Calling Maggie's bluff: The NAFTA labor agreement and the development of an alternative to neoliberalism

While an employee of the U. S. Department of Labor, Stephen Herzenberg served as assistant to the chief negotiator for the NAFTA labor agreement. He is currently executive director of the Keystone Research Center in Harrisburg, PA. Among his recent publications are Continental Integration and the Future of the North American Auto Sector, in Maureen Appel Molot, ed. Driving Continentally: National Policies and the North American Auto Industry (1990); Whither Social Unionism? Labor and Restructuring in the U.S. Auto Industry, in Jane Jenson, ed. Canadian and American Labor Respond: Economic Restructuring and Union Strategies (1993), and Better Jobs for More People: A New Deal for the Service Economy (forthcoming, Twentieth Century Fund). This essay draws in part from Switching Tracks: Using NAFTA's Labor Agreement to Move Towards the High Road, (Albuquerque: Interhemispheric Resource Center, Border Briefing Paper No. 2). It is now three years since the implementation of the North American Free Trade Agreement (NAFTA) and its labor and environmental side accords. In the United States the second Clinton administration is underway. Canada recently initialed free trade, labor and environmental agreements with Chile which may intensify pressure for Chilean accession to NAFTA and the side accords, necessitating at least technical changes to these agreements. The NAFTA labor agreement itself contains a provision requiring a review of its effectiveness within four years. After reviewing the negotiation and implementation of NAFTA's labor agreement, this essay argues that the free market/free trade model now guiding North America's economic integration is not working and that the NAFTA labor agreement, for all its limitations, could be an important vehicle for promoting more equitable, productive, and socially sustainable continental development. As NAFTA enters its third year, evidence accumulates of the disastrous outcomes of the current model. (2) For a decade or more, opportunity and living standards have stagnated or declined for most of the U.S., Canadian, and Mexican population. Mexico has suffered a prolonged economic crisis since the early 1980s, with the fall in wages that began following the late 1994 collapse of the peso just the latest episode. Despite the predictions of the economic theory of comparative advantage, even traditional labor-intensive manufacturing in Mexico has failed to adapt successfully to NAFTA and the preferential access to the U.S. market that preceded it. Mexico's foreign-linked export sector, including some capital-intensive production, continues to expand, driving the U.S. trade deficit with Mexico in 1996 to near $20 billion (the auto and auto parts industry alone accounts for almost three quarters of it). U.S.-Mexico trade patterns intensify the pressure on high-wage, blue-collar U.S. and Canadian workers but without creating jobs or spurring backward linkages and a domestic Mexican market that would generate self-sustaining development. In the debate over NAFTA, the decision to negotiate a labor side agreement (officially named the North American Agreement on Labor Cooperation or NAALC) represented the only concession to critics of unfettered markets. The NAALC, however, has always been something of an orphan (or, if it owes its paternity to Clinton, an abandoned child). NAFTA's neoliberal champions viewed the negotiation of NAALC as an irritant, a source of delay, and, like virtually all labor market regulation from their perspective, bad policy. Most trade unions and other NAFTA skeptics still see the NAALC as a political fig leaf for a trade agreement too flawed and reflective of corporate priorities to be worth swallowing at any price. International and human rights groups are the organizations most actively using NAALC instruments. While their efforts have been invaluable, their moral advocacy for rights and standards does not fundamentally challenge the economic case for deregulation. …