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Socialist Project • E-Bulletin No. 1404
April 28, 2017

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NAFTA Redux

Ernie Tate

The new Trump administration has made the North American Free Trade Agreement (NAFTA) between Canada, Mexico and the United States, a major issue in its relations with its two neighbours. Recently, Trump has threatened to tear it up. With his standard nationalist demagogy, he claims “previous bad trade deals,” have cost the United States many jobs as a result of American manufacturers moving plants off-shore. He is now in the process of telling Canada and Mexico the new administration is prepared to bully its way to a new and more favourable arrangement for itself.

Trump: The Art of Twitter Politics

There are no smiley faces, no comforting talk about making the deal “work for everyone”; instead the administration, casting the niceties of diplomacy aside, is using the hard language of war, even resorting to martial terms to let us know how they think the new negotiations should proceed. “Well, we're in a trade war,” stated the U.S. Commerce secretary, the multi-billionaire, Wilbur Ross, when asked directly about that possibility in relation to NAFTA. “We've been in a trade war for decades – that's why we have a deficit. The difference is our troops are now coming to the ramparts.” “If people know you have the big bazooka, you probably don't have to use it,” he stated.

“The Mexicans know, the Canadians know, everybody knows, times are different. We are going to have new trade relations with people. And they all know they're going to have to make concessions. The only question is what's the magnitude, and what's the form of the concessions,” he said.

It has to be noted here, that this stance on trade is a corollary to a more aggressive and even militaristic foreign policy shift toward the world, toward those countries who are outside the American empire – the end of the policy of “strategic impatience” toward North Korea, the bombings of Syria and Mosul, Iraq, the dropping of the monster bomb and the increase of troop levels in Afghanistan and a more aggressive, even bellicose, stance toward China, Iran, Russia and Cuba. In this shift to the right by the American ruling class, I prefer to see it as a further deepening of neoliberalism – neoliberalism on steroids if you wish – that has been underway for a considerable period of time. It is by no means a dismantling of the American empire, but a new phase in how it relates to the rest of the world.

Negotiations in Secret

I think careful attention should be paid by socialists everywhere to these NAFTA negotiations. It will be difficult to find out what's going on, of course, because like the “trade” negotiations in the late eighties and early nineties, a lot of it will be carried out in secret and it will be only later that we learn of the new limitations placed upon our sovereignty and democratic rights. Any concessions the Canadian ruling class make, will, like with the original NAFTA deal, be dearly paid for by working people. They'll most likely set the pattern in the next period for new trade relations between the major capitalist powers. Britain is a case in point: when it gets out of the E.U., it will negotiate a new series of trade arrangements with the countries that remain and which no doubt will have many of the undemocratic – and even secret – neoliberal features. As we have seen, these agreements are not so much about trade, but are more about investment and providing constitutional guarantees for corporate – foreign and national – property rights. Like Canada, when it negotiated the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) with the E.U., it retained many of the egregious features of NAFTA and which was also true of the failed TPP, Trans Pacific Partnership, cancelled by the Trump administration immediately after taking office.

These trade agreements have never been popular Canada. In 1994, despite widespread opposition to it, NAFTA was finally approved, with much fanfare from the ruling class. At the time, Ipsos Reid polls showed most Canadians, 58 per cent, were opposed. It also was very unpopular in the U.S., and ironically a source of Trump's support in the working class. The opposition in Canada was massive, with all the unions, federal and provincial, against it. Community groups, student organizations and the New Democratic Party (NDP), Canada's version of the British Labour Party, were part of the campaign to defeat it. In Mexico, the most dramatic opposition came from the poor southern state of Chiapas, where the Zapatistas led an uprising of indigenous people and peasants against the central government, an uprising which continues to this day. Probably the most important agreement ever signed between the ruling classes of North America, its adoption was a major defeat for the working class and for which it has paid a heavy price since.

Particularly obnoxious in the 1994 agreement were the clauses that gave transnational investors rights that infringed upon Canadian sovereignty and that undercut the power of governments at all levels to regulate investments. NAFTA opened up the economy for further privatization, especially in services such as hydro, municipal water utilities and sewage treatment systems.

