The North American Free Trade Agreement (NAFTA) among Canada, Mexico, and the United States has now been in effect for three years. Globalization advocates, including Bill Clinton, have heralded it as a major step forward for all involved, while the conservative Heritage Foundation says that under NAFTA "trade has increased, U.S. exports and employment levels have risen significantly, and the average living standards of American workers have improved."
Yet the evidence shows the opposite. First, recent research by Kate Bronfenbrenner of Cornell University confirms that globalization shifts bargaining power toward employers and against U.S. workers. Bronfenbrenner found that since the signing of NAFTA more than half of employers faced with union organizing and contract drives have threatened to close their plants in response. And 15% of firms involved in union bargaining have actually closed part or all of their plants—three times the rate during the late 1980s.
Second, NAFTA has caused large U.S. job losses, despite claims by the White House that the United States has gained 90,000 to 160,000 jobs due to trade with Mexico, and by the U.S. Trade Representative that U.S. jobs have risen by 311,000 due to greater trade with Mexico and Canada. The liberal Economic Policy Institute (EPI) points out that the Clinton administration looks only at the effects of exports by the United States, while ignoring increased imports coming from our neighbors. EPI estimates that the U.S. economy has lost 420,000 jobs since 1993 due to worsening trade balances with Mexico and Canada.
Research on individual companies yields similar evidence of large job losses. In 1993 the National Association of Manufacturers released anecdotes from more than 250 companies who claimed that they would create jobs in the United States if NAFTA passed. Public Citizen's Global Trade Watch surveyed 83 of these same companies this year. Trade Watch found that 60 had broken their earlier promises to create jobs or expand U.S. exports, while seven had kept them and 16 were unable or unwilling to provide data.
Among the promise-breakers were Allied Signal, General Electric, Mattel, Proctor and Gamble, Whirlpool, and Xerox, all of whom have laid off workers due to NAFTA (as certified by the Department of Labor's NAFTA Trade Adjustment Assistance program). GE, for example, testified in 1993 that sales to Mexico "could support 10,000 [U.S.] jobs for General Electric and its suppliers," but in 1997 could demonstrate no job gains due to NAFTA.
To see why, let's review recent trends in global trade. At a swift pace in recent decades, barriers to international trade, investment, and production have fallen. Transport and telecommunications have become much cheaper and faster, greatly improving the ability of multinationals to manage globally dispersed activities. Tariff and nontariff barriers have been removed through international agreements, including NAFTA, the European Union, and the World Trade Organization, while the proposed Multilateral Agreement on Investment is looming.
Since the 1970s trade in goods and services has been increasing much faster than world output, the opposite of what happened in the 1950s and 1960s. From 1970 through the mid-1990s, world output grew at a rate of 3% per year, trade volume at 5.7% per year.
For the United States, the ratio of exports and imports to gross domestic product (GDP) changed little over most of the present century, but from 1972 through 1995 it rose from 11% to 24%. By 1990, 36% of U.S. imports came from developing countries compared with 14% in 1970. For the European Union, imports from developing nations grew from 5% to 12% over the same period (the proportions would have been much higher if trade between European nations was excluded, just as interstate trade is excluded from U.S. foreign trade figures).
Multinationals' use of developing nations for production is substantial and growing, especially in Latin America and Asia (excluding Japan). By 1994 it accounted for a third of all trade between U.S. multinational parents and their affiliates, and at least 40% of their worldwide employment.
