Corporate Control of North
And how to bring NAFTA under
by Jeff Faux
The American Prospect magazine,
January 13, 2003
The business interests that promoted the
North American Free Trade Agreement (NAFTA) have gotten their
money's worth. Since the agreement went into effect in January
1994, American and Canadian corporations have moved production
and jobs south to take advantage of cheap Mexican labor. Subsidized
agribusinesses in both northern countries have blown small-scale
Mexican farmers out of their local markets for corn, wheat and
other commodities. Eighty-five percent of the Mexican banking
system is now foreign-owned. Mexican production, meanwhile, is
moving to even lower-wage countries. And the Mexican business
partners who brokered these deals got rich.
But business in all three nations has
gotten a good deal more. NAFTA is a potential battering ram aimed
at destroying domestic protections that temper modern capitalism.
These social, labor, environmental and regulatory constraints,
the fruits of more than a century of domestic political struggle
in each of the three countries, are in danger of being swept away
in a commercial arena impervious to democratic deliberation. NAFTA
has plenty of business constituents. And it has business-devised
rules of commerce. What it lacks are citizens. So NAFTA is leading
the way straight back to the circa 1890 laissez-faire system:
commerce unfettered by other stakeholders.
When two ex-corporate executives, George
W. Bush and Vicente Fox, became presidents of the United States
and Mexico two years ago, they were ready to do more business.
Their public-relations people dubbed them the "two amigos,"
and they tromped around each other's haciendas in Texas and Guanajuato,
bonded by a shared landscape and a shared faith in unregulated
markets. Bureaucracies in both countries began to negotiate new
deals that would liberalize Mexican migration to the United States
and allow U.S. and Canadian investors access to Mexico's nationalized
The terrorist attacks of September 1l,
however, slowed things down. In their immediate wake, encouraging
immigration from anywhere was a political nonstarter, and the
White House put Mexico on its back burner. For a while, continental
economic integration itself seemed to unravel. Tightened border
security caused trucks to back up for miles into Canada and Mexico,
and sudden new immigration restrictions fouled up thousands of
cross-border business trips that had become routine for Canadian
and Mexican businesspeople.
Fox, who had staked his presidency on
his relationship with Bush, saw his popularity at home plummet
along with the Mexican economy, which was now tied to the United
States in recession. Feeling abandoned, he had Mexico side with
France and Russia in the dispute over the wording of the United
Nations resolution on Iraq. At an international conference in
October, an angry Bush cold-shouldered his old pal. Meanwhile,
Bush's threat of a unilateral attack on Iraq, the killing of Canadian
troops by American friendly fire in Afghanistan and the U.S. government's
refusal to give Ottawa consular access to a 6-year-old Canadian
citizen held at Guantanamo Bay managed to tick off many partners
to the north as well.
But commerce will prevail. More customs
agents were sent to the border to break the bottlenecks. New "smart
border" systems are being put in place, allowing Mexican
and Canadian goods bound for the United States to be checked by
American customs officials stationed at the factories, electronically
sealed and sent without interference into the United States. Plans
are also being developed for "NAFTA Express" immigration
lines at airports for citizens of the three North American countries.
Ultimately, the war on terrorism is more likely to constrict the
freedom of Americans under the Bill of Rights than the freedom
of money and goods to cross our borders under NAFTA.
The three countries are now on an irreversible
path to further economic integration. Every day, more intracontinental
connections in finance, marketing, production and other business
networks are being hardwired for a seamless North American market.
Nearly 70 percent of U.S. trade with Mexico is within the same
firm or related firms producing the same final product. Ford pick-up
trucks are now assembled in Mexico's Cuautitlan, with engines
coming from Canada's Windsor, Ontario, and transmissions made
in America's Livonia, Mich. Labor markets are relentlessly merging.
For professionals from the United States and Canada- and increasingly
from Mexico-career ladders are already continental. At the other
end of the labor market, migrant workers from Mexico have spread
to virtually every region in every industry north of the border.
Illegal crossings from Mexico are now back to pre-g-11 levels
and, homeland security notwithstanding, U.S. officialdom increasingly
accommodates the porous border.
