By Michael Drohan
The first major trade agreement of recent decades was between Mexico, the US and Canada in 1993, coming into effect on January 1,1994. It is called the North American Free Trade Agreement (NAFTA). Many critics assert that the title of “Free Trade” for this agreement is a misnomer. They maintain that they should rather be termed foreign investor privilege agreements which have promoted offshoring of manufacturing and other industries to low wage countries across the globe.
Since NAFTA was instituted, US manufacturing has lost an estimated 5 million jobs and the shuttering of 57,000 factories. The Treaty itself was highly promoted by corporate and financial interests in the US as well as in Mexico and Canada. Protections for workers were mostly absent in this accord and in subsequent agreements, whereas capital investments were highly protected and foreign investors were granted rights equal to that of national corporations. By and large, there was bipartisan agreement in favor of these treaties by both political parties in the US, while US labor largely resented them.
NAFTA became the template for a slew of other trade agreements such as CAFTA, LAFTA and most recently the Trans Pacific Partnership (TPP). They all bear the same stamp of being foreign investor agreements. The result for the US and other leading manufacturing countries has been the creation of “rust belts” in the former industrial zones. Automobiles, textiles, footwear, pharmaceuticals and metal industries left behind devastated urban landscapes in North America and Europe. Disillusionment and a turn towards right wing populism got a foothold in these depressed areas of the industrialized world. In the meantime, corporate America made out like bandits, benefiting enormously from low wage labor across the planet.
As already indicated, most progressive economists took issue with the name for these agreements as well as with their contents. There was so little about trade in goods and services in these agreements that it made the name a joke. Further, while granting all this freedom to capital movements and investments, labor and people were granted no such rights of movement or relocation across borders. On January 1, 1994, a revolt took place in a south-eastern corner of Mexico known as Chiapas. It was called the Zapatista rebellion and was led by indigenous Mayans in that state. The Zapatistas saw clearly the implications of NAFTA for them. NAFTA practically destroyed much of the local production of corn as Mexico was overwhelmed by millions of tons of corn from the US midwest. In many ways the phenomenon we are presently beholding of massive migrations of poor peasants towards the Mexico-US border is a direct outcome of these so-called trade policies.
Now enter Donald Trump into the equation. Before he was elected he took issue with many of these agreements and he refused to let the US be part of TPP. He has also roundly rejected NAFTA and says that it should be renegotiated. His most concrete measure to date has been to impose or threaten to impose tariffs on Canada, China and the European Union. Trump’s take on the trade situation and the treaties is that “America is being taken advantage of.” He practically alleges that these agreements were crafted by foreigners and that US interests and parties had little say in them. The truth is, of course, that US corporate and financial elites were the principal architects of these agreements. These are the very individuals and institutions that Trump lavished even more goodies on in 2017 with his massive tax gift to them and himself. In addition, Trump and his family offshore the production of a slew of Trump-branded products.
In the 2016 election and since, Trump has played to the angry people, largely white, in America’s shell of a manufacturing heartland. His fulminations seem like sending out an alarm long after the horses have bolted from the barn and are thousands of miles away. They ain’t coming back no matter how much you holler. However, the hollering does bring him much political capital and many are prepared to hold on to the illusion that automobile, textile and appliance manufacturing are on their way back to the US.
It would seem to be a no-brainer that Trump’s economic interests are light years away from the disenfranchised sectors just mentioned. At most they would be able to afford to drive by Trump’s resorts, towers and luxury apartments. They are not really a part of the America that he wants to make great again. Perhaps his entire discourse about “making America great again” and of “America being taken advantage of” are mere externalizations of Trump’s megalomaniac tendencies and feelings of inferiority. His slapping on of massive tariffs on certain nations may play well in Peoria but it is a dangerous game. During the early days of the Depression in 1929, the US tried to play this game by introducing the Smoot-Hawley Bill of massive tariffs. The result was a vicious trade war which deepened the economic crisis and played a major role in deepening the Depression.
Michael Drohan is a member of the Editorial Collective and Board of TMC.