Follow the Money: Understanding NAFTA

by Pat Choate

Recall Deep Throat's advice on how to unravel Watergate: "Follow the money." It's not a bad way to understand the North American Free Trade Agreement (NAFTA).

Mexico has millions of well-motivated and unemployed workers who will be delighted to work for $1 per hour or less. The United States has thousands of employers who will be delighted to ditch their American workers, move to Mexico and hire Mexicans. Dozens of powerful Washington influence peddlers will be delighted - for a high fee, of course to lobby Congress for passage of NAFTA legislation.

Mexico wins big-time with NAFTA. The deal gives companies from any other country operating in Mexico virtually unrestricted access to the rich American market.

The combination of cheap labor, compliant regulators and low corporation taxes will allow companies from Asia and Europe to use Mexico as a low-cost platform from which they can devastate their U.S. competitors.

For the U.S.-based transnationals, the threat of moving to Mexico will be a potent weapon to be used against unions and workers. What is more important, thousands of existing American-based factories will join the 2,200 other U.S. owned companies now operating out of Mexico.

NAFTA is also a winner for U.S. banks. They can establish operations in Mexico, take equity positions in deals (something outlawed inside the United States) and provide lucrative investment bank services for their clients there. Less visibly, the shift of production from America to Mexico will allow the Mexicans to repay the billions of dollars of debt and interest owed to U.S. financial interests.

NAFTA will be a big winner for Washington lobbyists. In 1993, the Mexican Government and Mexican corporations will spend an estimated $50 million for lobbyists and publicists whose job is to get the agreement enacted into law.

The NAFTA losers will be American workers and the communities where they live. Several independent studies verify this unpleasant reality.

The most optimistic of these reports was released in 1992 by the Department of Labor, the U.S. Council of the Mexico - U.S. Business Committee, and the international Trade Commission. They conclude that the agreement will cause few or nojob losses, but few job gains. Yet, these conclusions are based on the assumption that the U.S. will have fuII employment in the 1990s and every displaced American worker will have a replacementjob. To say the least, this stretches credibility.

By contrast, the Washington-based Economic Policy Institute projects that an unrestricted free trade pact with Mexico would cost 550,000 U.S.jobs over the next five years. The Economic Strategy Institute, another leading Washington think tank, projects that more than one million American jobs could be lost in the 1990s under an unrestricted agreement.

Are job losses of this magnitude actually possible? They are. U.S. corporations have already built more than 2,200 factories in the thin strip of land along the U.S.-Mexico border that is part of Mexico's Maquiladora program. They employ almost 800,000 Mexican workers. If this treaty is ratified by Congress, U.S. corporations will have an even better deal in Mexico and the entire nation in which to locate. They will move South.

The negative effects will fall disproportionately on special industries, workers and locales.Textiles and apparel workers are particularly vulnernble. At least one million apparel and textile workers face the loss of their job over the next decade if NAFTA takes effect. Roughly 90 percent of this employment is concentrated in eight states and more than 80 per-cent of the workers are women and minorities.

The State of Texas, which is supposedly a prime beneficiary of this agreement, will be particularly hard hit. The Texas Department of Commerce, which did a detailed analysis of the employment effects of the agreement, reported in October, 1991, that those Texas industries that will "lose" under this agreement employ one-third more workers in the state than the projected "winners ".

The Texas losers will include fresh fruits and vegetables, livestock, distribution services, transportation equipment, fabricated metals, lumber and paper, primary metals, leather and leather products, apparels and textiles, wholesale and retail trade, and banking. These are industries that employ disproportionately high numbers of semi-skilled workers, women and minorities.

American cities will also suffer under this pact. Even without this agreement, the nation's twenty largest metropolitan areas lost more than 1.2 million manufacturing jobs between 1969-89. Many of the remaining jobs, such as the 60,000 in New York's apparel industry, pay $6.50 perhour. These are not great jobs, but for many Americans these are the only jobs, jobs with dignity that hold together the working poor. And if this treaty is ratified, these jobs will disappear.

The effect of job losses on rural areas will be less visible, but even more destructive. In many communities, only one or two companies provide most of the jobs. If these companies are forced out of business or move, the entire community suffers.

And recovery comes slowly, if at all. Most of the New England textile workers who were displaced when their companies went South never found a comparable replacement job. Millions of other workers across America now face exactly the same prospect.

If NAFTA becomes law, the question that these workers will face is this: Where will I find a job if my company moves to Mexico?

For most people, there is no answer for there will be no job.

[Pat Choate is the author of "Agents of lnfluence" and Director of the Washington-based Manufacturing Policy Project]

John W.