Editorial: Winds of Change for NAFTA

The renegotiation of the North American Free Trade Agreement (NAFTA) is one of the main promises that helped Donald Trump being elected president in the industrial states more harmed by the outsourcing of jobs to Mexico. 23 years after the signing of the commercial agreement it’s not crazy to think that some things have not worked well or may have failed to fulfill the original expectations – and see if anything can be corrected.

Many of the problems do not stem necessarily from what is specifically written in the agreement between Canada, the United States and Mexico. They are more the result of governments not doing their part, unintended effects, and a model for economic development that contributed to the accumulation of wealth in the hands of a few.

NAFTA’s main goal was to benefit economically the signing countries’ citizens. In Mexico it helped the economy at a macro level, and in the U.S. it did the same for the private sector – especially the largest companies. However, it did not lift the former out of poverty, and it reduced the quality of jobs in the latter.

In order to approve NAFTA it was necessary to implement the North American Agreement on Labor Cooperation (NAALC), which deals with the impact of the disparate economies and different labor laws. The result was not good. Sweat shops in the Mexican side would fire anyone trying to organize a union; pregnant women were discriminated against and child labor was allowed in farms, all of which is in violation of NLAAC rules. In the U.S., the priority of retraining displaced workers was pushed aside behind a series of special payments which unions dubbed “burial insurance.”

NAFTA expectations for Mexico meant the promise of a prosperity that would allow it to “export products, not people.” The reality was that, for example, structural reasons prevented Mexican farmers from competing with U.S. products, thus creating a new immigration wave to the north. At the same time, it was a boon for Mexican food companies that grew by increasing exports.

Canada is willing to amend but Mexico is not so forthcoming. It will not be easy for Trump to make changes to NAFTA because they require Congress approval. The auto industry, among others, will push not to pay tariffs, as Trump wants, and the idea that jobs will come back sounds implausible, since big companies’ profits are based on using cheap labor.

There are reasons to change the NAFTA dynamics, but it’s going to take much more than an electoral promise.