Thirteen states, 80 U.S. cities, 600 police
departments and thousands of businesses formally accept a Mexican
government card in lieu of a Social Security number as sufficient
identification for applications for jobs, driver's licenses and
bank accounts. Eight years after NAFTA, too many economic channels
have been redirected north-south to reverse the course of economic
integration. What remains is the question of how this new political
economy will be governed, and in whose interest.
A CORPORATE UTOPIA
Markets are defined by rules, and common
markets need common enforceable rules. Thus, more than a century
ago, when the regional American markets merged into a national
economy, the federal government took over what had been state
functions to establish national rules for everything from banking
to product standards to labor law. In Western Europe, the political
union of countries infested with centuries of mutual hatred grew
out of the strategic understanding that common political institutions
are the inevitable consequence of common markets. A simple post-World
War II joint agreement over coal and steel industries on the French-German
border was relentlessly transformed into a supranational European
Commission, a directly elected European Parliament and a single
The American national economy expanded
within an already established national Constitution, with a Bill
of Rights and a defined process of democratic change. The European
common market was subject every step of the way to fiery arguments
over social and political, as well as economic, rules. In both
cases, the erosion of local sovereignty was balanced with individual
rights and political democracy, allowing businesses, labor unions,
farmers and other stakeholders to engage in a common cross-border
politics over the common market's rules.
By contrast, the constitution of the North
American common market, NAFTA, was merchandised to the citizens
and legislators of each of the three countries as a simple, narrow,
stand-alone agreement on foreign trade. Neither Ronald Reagan,
who thought up the idea, George Bush Senior, who negotiated it,
nor Bill Clinton, who sold it to Congress, acknowledged that NAFTA
was opening the door to the integration of people and political
institutions that a common market ultimately requires.
NAFTA, in fact, is not a simple free-trade
agreement. It is a 1,000-page blueprint for a continental society
that recognizes only one class of citizenship: the multinational
corporation. The treaty gives corporations enforceable rights
to invest, produce and sell anywhere in all three countries. Governments
are prohibited from restricting the flow of repatriated profits,
barred from favoring their own citizens with government contracts
and required to give multinationals American-style intellectual
property rights. Chapter 1l of the agreement grants corporations
of each nation the extraordinary power to sue the other two nations
and overturn laws that might be construed as interfering with
the corporation's profits. Disputes are settled in secret by tribunals
and "experts," many of whom work as lawyers and consultants
for the multinationals.
Individuals have no legal status in NAFTA.
Human and labor rights, environmental protections, public health
and democratic accountability were consciously excluded. In a
bureaucratic design that Franz Kafka would have admired, two toothless
commissions can listen to complaints that the governments are
not enforcing their own labor and environmental laws but have
no authority to act on whatever they might happen to hear. NAFTA
thus represents the most extreme example of the so-called neoliberal
model, in which supranational rules liberate the private corporate
investor from the constraint of democratic public values.
Even in these conservative times, such
a reactionary formula for governing their own national economies
would be overwhelmingly rejected by the electorates of each of
the three nations. But labeling it a "free trade" agreement,
which puts it into the remote domain of foreign policy and international
economics, has obscured NAFTA's significance as a blueprint for
their future domestic society. Many members of the U.S. Congress
were persuaded to vote for the NAFTA premise because they felt
that foreign relations were the president's constitutional prerogative.
with the creation of a common market,
however, the fundamental questions of how a market is to be governed,
and in whose interest, become a domestic issue rather than a matter
of foreign policy. And, in reality, a continental politics is
being created over the issues of the common market's governance.
But it is a virtual one-party system of cross-border business
networks and their political clients. The policy hothouses that
serve them are already busy planning the next stage of the North
American constitution out of the earshot of popular politics.
Tri-national governmental task forces
and commissions are preparing plans for guest-worker programs,
continental transportation and the privatization of energy and
water resources. Business associations, corporate-sponsored think
tanks and a variety of academic institutes in Canada, Mexico and
the United States are busy testing ideas such as a dollarization
of the Canadian and Mexican economies, a North American Commission
of non-elected prominent citizens to guide the future of the common
market and the downward harmonization of business taxes among
the three countries. E-mail traffic hums with notices of conferences,
seminars and new research ideas. Organizations such as the Brookings
Institution and the Institute for International Economics in Washington
and the C.D. Howe Institute in Toronto have produced books laying
out the future of economic integration on the neoliberal NAFTA
IN SEARCH OF AN OPPOSITION POLITICS
Although business is increasingly organized
politically on a continental basis, the progressive opposition
to the neoliberal model in North America was, from the beginning,
fragmented by arguments that do not travel beyond national borders.