It's still early days and the various ideas being talked about by the Republicans have not reached their final form, but currently being debated – to help pay for their pending tax reforms for the wealthy it is suggested – is a possible 20 per cent border adjustment tax (BAT), on all trade across both borders. Canadian soft wood lumber has now had a 20 per cent curtailment tax imposed upon it. These taxes will be used to compensate for the money they had been expecting to save because of eliminating Obama-care, a Trump failure. In the upcoming negotiation, they have signalled they will be demanding special rights for foreign investors to bid on the three levels of government's contracts and infrastructure programmes, without reciprocity.

Singling Out Mexico

Trump has singled out Mexico – highly dependent on U.S. trade that makes up 80 per cent of its exports – for nasty treatment. Prominent Republicans are suggesting that a special import levy be imposed on all Mexican products to help finance the building of a wall along the border, promised by Trump in his election campaign. But an unintended consequence of his hostility to Mexico has been a sharp rise in anti-American feeling and a dramatic increase in radical nationalism among the Mexican people.

Protests have broken out all over Mexico ever since Trump's election. A significant one was seen on February 12th: newspapers report that a widespread, nationally organized protest took place with mass mobilizations in over twenty major cities. Tens of thousands of protestors packed the huge square, the famous Zocalo in Mexico City to voice their anger against Trump.

One beneficiary of all this shift to the right in the U.S. has been Andre Manuel Lopez Obrador, “AMLO” as he is known in Mexico, former leader of the PRD – Party of the Democratic Revolution – who was runner-up in the last two presidential contests and was thought to have been cheated out of his win when the vote was finally tabulated. In 2012, he formed the new National Regeneration Movement Party (MORENA) and is presently that party's candidate in the upcoming 2018 campaign.

Much to the consternation of private investors, “AMLO” is threatening to put a halt to the privatization contracts for Pemex, the state owned oil company and for the Federal Electricity Commission. Before Trump's rise, “AMLO” was far behind in the polls; now he has surged ahead, bypassing his two main contenders. The possibility now exists that in 2018, the U.S. will have sitting on its southern door-step, a leftist radical government, with the second largest economy in Latin America, something I'm sure it wasn't expecting when Trump was only a candidate.

At this early stage in Canada it looks like Justin Trudeau, will continue to toady favour with the new administration, and throw Mexico, which was never really accepted as a full partner in the agreement, under the bus in his efforts to get a favourable deal. And even though Chrystia Freeland, his Trade Minister, says she wants a “trilateral agreement,” her main advisor on the issue, who claims to have a special relationship with Trump, Brian Mulroney, who has a home near his Mar-a-Lago resort, was the Prime Minister who signed the original agreement, says it most likely that it will be a “bilateral” deal.

It's notable that not one word of solidarity was ever offered to Mexico or protest expressed by Trudeau against Trump's racist campaign. This, when on many occasions he has called Mexicans “rapists,” “criminals” and “drug dealers.” These same Canadian hypocrites don't hesitate a moment to publicly criticize other governments such as Russia or China when they are presumed to have behaved badly, but with the Trump administration, they are as silent as church mice.

Of the three countries, it's clear that Mexico has suffered the worst from NAFTA since its enactment. Among other things, it has been devastating for its agriculture: the country went from near self-sufficiency in food production to being almost totally dependent on American imports to meet its food needs. For example, all tariffs on American corn – a major component of the Mexican diet – were abolished allowing unrestricted flow south across the border. And if that wasn't enough, American subsidies on corn were later increased in 2002, making it cheaper and even more devastating for Mexican farmers, most of whom retain small holdings. As a consequence, thousands of farmers and peasants were driven into bankruptcy and unemployment, the main reason many Mexicans in recent years have headed north over the American border in a desperate search for work.

And Canada...

The Republican administration under NAFTA will be targeting Canadian agriculture and its supply management system for milk, poultry and egg production, much of which come from cooperatives and family farms, many of them small when compared to those in the USA. Supply management protects them against the States’ heavily subsidized agriculture.

