raising the quality of life for many Mexicans (Economic Policy Institute). Arguably, NAFTA bifurcated the socio-economic classes in Mexico, where people either benefited from it or were injured as a result of its policies.
Much in the same vein as his predecessor, Bush was focused on expanding free trade within the world. In particular, the Bush administration began striking agreements with Latin American countries such as Columbia, who were spurred by the exceptional economic growth Mexico was witnessing. In 2001, at the nascence of his administration, Bush projected to buttress an over-arching free trade continental economy that spanned across North America. It would encompass 34 countries and 800 million people approximately by 2005 (Background on Free Trade, 1).
Unlike Clinton, however, Bush attached democratic conditions to the agreements, stipulating that these free trade agreements were exclusively entitled to countries with democratic political institutions (Bush on NAFTA + WTO, 1). This policy was pushed further by trade experts who wished to explore forays into border security and product liability (Yung, 1). Bush also desired to swell the Mexican guest work policy, citing its deterrence towards illegal immigration despite internal objections that it could foster drug-war violence (Dellios, 1). The United States, though facing an intensified backlash against NAFTA, continued to laud it as a groundbreaking economic instrument. Mainly, it had been criticized for increasing trade deficits and cutting American jobs, since nimble corporations were able to reconfigure their procedures.
Bush's counterpart in Mexico, President Vincent Fox, shared a similar level of affinity for the agreement, citing ample evidence for its success. He, like Bush, wanted to broaden its influence by curbing illegal immigration, a contagion which the United States continues to vehemently wrestle with (Yung, 2). Fox pushed for the legalization of these illegal immigrants. However, Mexico was not able to dodge the anti-NAFTA cabal, as officials and economists alike dismissed the policy as having restrained Mexican growth, in particular in sectors such as agriculture (Brooks, 1). Criticism against NAFTA was led by Senator Salvatore Rodriquez, who expounded that NAFTA undercut agriculture as a part of Mexican GDP. Before the institution of NAFTA, it had stood at 10%, but after it has shriveled to 5%, sparking massive job layoffs within many Mexican communities (BBC International-Senator Says).
Early on in the decade, Mexico and the United States repeatedly found themselves at an impasse concerning deceptive barrier lifting. For instance, Fox called the United States out on multiple occasions for subsidizing their agricultural and food products, a form of protectionism that threatened Mexican growth (Le Monde Cites Mexico's Fox, 1). There is internal discord over Mexican agriculture, which has sustained a heavy blow because of the agreement. This has drawn the ire of many citizens, who have put pressure on the government to send aid to these farmers (Porter, 1-2).
In 2008, President Bush continued to laude NAFTA despite facing sharp critiques from leaders and global economists alike. In a speech at a summit of North American leaders in New Orleans, he denounced Nancy Pelosi, speaker of the House of Representatives, for blocking the Colombia Free Trade Agreement. He argued that the abolition of NAFTA would rob Mexico of numerous job opportunities (The Real News).
Currently, President Obama has issued caustic criticism and comments about NAFTA, desiring to renegotiate the deal in order to shield American workers from job losses and alter its pollution provisions to make it more environmentally-friendly. Obama has asserted that NAFTA has undermined the survival of many American jobs and industries, allowing American companies to produce goods cheaply under a deregulated economy in Mexico only to ship them back into the American consumerist economy. Moreover, he has also pointed out that subsidized U.S. produce has ousted thousands of Mexican farmers from their livelihood. It has also stimulated illegal immigration, which has increased nearly 100% since the inception of NAFTA (Faux, 1).
In order to remedy these foibles, Obama has resolved to clamp down on free trade by enforcing the labor and environment standards initially conceived by President Clinton, though they have not be consistently implemented. Despite his frequent excoriations of the agreement, in March of 2009 the Obama administration laid the groundwork for a new program to given Mexican truckers increased access to U.S. highways (Conkey, 1). This duplicity mirrors the state of relationships between the Untied States and Mexico, as Mexico is agitated by the United States protracted resistance to lift more barriers.
President Calderon of Mexico, elected in 2006, has been clear that he has no interest in reformulating NAFTA during his tenure in office. He remains firm, however, in suppressing poverty rates that have become a mainstay of the Mexican economy (Council of Hemispheric Affairs, 1). With the recent election of President Obama, it will be interesting to see how each candidate’s policy on NAFTA unfolds, and if there are any more contradictions.
NAFTA has been a hotbed for controversy and prosperity. The United States has been a staunch supporter of the agreement, though with the leftist agenda of the Obama Administration, there may be a drastic alteration. Mexico, which has also supported the tenets of the agreement, began criticizing the bill from an executive position as far back as 2000 with the ascension of President Fox. In order to amicably resolve this, steps must be taken to generate mutually acceptable legislation that will reach the economic goals of both countries. Still, under NAFTA, United States has enjoyed overall prosperity, even in the manufacturing labor market. Contrary to popular belief, even manufacturing jobs rose after a five year decline, creating nearly 400,000 jobs by 1999 (Jones, 1). The future of NAFTA will be predicated on the stability of the United States and Mexico. Given Obama's interest in expanding the jurisdiction of the federal government, it is plausible to anticipate possible friction between American public and private interests in this agreement. American labor unions, traditionally Democratic in political allegiance, will be sure to turn up pressure on Obama to regulate NAFTA closely in order to prevent the loss of jobs or industry to Mexico or other foreign competitors like China. Currently, Mexico is besieged by a drug war that has drained it of its resources and called into question many police and political leaders who have been bribed by drug lords. To further complicate matters, the latest outbreak of the swine flu may ignite debate over NAFTA standards for trading, as the United States would not want to import any infected goods from Mexico.
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