Many U.S. labor and nongovernmental organization leaders condemned
NAFTA because of its insufficient protection for all workers,
but the grass-roots political heat that almost defeated the agreement
in the U.S. Congress was fueled by the specter of American jobs
moving to Mexico. The Canadian opposition painted NAFTA as a threat
to Americanize Canadian culture and undermine its more social
democratic welfare state. In Mexico, opposition was rooted in
its people's historic mistrust of Yankee imperialism.
But economic and cultural nationalism
was not enough to stop NAFTA and cannot now rescind it. Anti-American
rhetoric is still present in Mexican and Canadian political life,
further aggravated by the arrogance of the present U.S. administration.
It will always be there in some form, reflecting the tensions
that came with having to share the neighborhood with the world's
superpower. Still, polls show that most of both countries' people
have accepted that their fate is tied to the United States.
In the United States, Pat Buchanan notwithstanding,
most of the opposition to NAFTA came from the left, and few in
the labor or environmental movements have their hearts in nativism.
Certainly there is no political traction in a politics of hostility
to either neighboring country. Among Americans, approval ratings
of Canada and Mexico are higher than go percent and 70 percent,
respectively-higher than those of even popular U.S. politicians.
Once the fight over NAFTA was settled
and the common market was established, economic nationalism lost
much of its steam. Consequently, in the past two years, the Seattle
Coalition has moved on to try to defend against neoliberalism
in other global settings, such as the proposed Free Trade Agreement
of the Americas (FTAA) and the new round of World Trade Organization
These are important battles, but the capacity
of North American activists to influence these negotiations is
marginal. Government-to-government bargaining over the FTAA and
the WTO is even more remote, more secretive and more dominated
by corporate interests than it was over NAFTA. At this stage of
the development of global trade politics, there is little leverage
for imposing labor, environmental or other social protections
on these agreements. If the FTAA is derailed, it is most likely
to be because a compromise cannot be reached among negotiators
bargaining on behalf of the national economic interests that dominate
their domestic politics, not because of the opposition of hemispheric
civil society. Even someone such as Luiz Inacio Lula da Silva,
the new populist president of Brazil and longtime critic of the
FTAA, will in the end concentrate on protecting the home markets
of Brazilian farmers and manufacturers and getting them greater
access to U.S. consumers.
Meanwhile, the future of the common market
of North America, in which the activists do have more potential
leverage, goes uncontested. Given the influence of U.S. government
in setting the rules for the global economy, a sustained challenge
to the NAFTA model in North America is arguably the most important
contribution progressives on this continent could make to the
building of a more just global economic system.
It is therefore time for the social-democratic
left in Canada, Mexico and the United States to go on the offensive
by proposing a comprehensive vision of the North American future
against the narrow business-dominated vision that currently overwhelms
the non-electoral, but nevertheless very real, continental politics.
A continental progressive movement would build on the existing
social-democratic infrastructure in each nation-labor, environmentalists,
human-rights activists, progressive churches and populist legislators.
Add to that the small-business people and farmers whose markets
are being crushed by multinationals. And add to that the majority
of ordinary citizens in all three nations who clearly prefer their
national economies to come with social safety nets and protections.
Among other things, creating cross-border
alliances and synergies requires that progressives expand their
political language beyond the categories of the nation-state.
Polls show that Canadians, Mexicans and Americans all think that
their neighbors have benefited more from NAFTA than they did.
Yet to ask whether Canada, Mexico or the United States "won"
or "lost" tells us little or nothing. The reality is
that the corporate investor class in each country generally "won"
and working people generally "lost." The private corporate
sector in each nation was strengthened and the public sector was
weakened. We need a language that reflects how the economic interests
of a working family in Canada will have more in common with working
families in Mexico and the United States than with the CEO of
a continental enterprise headquartered in, say, Toronto.
