As U.S. President Donald Trump promised, renegotiation of the North American Free Trade Agreement (NAFTA) has commenced. The initial talks are already sending a clear message: the disagreements to be resolved by Canada, Mexico, and the United States are fundamentally political, not economic, and they are as pronounced within each country as they are between them.
Contrary to popular belief, the true global trade dilemma of our time is not so much liberalization versus protectionism, but the rights of capital versus the rights of people. In recent years, trade pacts have exacerbated imbalances on that front, by failing to deliver benefits for the many, rather than for a relatively few powerful corporations.
In this context, a focus on improving each NAFTA economy’s trade balance would be misguided. Instead, negotiators must aim to spread the benefits of trade more widely, by taking better advantage of the opportunities for cooperation stemming from geographical proximity, complementary labour markets, demographic dynamics, and economic integration.
The Office of the United States Trade Representative (USTR) has the right idea, with negotiating objectives that cover labour issues and wages, transparency, corruption, and some aspects of human rights. Canada has enriched this approach further, insisting that gender and the rights of indigenous people also be included. Mexico has yet to say what it wants, but it should move in the same direction.
Issues relating to wages and working conditions will be particularly important to Mexico, where the prevailing approach can be called “patriotic exploitation.” In short, workers’ rights and compensation are regarded as a concern for Mexican companies alone.
Though Mexico promised in 1993 to bring its labour standards into compliance with International Labour Organization guidelines, it has yet to follow through. So, as labour productivity grows in Mexico, the additional income is appropriated mainly by companies and their shareholders, rather than by the workers creating the value. As the CEO of United Technologies gushed, Mexican workers now do the same jobs to the same standard as their U.S. counterparts, but for barely a fifth of the pay.
Mexico continues to operate under the assumption that wages low enough to attract and sustain investment ensure the shortest route to competitiveness. The Mexican economic elite, therefore, considers it almost a patriotic duty to continue exploiting the country’s workers. Spurring faster wage growth in Mexican manufacturing may require that free access to the U.S. market be conditioned on it.
How could Mexico fulfill this condition? In the long term, achieving full employment would do the job. But, in the medium term, the key will be labour rights: unionization and collective bargaining; prohibition of child labour, unpaid overtime, unjustified dismissal, and excessive outsourcing; and skills training to meet the economy’s changing needs.
Including wage conditions in the revised NAFTA could also be meaningful in the U.S. and Canada, especially with regard to the rights of migrant workers and permanent residents. As for Mexico, immigration and migrants are the most important topic excluded from the original agreement. The key to success will be effective penalties for non-compliance, focused on the withdrawal of trade benefits.
On corruption, too, it is likely to be difficult for Mexico to move forward without external discipline. To be sure, since 2008, Mexico has sought to implement far-reaching reforms of the criminal justice system, and last year, it created a national anti-corruption system.
But the government has actively undermined its own efforts on both fronts, with the anti-corruption system having yet to see the light of day. Meanwhile, calls by major civil-society organisations, business leaders, and top academics for the appointment of an autonomous and effective attorney general and anti-corruption prosecutor have met considerable resistance.
The NAFTA renegotiation provides an opportunity to internationalize Mexico’s anti-corruption fight. Already, the USTR has identified corruption as an area of interest. For example, the main provisions of the U.S. Foreign Corrupt Practices Act could be included in the new NAFTA, in order to raise Mexican standards of compliance.
The final chapter that should be added to the renegotiated NAFTA is also the most delicate: human rights. Since the end of the 1990s, Mexico has accepted the idea of subjecting its commitments in this area to international scrutiny.
Yet this promises to be the most violent year in Mexico since 2006, when the “war on drugs” was declared. There is reason to believe that concern in the U.S. about its worsening opioid epidemic, which supposedly originates in the poppy fields of Mexico, will intensify the war effort – and, with it, human-rights violations.
With the Mexican government failing to translate its rhetoric on human rights into action, NAFTA may provide a powerful mechanism to improve outcomes. Specific goals should include improved gender wage equality and a better balance between agricultural exporters’ prosperity and that of agricultural workers, many of whom are indigenous.
Trade pacts like NAFTA must no longer be regarded as charters of rights for large corporations. They must serve ordinary citizens and address their problems. To that end, today’s trade deals must take a cooperative approach that emphasizes capacity-building and encourages vigorous citizen participation, with civil society in each country assured the legal standing to present cases within the framework of a renegotiated agreement.
For the renegotiation of NAFTA to be worthwhile, it must address wages, corruption, and human rights – all particularly serious challenges for Mexico today. If it does, Canada and the US will be better off as well. - Project Syndicate