Regarding the digital economy, it's also expected that the Americans will be making new demands here that will further impinge on Canadian sovereignty. Insisting on special rights for their security services, American negotiators will be demanding that Canada not proceed with implementing “data localization” regulations that mandate that servers storing Canadian's personal and private information be located in Canada, and not be accessible to foreign powers, i.e., the U.S., a provision they were able to achieve in the recently discarded TPP. “Data localization” is a measure many countries have been insisting upon for their data storage systems to protect their citizens against U.S. surveillance

Also on the agenda is the lumber industry and the vast areas of land which is publicly owned, and known here as “Crown land.” These public lands have been under attack from American lumber producers for a considerable period. They claim that the royalties paid to the Canadian government by the mill operators are insufficient and amount to a subsidy. All across the north from coast to coast, saw-mills are the primary source of employment in many small towns and communities. Despite NAFTA, exports of soft wood lumber into the U.S. have been reduced because of the imposition of curtailment duties, U.S, measures that Canada has challenged many times before the World Trade Organization and won and that the U.S. has refused to recognize

In the energy industry, the Republicans are also threatening that all new pipe-lines going south from Canada, will be built solely with American-made steel. Trump has just signed an executive order clamping down on the “dumping” of foreign steel into the U.S. market. The border between the two countries for many years has virtually ceased to exist for Canadian steel mills – severely reduced in number from previous years. Nevertheless, steel worth $14 billion a year flows south and iron ore, metallurgical coal and steel scrap comes north According to the Association of Canadian Steel Producers, U.S. proposals on steel would severely impact an industry which provides 22,000 direct jobs in Canada and 100,000 indirect ones.

In Trump's talk about trade – most of which is inflammatory and appears quite ill-informed – what is not mentioned in the equation is the enormous amounts of capital that the American multi-national corporations accumulate as a result of their domination and exploitation of the rest of the world. What he is saying is typical of what most demagogues shout, as they look for scape-goats as they try to present an explanation for problems endemic to a capitalist economy, the problems of unemployment, poverty, crime, problems of housing, a health care crises, a high prison population, all the problems that arise from an economic system not able to meet the needs of its people and which goes from crisis to crisis.

You can be sure the upcoming NAFTA talks will not be about improving the lives of working people. In 1994, that's what was promised, but while the “one per cent” has certainly gotten a lot wealthier, it has been a disaster for the rest of us. When adjusted for inflation, Canadian wages have remained stagnant over the past two decades, and every time union contracts come up for negotiation, employers are now demanding enormous take-backs, and getting them.

There has also been a decline in manufacturing in Canada's two largest provinces, Ontario and Quebec, and a resulting disappearance of as many as 300,000 jobs, in an economy that's now being pushed further down the road toward becoming that mainly that of “a hewer of wood and shipper of natural resources.”

Social activists must pay attention to what's going on with these NAFTA negotiations. Whether it's trilateral, like what was signed in 1994, or three separate bi-lateral agreements, we can be sure that just like it was with the original NAFTA, this new agreement, if not quite a template, will nevertheless, set the pattern for what the American ruling class will be demanding from its other trading partners around the world. Despite all the talk we've heard in some circles over the past few years, about a “declining America,” when you have the most powerful economy in the world along with the most powerful nuclear-armed military machine – by several magnitudes – other ruling classes quickly get on board.

We've just seen a hint of this from the G20 group of Finance Ministers which met over the week-end of March 18th – 19th. The new U.S. administration went aggressively to work to lay down its new hard stance on trade and the effects of this was seen in the G20's final statement. There was no mention of what had usually been present in previous texts, words such as the “need to resist protectionism,” etc. As man in the media observed, the new position of the G20 Finance Ministers on this issue moves them closer toward alignment with the new American “protectionist” stance. It helps prepare the ground for the U.S.'s coming trade negotiations with China and for the American Congress to label China “a currency manipulator,” a threat to be used against China if the Americans don't get their way.

