The Super Bowl of Business
I have a friend who at 7 years old wanted to start a lemonade stand. Her mom wanted to teach her the value of a dollar and told her that to sell lemonade she would have to buy the lemons and pay for the sugar. Well, soon my friend figured out that if she sold water and the wild onions from her yard instead, she wouldn't have to pay her mom for the supplies. This way, any money she made from her sales was strictly profit. That's pretty good business sense even for a 7 year-old. Determining where you'll get your goods and services, how you'll pay for labor, and to whom you'll sell your product may be simple when you're just talking about a lemonade stand. But nowadays, American companies cross borders, sail over seas and mix in politics to help create what is now called "a global economy."
There are many ways in which countries do business with one another. Using taxes on imported goods and services (called tariffs), governments and large corporations impact their economies, employ their citizens and establish political allies. In 1994, the United States, Mexico and Canada enacted the North American Free Trade Agreement (NAFTA), opening up trade between these three countries. With NAFTA, the tariffs (and other trade barriers) have been gradually removed since 1994 with a goal of no tariffs by 2008. It sounds simple, but the effects on employment, culture, the environment and the future of the global economy are vast. And whether you believe in NAFTA or are opposed to it, the idea of free trade seems like it is here to stay.
Trade relations in North America were happening long before the enactment of NAFTA. In the seventies, Mexico opened up its trade with the United States, which made it easier for foreign investors to come into the country and exploit the cheaper labor and the more relaxed environmental laws of Mexico. Today, there are about 3,000 companies registered as maquiladoras-American-owned companies that are situated on the Mexican border. Here is where the global economy starts to take shape. By taking its factory to Mexico, an American company pays lower wages, because the minimum wage in Mexico is lower than in the U.S. They can then offer lower prices to us, the consumers. Because Americans want the best quality products for the cheapest prices, we benefit from the cheaper labor of the maquiladoras.
Both Mexico and the U.S. felt the effects of these early free trade agreements. Workers in the U.S. lost their jobs as factories began moving south. Big American corporations were buying out the businesses that were once Mexican-owned because they could no longer compete. This meant that more and more Mexicans who once made up the middle class were out of work. Many of these workers moved north to the border where they could find work in the maquiladoras. As a result, the middle class in Mexico has slowly deteriorated, and American corporations continue to grow more powerful. NAFTA has continued these trends.
There were also strong impacts on the indigenous people of Mexico. I met with Josefina Castillo from the American Friends Service Committee. She explained that indigenous people of Mexico, living mostly in the countryside, were able to subsist on farming. But the trade agreements made it so that the Mexican government no longer held low interest loans for these people, and so that it controlled the price of seeds. These two conditions made it impossible for the indigenous people to survive in the countryside. The government also stopped giving subsidies (which help stabilize and reduce the price) on staple food items like milk, sugar and corn. As prices went up, people simply had less to eat. When NAFTA was implemented in 1994, an uprising of the indigenous people calling themselves the Zapatistas took place. These revolutionaries are still giving voice to this marginalized group whose land and livelihoods are being affected by the agreement.
One of the biggest impacts on farmers has been from the import of corn into Mexico from the U.S. Even though the Mexican farmers produce enough corn at a fair price to sustain the demands of the country, the U.S. exports it at an even cheaper price. The U.S. government provides large subsidies, which allow corporate farmers to export at a price lower than what it takes for them to produce it. Mexican farmers have no way to compete with these prices and cannot even support their families. Many of these farmers have migrated to the border where there is more work in the maquiladoras.
Since NAFTA, even more maquiladoras have opened. This has been especially true for the textile industry (the folks who make our clothes). Businesses like Sun Apparel (who makes the Polo brand) headed to Mexico and thousands of workers in El Paso, Texas lost their jobs. NAFTA has also diminished the power of American labor unions. With the threat of jobs moving to Mexico, bargaining power and wage demands made by unions are weakened. I met with Martha Tovar, whose El Paso company provides information about the maquiladora industry. "El Paso used to be the jean capitol of the world," claimed Tovar. "A lot of the job loss was [in the] textile [industry] because most of the other trade already moved in the seventies." Even without NAFTA, Tovar says there were rumors that textile companies were going to leave anyway, because they couldn't compete with the cheap labor in Asia. According to her, "U.S. companies didn't go to maquiladoras because they wanted to make a lot of money, but because they were forced out by global competition."
Not only does this mean many U.S. workers lose their jobs, but the companies that have gone to Mexico do not always have policies that require humane working conditions or fair wages. According to Tovar, the majority of the maquiladoras do provide safe and humane working conditions and fair wages to its workers. She says that it has been mostly the textile corporations that have really been at fault and that these companies are not even registered as maquiladoras. Of the hundreds of maquiladoras that Tovar has visited, she claims that they all have safety equipment for their workers and that while the pay rate is lower than here in America, it does meet the wage standards set by the Mexican government. But the fact still remains that there are many companies who do not abide by the regulations. As a result, workers suffer while the CEO's of these big companies get rich.
So, what about the American workers who lost their jobs when companies went south? Since NAFTA, El Paso has lost more jobs than any other city in the U.S. While NAFTA does provide some assistance for displaced workers, it seems that it is not enough. NAFTA has put into place training programs to help workers learn new skills. Unfortunately, many of the workers in El Paso are immigrants who may not know English. So instead of learning new skills with the NAFTA programs, they are taking basic English courses. Many of them are older people who have had factory jobs for over twenty years. Supporters of NAFTA claim that the jobs being lost are only low skilled jobs and the agreement opens up more specialized jobs. While this may be true, it does not mean much to the thousands of displaced workers who relied on the low-skilled jobs that helped them to support their families.
As I stand atop the scenic road in El Paso, the smog lies heavy over the city and across the border into Juarez, Mexico. By taking U.S. jobs to another country, big corporations can exploit not only the cheap labor, but also the environment. While NAFTA contains "side agreements" that are supposed to provide environmental standards, there are very few resources to implement the regulations. Since NAFTA, many U.S. wood companies have entered Mexico for logging. In the Mexican state of Guerrero, 40% of the forests have been clear-cut in the last decade. Castillo says, "You can see this at the border, the river is contaminated by chemicals. There are no safety conditions." Not only do American companies neglect environmental standards but under NAFTA, they can also actually sue the government for enforcing these regulations, if it means they will be losing money. It seems that profit is valued above everything else. In order for the U.S. to compete in the global economy, governments and big corporations are continuing to build on these agreements.
Currently, in 2001, there are 34 countries working on a plan to expand NAFTA into the Free Trade of the Americas Act (FTAA). Not only government leaders, but also corporate representatives will be meeting to create this new agreement. If enacted, all the countries in the western hemisphere (except Cuba) would be involved in a free trade system that will expand the global economy and have an even greater impact on labor, the environment, and cultures of all the countries involved. Politics, economic strategy and high-power corporations all have an influence on the outcomes of these agreements, while working class people and environmentalists have little choice in the outcomes of these meetings. Students, activists, environmentalists, peasants and various other groups are going to descend on the FTAA meeting in Quebec in April 2001 to try and argue for another version of "free trade", one that they hope will care about people over profits. Think of it as the ultimate Super Bowl that determines the future of the planet.
Friends and Family
Please email me at:
Links to Other Dispatches
Stephanie - America the bully? Corruption in Latin America
Neda - The after effects of Saddam's bombs
Nick - Is peace in the Middle East just a pipe dream?
Stephen - "Operation Just Cause" was anything but just