Creating a continental political consciousness
does not mean forming one nation. Few are ready for that. In particular,
polls show a majority of Canadians and Mexicans opposed to the
proposition that the United States might absorb them. At the same
time, a majority in each country says it would support the creation
of a new North American country (i.e., not just a larger United
States) if it would result in a higher quality of life. Indeed,
some three-fourths of Canadians say that some sort of political
union with the United States is likely within the next 10 years,
and some 40 percent think it likely that the United States will
absorb the entire country within a decade. On the other hand,
only 15 percent say they want Canada to be more like the United
Another recent poll showed that despite
their willingness to contemplate closer union with the United
States, a majority of Mexican leaders think that NAFTA has been
a bad bargain for their country. Despite the promises since 1994,
Mexico's growth is still not enough to absorb its expanding labor
force, and the distribution of income and wealth has gotten more
lopsided. With half the population living on about $z a day, the
definition of middle class in Mexico today is someone who can
afford toothpaste and shampoo. Meanwhile, jobs that had been outsourced
from the United States and Canada are now moving from Mexico to
China, where labor is even cheaper. The fact that Mexico desperately
needs to keep sending people to the United States-both to reduce
unemployment and to maintain the flow of emigrant remittances-is
one of the many implicit acknowledgements that NAFTA did not deliver.
Moreover, Mexico is now facing a NAFTA-generated
political crisis in its agricultural sector, which employs one-fourth
of the country's labor force. In order to placate Mexican farmers
concerned about competition from highly subsidized U.S. and Canadian
food imports, the Mexican government promised them generous financial
and technical aid. The assistance never came. Moreover, last year's
massive new subsidies for U.S. agribusiness put them in a position
to further undercut Mexican farmers when tariffs are further reduced
on many farm products beginning Jan. 1, 2003. In recent weeks,
angry Mexican farmers have blockaded roads, hounded Fox and disrupted
the Mexican Senate to demand that NAFTA's agricultural rules be
renegotiated. The Mexican government's response is that it has
no power to reopen an international treaty, so the conversation
stops there. Yet in a common market, the costs of the massive
dislocation in rural Mexico will not be borne by Mexico alone.
As we have seen already, displaced rural families will join the
migrant stream and head north.
A NAFTA WITH CITIZENS
The first step in building a progressive
continental politics is for progressives of each country to join
in a demand to amend NAFTA by adding enforceable human and labor
rights, social protections and the preservation of local democracy.
Proposing a formal revision of NAFTA would take the discussion
out of the seminar rooms and watering holes of corporate lobbyists
and bring it out into the open, where the electorates of all three
countries could share the dialogue over a common future that was
denied them in the first NAFTA debate.
This in turn requires the building of
a cross-border organizing infrastructure. Given the disparity
in income and development, labor and NGOs in the United States
and Canada need to help nurture the struggling independent labor
movement and the thin civil society in Mexico. Progressive legislators
in all three countries should begin meeting and working out proposals-covering
issues such as corporate governance, public health and safety,
investment in education-that could be simultaneously introduced
in all three capitals. Labor and environmentalists in all three
countries would bring simultaneous actions in the existing side-agreement
institutions to demonstrate their weakness and to work out the
principles of a continental social contract.
An amended NAFTA could reflect a new bargain
among the citizens-as opposed to the business interests-of the
continent. It would therefore include assistance to Mexico in
building its economic and social infrastructure, just as the European
community has redistributed funds to its poorest members in order
to create a more balanced economy.
As part of the bargain, continent-wide
labor, human-rights and environmental protections ought to be
established to prevent the erosion of living standards in Canada
and the United States, and to ensure that Mexican workers share
in the benefits of growth. Chapter 11 should be removed, as well
as other provisions that erode the ability of the local public
sector in all three countries to promote the welfare of its citizens.
Progressives need to pose the central
question: What do we want the future of North America to look
like? For example, do we want a social contract that looks more
like Canada's balance of class interests or something more like
the American/Mexican blend of socialism for the rich, economic
insecurity for the middle class and contempt for the poor? Despite
all the obvious difficulties in developing a crossborder politics
around this question, if progressives want to influence this historic
interlocking of the three societies, they have little choice but
to grasp hands across the borders and work together to build a
shared economy that serves all of the continent's working people.
The North American constitution will otherwise continue to be
written on the NAFTA template, side agreement by side agreement,
sealing off more and more public decision making from the reach
of those noncorporate humans who are citizens of Canada, Mexico
and the United States-but not yet of North America.
JEFF FAUX, the founding president and
current Distinguished Fellow of the Economic Policy Institute,
is writing a book on the future of North American integration
Control of American Democracy