NAFTAmath - two years later

by Fred Gaboury & Victor Perlo

This article was reprinted from the May 4, 1996 issue of the People's Weekly World. For subscription information see below. All rights reserved - may be used with PWW credits.

In the two years since NAFTA entered into force, problems facing workers in Mexico, Canada and the U.S. have grown substantially.

The impact of NAFTA is most clearly seen in the U.S.-Mexico bilateral relationship. In 1993, the U.S. had a merchandise trade surplus of $1.7 billion with Mexico. That surplus declined to $1.3 billion in 1994. With the deep economic crisis confronting Mexico, the U.S. bilateral trade balance with Mexico exploded to a $15.4 billion deficit in 1995.

In effect, NAFTA made all of Mexico into one giant "export zone" where the minimum wage following peso devaluation is now $2.68 per day. In 1995, Mexican exports to the U.S. soared 25 percent compared to 1994 - rather than exporting more automotive goods to Mexico, for 1995, the U.S. deficit with Mexico in autos and trucks, $7.3 billion, and auto parts (including engines), $4.5 billion totaled $11.8 billion - a 97 percent increase over 1994.

With merchandise trade totaling $272 billion between the two countries, Canada is the largest trading partner of the U.S. Unfortunately, the merchandise trade deficit with Canada increased by 70 percent during the first two years of NAFTA to $18.2 billion in 1995, contributing to a combined merchandise trade deficit with NAFTA partners of $34 billion - one-fifth of the entire U.S. deficit.

During the NAFTA debate in Congress, supporters claimed that NAFTA would result in creation of 170,000 U.S. jobs by 1995 an estimate based on the assumption that 20,000 jobs are created for every billion dollars of net exports - meaning that the trade surplus with Mexico needed to reach $8.5 billion by 1995 to produce those jobs. Using this calculation the $15.4 billion trade deficit for 1995 means that more than 262,000 jobs were lost or not created.

A forthcoming Economic Policy Institute briefing paper estimates that increases in the U.S. trade deficit with Mexico in 1995 eliminated more than 267,000 U.S. jobs.

In addition, there is no cumulative data on the job opportunities lost in the U.S. because of corporate decisions to locate new plants or to expand operations in Mexico rather than in the United States.

Foreign direct investment in Mexico - outlays for plants, equipment and other tangible assets in other countries - for 1994 totaled $8 billion, an increase of 64 percent over the previous year. Of the $8 billion total direct foreign investment, 40 percent was channeled into manufacturing, 40 percent into services (including financial services), 8.5 percent in transport and communications, 7.9 percent into commercial activities and 3.5 percent in construction.

Today, 690,000 workers are employed in the 2.250 Mexican export maquiladora plants. As many as 160 new maquiladoras are likely to be established in 1995-96, according to a study by the forecasting service, Warton Econometrics Forcasting. They estimate that the number of maquiladora (foreign-owned facotries on the Mexican-U.S. border) jobs will total 943,000 by 2000.

During the NAFTA debate, the AFL-CIO argued that the agreement would transform Mexico into one giant maquiladora zone. Because the border is now saturated and because of strong financial incentives, Mexico's interior cities are luring maquiladoras. For example, Border Apparel Industries, based in El Paso, recently opted to locate a plant in Torreon, Mexico 520 miles south, rather than in Ciudad Juarez, just across the Rio Grande. Last year, the northern Mexican city of Monterrey, 150 miles from the Texas border, welcomed 29 new maquiladoras, a 1.27 percent hike over 1994.

As of Jan. 22 the U.S. department of Labor had received 768 petitions involving workers from 48 states who believed that NAFTA had caused their unemployment. Of that total, the Department of Labor has certified 380 petitions covering 53,210 workers as experiencing NAFTA-related unemployment. According to the Institute for Policy Studies' report, a disproportionately large percentage of layoffs occurred in rural communities. The electronics and apparel industries experienced the largest number of NAFTA-related layoffs, and both industries employ a disproportionate number of women.

Many displaced workers were unaware of the NAFTA-TAA (Trade Adjustment Assistance) program. Service workers such as truck drivers and railroad workers are ineligible. The rigid deadline for enrolling in training prevents qualified workers from receiving assistance and the program is needlessly cumbersome.