Lessons From 20 Years of NAFTA
The NAFTA model has failed.
When NAFTA (the North American Free Trade Agreement) took effect 20 years ago, we were promised mutual gain.
To be clear, everyone I know wants good trade policies that raise living standards at home and abroad. The question is not trade versus protectionism. It's good trade policy versus bad trade policy.
NAFTA and numerous subsequent trade deals perform very well for investors and global businesses, while leaving most workers and communities at a disadvantage.
Since NAFTA, our trade deficits totaled over $8 trillion. We've lost millions of good manufacturing jobs and de-industrialized our economy.
Workers have lost bargaining power and wages stagnated. We see more part-time precarious work, and a decline in job security. Wal-Mart is the dominant domestic employer, becoming the face of new 21st Century jobs. Inequality is arguably the defining challenge of our time.
We did trade wrong.
We could have had a good trade policy that increased trade and raised living standards. We could export more soybeans, airplanes and software, and protect the environment around the world. We could have low-cost goods and encourage democracy, respect for human rights and improved working conditions.
The "deal" in a trade agreement is that other countries want access to our markets -- to sell their products to us. We expect something of value in return. We could have asked for very basic enforceable labor protections: no child labor, no slave labor, the right to organize and protections from discrimination. We did not.
We could have asked for basic enforceable environmental protections for forests, clean air and clean water. We did not.
We could have insisted on access to medicines, food security, sanctions against currency manipulators, internet freedom, and prudent financial regulations to prevent extraordinary damage from repeated financial market failures. We did the opposite.
Let's step back.
Our Constitution grants extensive political and social protections to people and communities. The Constitution never mentions corporations -- not once. It has its flaws, but at its core, the Constitution balances political power. Our courts balance public interests with private property interests.
Trade agreements take the opposite approach to global governance. These deals look like a corporate Bill of Rights, full of protections for global investors and corporations, enforced by special courts or tribunals. The shadowy trade tribunals are fundamentally different from courts and legal principles we expect in modern democracies. They are completely one-sided -- favorable to global corporations, but closed to citizens. Trade tribunals seek maximum possible trade and maximum opportunities for investors. They are indifferent to public good or public interest.
This looks more like the East India Company, which administered a century of corporate rule in India during an earlier age of globalization. The East India Company ran its own courts under its own authority, for its own interests. That was great for British colonialists. Not so good for India.
Since NAFTA, tribunals have heard over 500 challenges to various national policies. Trade sanctions threaten public health policies approved by Australia's High Court and environmental decisions from courts in Canada and Ecuador. Trade sanctions can thwart actions of our own Congress and Supreme Court.
Last year, a trade ambassador predicted that trade deals would set the Gold Standard for global governance. They would facilitate the life of global business for a generation. These agreements would determine the way life is organized in 2050.
Trade agreements go far beyond tariffs and import duties. Trade deals are political, economic, social and moral documents. They define how we divide gains and how we determine winners and losers. They set rules at a global scale, bypassing the normal democratic processes that we used for generations to build a strong middle class in America.
Very soon, Congress will take up the Trans-Pacific Partnership (TPP) and a similar deal with Europe, known as TTIP. These two huge NAFTA-style trade deals will consolidate the failed NAFTA-style trade policy as a global standard. Collectively, trade deals define global power relationships in manufacturing, agriculture, pharmaceuticals, public health, patents, internet freedom, food safety, immigration, financial regulation, labor rights, and environmental protection.
Those power relationships will determine how we divide future gains from productivity and trade. Those with dominant economic, political, social and moral power will extract gains for themselves, and those without power will be fortunate to cling to what they have. No wonder that inequality is the defining challenge of our time.
"Free trade" failed. It's not free -- it will cost us our future.
It's not trade -- it's about the power to divide gains.
It doesn't work -- the historical trajectory from NAFTA to TTP to TTIP leads to a lesser America.
We can have a good trade policy. It will look a lot more like our Constitution than NAFTA.
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This piece was first published on The Huffington Post.
