How NAFTA Impacts Flow Of US Jobs South of Border
Study shows accord has cost 250,000 jobs; firms use it to thwart unions
From the halls of Congress to America's factory floors, the North American Free Trade Agreement is emerging again as a lightning rod in the debate over the causes of US job losses.
Three years ago, NAFTA formally linked the lives and livelihoods of workers from the US, Canada, and Mexico. Since then, some studies have shown an overall loss of US jobs both to the south and the north. And American manufacturers have threatened to move operations to Mexico in more than 200 unionization drives, a new study says.
"NAFTA has created a climate that has emboldened employers to more aggressively threaten to close, or actually close their plants to avoid unionization," writes Kate Bronfenbrenner, a labor expert at Cornell University in Ithaca, N.Y.
But whether NAFTA is the main cause of US jobs shifting abroad is a source of contention. Gauging its impact on US assembly lines will be key as President Clinton prepares to visit Mexico in May and South America this summer. He is likely to push hard to expand the NAFTA concept to include other South American nations, particularly Chile.
Debate over expanding the treaty was renewed last week in congressional hearings. But Congress has refused to grant Mr. Clinton the type of "fast-track" authority he says is needed to negotiate new trade pacts.
The root of the deadlock is that the White House wants fast-track authorization to include the responsibility to negotiate labor rights and environmental issues with a new trading partner. Republicans oppose that as unnecessary government involvement in free trade. Some Democrats also oppose expansion of NAFTA due to potential US job losses.
NAFTA went into effect Jan. 1, 1994. The goal is a free-trade area with Mexico and Canada. Tariffs have begun to tumble in a process that for some products will take 15 years.
In assessing the impact of NAFTA, economists say that the Mexican financial crisis is probably more a factor than lower tariffs. The crisis began the month before the treaty went into effect. Mexico's peso lost some two-thirds of its value against the dollar, falling from 3.3 pesos per $1 to nearly 8 per $1 today.
That devaluation and the accompanying recession in Mexico encouraged Mexican exports and discouraged imports from the US. As a result, the US trade balance with Mexico went from a $1.7 billion surplus in 1993 to a $16.2 billion deficit in 1996.
This shift cost the US 251,000 jobs, estimates Thea Lee, an economist with the Economic Policy Institute, a liberal Washington think tank that has opposed NAFTA for years. Similarly, the trade deficit with Canada has grown from $10.7 billion in 1993 to $22.8 billion in 1996. This represents a loss of 169,000 jobs, Ms. Lee figures, using a Commerce Department method of calculation. The trade shift with Canada also results mostly from currency devaluation.
THE Department of Labor has certified that 107,632 US workers - mostly in the apparel and electronics industries - lost their jobs since NAFTA began because production shifted to Mexico or Canada, or because of competition from imports from these countries. Under NAFTA, these workers (from 771 firms in 48 states) are eligible for special funds for retraining.
Despite such jobs losses, the US economy is the best job-creating machine among the industrial nations. It adds some 250,000 jobs a month, enough to easily offset the Mexican-Canadian.
Still, economists see two continuing influences from growing trade ties with Mexico:
* Overall, NAFTA will raise average incomes in both countries, hold David Wyss and Francisco Larios, economists at DRI/McGraw-Hill, a Lexington, Mass., consulting group.
In the US, the skilled and college-educated may see larger wage increases as business profits from the the enlarged free-trade market, the two maintain.
"It may, however, worsen the inequality of US incomes," they write. Because Mexico has so many unskilled workers willing to work at relatively low wages, it will attract unskilled jobs from the US - "worsening the incomes and job prospects for unskilled and uneducated US laborers."
* The threat of moving to Mexico is likely to be used by manufacturers to prevent unionization.
Ms. Bronfenbrenner of Cornell's School of Industrial and Labor Relations examined the nature of plant closings and plant closing threats in more than 500 organizing campaigns in the US in the years 1993 through 1995.
The study was completed last September for a joint US, Mexico, and Canada commission. But its release was blocked by the US Labor Department.
More than 50 percent of the employers made threats to close all or part of a plant during union organizing drives, she found.
More than 80 percent of the threats, the study says, involved "aggressive legal and illegal employer behavior such as discharges for union activity, electronic surveillance, illegal unilateral changes in wages or benefits, bribes, promises of improvement, and promotion of union activists out of the unit."
NAFTA has also tipped the balance of bargaining power toward employers by "enhancing the credibility of moving work to Mexico," adds Lee.