Trade with the U.S. is a very big deal for Canada. Of all countries, we are the most integrated into their economy and NAFTA has accelerated that process. Thirty per cent of Canada's GDP, or seventy-five per cent of Canadian exports, go to the U.S.; only 2% of theirs comes here, which shows the comparative size of the two economies. To try and head off the protectionist measures, Justin Trudeau has been keen to sweet talk the Trump administration and point to the importance of the Canadian market to northern states sitting on the border. But Ontario – where most of Canada's manufacturing is concentrated – exports almost half of its GDP to the U.S, Quebec sits at 40 per cent and Alberta a whopping 83 per cent.

Moreover, in the auto industry, with its modern just-in-time manufacturing systems, and with parts plants and major auto assemblers – such as General Motors, Ford and Chrysler – located on both sides of the border, a single part, for example, in the auto assembly process can re-cross the border as much as seven times before the finished vehicle finally rolls off the line. Under NAFTA currently, vehicles and auto parts are shipped duty-free between the three countries.

Labour Movement?

So far we have yet to hear anything significant from the Canadian labour movement, or the NDP on what a new NAFTA will mean. It's as if they are all asleep at the wheel. Over the past few years, it has dropped off the agenda of the labour movement almost entirely as an issue around which meaningful action could take place. In the coming negotiations, it's not certain that the CLC and large unions, such as the auto workers union Unifor (the successor to the CAW), will oppose it with the same vigour they mustered in the early nineties. That was a more militant period for unions in Canada which lasted to the end of the decade when the Ontario Federation of Labour (OFL) organized a series of one-day general strikes in major cities throughout the province against Mike Harris’ Tory government. But since then the labour movement has retreated from a mass action and militant perspective, and in auto is in an especially weakened state. The General Motors plant in Oshawa, Ontario, for example, organized by Unifor, has gone from a membership of around 13,000 to approximately 6,000 today, a result not only of NAFTA, but also of automation.

Union leaderships are signing contracts with the bosses these days that truly signify the depth of their defeat. Unifor has been accepting, something that would have been unthinkable when NAFTA was first signed:regressive two-tier settlements in the workplace – and even boasting about them to other employers to show how reasonable and “competitive” they are. These kinds of settlements are all over the place now, and not only in auto. Under them, newly hired workers are paid a lot less than the rest of the work-force. The same system is applied to pensions, where they are being fundamentally changed to force workers to rely on the ups and downs of the stock market and/or are being applied so that newly hired workers end up with an inferior pension compared to the rest of the work-force.

With Trump's threats after his election about NAFTA, some of the unions have issued statements pointing to its “weaknesses” and explaining how it should be “improved.” This is the approach of Hassan Yussuff, the new leader of the Canadian Labour Congress, to which most of major Canadian unions belong and which has 3.3 million members. And Jerry Dias, Unifor's President, and Maude Barlow, leader of the Council of Canadians, while making valid criticisms of NAFTA, are not calling for its repeal, but for its reform. It would be like putting lipstick on a pig, in my opinion.

My hope is that once the discussions about NAFTA get under way, there will be an awakening as to its terrible significance for working people's lives in the years ahead. NAFTA's very existence is a challenge to popular and working class sovereignty: it limits our ability to change the relationship of class forces in Canada and struggle for a better world. One thing the unions could do right away, and before the NAFTA negotiations get underway, is to take the initiative and organize/support the biggest protests ever in Ottawa, such as that which is being prepared now in London in anticipation of when Trump sometime this year visits the Queen. We should do the same here when he comes to see Trudeau, which he is sure to do soon. All new American presidents visit Ottawa early on in their mandate. What a way to protest the rottenness of NAFTA! •

Ernie Tate is an activist living in Toronto. His memoir, Revolutionary Activism in the 1950s and 1960s, recently published, is about the history of the left in Canada and Britain.

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Comments

#1 Anonymous 2017-04-28 17:52 EDT
Neoliberalism is dead according to some on the Left
I've read that neoliberalism is dead. The well known lefties who proclaim neoliberalism dead didn't explain themselves. And I don't agree that neoliberalism is dead. I would like to know why some on the Left say that neoliberalism is dead. And by "on the Left," I mean on the real Left.



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