NAFTA was overwhelmingly ratified by the Mexican parliament last month, following the close vote in the US Congress. From San Francisco, SEAN HEALY reports on the changes it will bring.
The North American Free Trade Agreement is ostensibly about ending all tariff and trade barriers between Canada, Mexico and the US to allow the free flow of goods and services. The pact - the US's answer to the emerging European trade bloc - took effect on January 1. Various tariff cuts happen immediately or over 5, 10 or 15 years.
The pact cuts 57% of the USA and Mexico's agricultural subsidies immediately, 94% over 10 years and the rest within 15 years. Mexico's tariffs on US-built cars and light trucks are immediately halved to 10% and then phased out over 10 years. The US 2.5% tariff on Mexican- assembled cars ends immediately, while the 25% tariff on light trucks is halved and then phased out over 10 years.
Mexican tariffs on textiles and clothing will end immediately; US and Canadian tariffs (of up to 30%) will be phased out over 10 years. The Mexican trucking industry will be deregulated, with US companies allowed to own majority stakes in Mexican firms by 2000 and own them entirely by 2003.
Yet according to Kim Moody of the US trade union journal Labour Notes, "NAFTA's not about trade, it's about investment strategy. The major strategy of the last decade has been towards Japanese-style production, with an emphasis on out-sourcing and subcontracting to lower wage areas.
"Formerly it used to be to the [southern US], but increasingly in the last decade it's been to Mexico. The Big Three car makers all have plants in Mexico, all for export back to the USA. They're been able in a way to combine low wages with high tech. Mexico is the natural candidate because it's thoroughly industrialised, it has an educated and relatively skilled working class, it has monstrously high unemployment to keep wages down."
Its physical proximity has also suited the trend towards "just-in-time" production, which has produced a belt of factories ("maquiladoras") just inside the border from California to the Gulf of Mexico. From there, products and components can easily and quickly be trucked back to California and Texas.
One dollar an hour wages and very little by way of environmental regulation have turned these areas into mile after mile of dusty slums reeking from the ammonia of chemical factories.
The radical journalist Alexander Cockburn, writing in the Nation, said, "NAFTA is centrally about protecting the rights of US and Canadian investors in Mexico and locking Mexico into a dependency path foreclosing radical options forever".
The pact includes major changes to the Mexican economy and pattern of ownership. NAFTA dismantled Mexico's virtual ban on US banks, allowing them to take over 15% of the Mexican banking market by 2000, up to 25% by 2004 and conceivably all of it by 2007. Similar deregulation will occur in the Mexican securities market: 30% by 2004, conceivably all of it after that.
Even Mexico's nationalised oil industry will suffer inroads. While Mexico is allowed to retain its ban on foreign ownership of oil and gas reserves, US drilling companies are allowed to "share" in the profits of striking oil.
NAFTA will complete a series of major economic "reforms" that the Institutional Revolutionary Party (PRI) government has instituted since the Mexican debt crisis of 1982. The IMF-engineered rescue plan of that year included provision for massive privatisation of the once-strong Mexican public sector. More than 1000 government enterprises have been privatised over the intervening period.
The result has been that today 37 men own 54% of the Mexican economy, overwhelmingly as a result of participating in the privatisation frenzy. Many of these purchases were made by joint ventures between these men and US transnationals and US banks. Others were financed by entrepreneurs buying Mexico's foreign debt at 50 cents in the dollar at 12% interest - a 24% profit rate.
This process has resulted in increasingly close ties between the Mexican business elite and their US counterparts.
NAFTA will almost completely undermine any autonomy or national sovereignty that Mexico has been able to retain until now. Mexican left forces are describing it as the biggest land grab in history. Mexico will lose its ability to regulate in any real respect its economy, environment or culture.
The NAFTA agreement consists of five volumes weighing seven kilograms. "What most people don't realise is that all these regulations are not regulations on corporations but on the ability of the nations to act", Kim Moody explained, "and especially of Mexico, which will have it worse because it has less leverage".
Of especial concern is the proposed formation of so-called "settlement panels" consisting of one appointed representative of each government. These panels will have wide powers to overrule national regulations that "infringe on free trade". The panels themselves will be unaccountable, standing above national structures, with no right of appeal from them. The impact on national sovereignty - more specifically, Mexican national sovereignty - is obvious.
Just as obvious is the impact these panels and the NAFTA rules will have on environmental regulations. According to a statement issued by 25 US environmental organisations, including Sierra Club and Friends of the Earth, printed in the November 15 New York Times, "many existing conservation policies, like the present bans on exporting raw unprocessed logs from state land in Oregon, federal lands in the US and certain other public lands, would be considered illegal barriers to trade. Moreover, our control over pesticides in our food, or worker safety, or consumer safety will be undermined."
The statement lists six US environmental laws which will be undermined by NAFTA: the Marine Mammal Protection Act, the Endangered Species Act, the Clean Air Act, Driftnet Enforcement Act, Wildbird Conservation Act and the Humane Slaughter Act.
NAFTA will also reinforce intellectual property rights, in line with the campaigns the US government has waged for several years to ensure continued transnational monopolies over technology, particularly biotechnology. The pact will ensure virtually no technological transfer will occur between the USA and Mexico, even when US-owned technologies are used in Mexican factories and plants.
Within the USA itself, NAFTA will also have a serious impact on some industries, though very few reliable studies have been done. Certainly, the pact will have a dire impact on industries such as clothing, auto and chemicals, many of which will move to Mexico.
This issue of US jobs has been the central point addressed by the AFL-CIO union federation. Its president, Lane Kirkland, wrote in the November 14 New York Newsday, "The net result is that rather than lifting the Mexican standard of living out of poverty, NAFTA will force the US standard down. First, it will increase the flow of good-paying US jobs to Mexico. Second, the mere threat of companies moving south of the border will lower US wages."
This issue provoked a unanimous reaction from organised labour around the USA. However, the No to NAFTA campaign was badly damaged by its self-proclaimed spokesperson, Texas millionaire Ross Perot. The administration manoeuvred Perot into that position, knowing he was incapable of winning public support. The CNN debate between Perot and Vice President Gore led to a debacle as Perot fudged his figures and Gore attacked him over his own personal free trade zone in Texas, leaving Perot looking hypocritical and discredited.