After a year of North American Free Trade Agreement (NAFTA) renegotiations, the United States, Canada, and Mexico are expected to sign a revised deal on Nov 30.
The NAFTA 2.0 text is not the transformational replacement of the corporate-rigged trade-pact model that progressive activists, unions and congressional Democrats have long demanded.
But if the incoming House Democratic majority and their progressive allies successfully fight to secure swift and certain enforcement of the pact’s new labor standards and other key improvements, then the final package Congress will vote on next year could stop some of NAFTA’s ongoing, serious damage.
And that is a worthy goal. Almost one million American jobs have been government-certified as lost to NAFTA, with more being outsourced to Mexico every week. Nearly $400 million already has been paid by North American taxpayers to corporations using NAFTA’s outrageous Investor State Dispute Settlement (ISDS) tribunals to attack the policies that protect our health and the environment.
ISDS grants multinational corporations rights to sue governments before a panel of three corporate lawyers that can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits. NAFTA 2.0 largely eliminates the ISDS threat.
U.S.-Canada ISDS is terminated. ISDS with Mexico is replaced with a new approach that jettisons the extreme investor rights used to attack public interest policies and remedies key procedural concerns. (A problematic loophole preserves broad rights for nine U.S. oil and gas companies with contracts with Mexico’s Hydrocarbon Authority.)
The new text also eliminates provisions that forced countries to export natural resources they sought to conserve and restores U.S. rights to prohibit access for Mexican-domiciled trucks that do not meet U.S. environmental and safety standards.
It closes loopholes that granted NAFTA benefits to goods with significant value produced in China and other non-NAFTA countries. And, its benefits sets an important precedent by conditioning trade benefits on wage standards. How this Labor Value Content (LVC) requirement that 40 percent of the value of autos must be produced by workers paid $16 per hour or more to qualify for NAFTA will effect production location decisions remains unclear.
But, unless the new deal has strong labor and environmental standards that are subject to swift and certain enforcement, firms will continue to outsource U.S. jobs to Mexico to pay workers poverty wages, dump toxins and import their products back here for sale.
On this most critical measure, the NAFTA 2.0 text falls short.
Yes, the NAFTA 2.0 text includes terms that could eliminate the fake “protection” unions endemic in Mexico that lead to workers in new high-tech plants being paid $2 per hour. But absent greatly enhanced enforcement, such terms won’t improve North American workers’ lives.
Plus, Trump’s text has major new giveaways for Big Pharma that help them keep drug prices high by avoiding generic competition. These terms would lock in current U.S. policies that keep medicines outrageously expensive and export our bad system of protectionist drug company monopolies to Mexico and Canada.
So, what happens next? With Democrats regaining control of the House of Representatives, only a final NAFTA replacement package that preserves the NAFTA 2.0 text’s progress while addressing its flaws is likely to pass.
Congressional Democrats are well aware that Trump won in 2016 in no small part by focusing on people’s legitimate grievances with the devastation that U.S. trade policies have caused to communities nationwide. He exploited the infuriating reality that Democratic presidents have pushed NAFTA-style deals and been dismissive about the damage.
As a matter of policy and politics, progressives must not fall into the trap of conflating Trump’s isolationist withdrawal from the Paris Climate Treaty and other non-trade pacts with progressive opposition to job-killing, wage-suppressing, corporate-power-enhancing deals like NAFTA. That frame falsely posits neoliberalism as the alternative to Trump’s nationalism.
Rather, the test is whether a final NAFTA package puts the needs of working families first and stops some of NAFTA’s ongoing damage.
If NAFTA 2.0 does not measure up to that standard, it will face fierce opposition. Consider that the Trans-Pacific Partnership could not get through Congress in the year after it was signed despite both chambers being controlled by Republicans more favorably inclined to any and all trade deals.
Alternatively, if a final NAFTA package includes the improvements necessary to stop NAFTA’s ongoing job outsourcing and environmental damage, it would merit support even if its enactment were only a first step towards a truly new trade agreement model that could benefit all of us.
Lori Wallach is director of Public Citizen’s Global Trade Watch.