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This Day in Labor History: January 1, 1994

[ 33 ] January 1, 2012 |

On January 1, 1994, the North American Free Trade Agreement went into effect. NAFTA intended to bring down trade barriers between Canada, the United States, and Mexico. After a long fight against NAFTA’s passage by labor, environmental groups, Mexican farmers, and many other constituencies, the support of President Bill Clinton clinched its success. Clinton promised that “NAFTA means jobs. American jobs, and good-paying American jobs. If I didn’t believe that, I wouldn’t support this agreement.”

While judging the precise impact of NAFTA itself upon the number of employed Americans is complicated, NAFTA has had a highly negative impact upon high-paying blue-collar union jobs, a very bad environmental record, and did a great deal to spur the migration of Mexican farmers from the countryside and into the United States.

Even since the creation of the Border Industrialization Project in 1965, U.S. firms have had great incentive to move their operations to the Mexican side of the U.S. border. The Mexican government created BIP because it brought jobs to their country. American industry began lobbying the U.S. government to brush aside all barriers to globalization. As Jefferson Cowie shows in his fantastic book Capital Moves, American corporations had never bought into the Grand Bargain of the mid-twentieth century and looked to move away from unionized workplaces as soon as possible. When new factories in the United States, even in the South, proved too open for unionization, opening new factories in Mexico proved irresistible.

The passage of NAFTA allowed the fleeing of American manufacturing to enter its peak phase. Between 1994 and 2010, American trade deficits with Mexico were $97.2 billion, displacing 682,900 jobs. Of those, about 80% were in U.S. manufacturing jobs. Overall, since the passage of NAFTA, the United States has lost 5 million manufacturing jobs. Union membership plummeted. Today, only about 7% of American workers in private companies have union representation. In 1994, that number was 11%, down from 30% in 1965, when the Border Industrialization Project began. Companies used the threat of moving jobs to Mexico to force down wages and suppress unionization campaigns. Fearful of losing their jobs, American workers accepted rollback after rollback, but usually the companies eventually closed their American plants anyway.

NAFTA also spurred the migration of Mexicans into the maquiladoras, the cities, and the United States. While some will argue this is good for Mexicans (though anyone visiting Mexico City or Ciudad Juarez may have trouble making this argument), the reasons for it are really bad. American farm subsidies, a violation of NAFTA in spirit if not in rule, allowed American farm companies to dump commodities on the Mexican market. Soon, Mexican corn farmers could not compete with American corn and lost their land. Since 1994, approximately 1.3 million Mexicans have lose their farms or farm jobs. The states of central Mexico, including Jalisco, Guanajuato and Michoacan, where a huge number of farmers lost their land, have also been the states that have contributed the most migrants to the United States. In 2003, 1/3 of the Mexican migrants residing in the United States came from these states. Numbers of migrants have skyrocketed from the southern state of Oaxaca, largely again with agricultural workers moving north. Were the United States to have included humane immigration laws in NAFTA that might be one thing, but instead we have forced them into the desert to die.

American unions have tried to reach across the border and create transnational alliances between workers. When the textile industry moved en masse to Mexico, unions like UNITE sent delegations of workers to meet maquila workers in Mexico and gave them organizing advice and funds. But the major unions are part of the corporate structure of the Mexican government and have not exercised much if any independent action since the early 20th century. There are independent unions that struggle to survive, but between government discouragement, local intimidation of activists, and the same and worse anti-union activities by employers that you see in the United States, they have had a very difficult time getting off the ground. And the same threats of moving factories if workers form independent unions that provide real representation for labor that worked so well against American workers have been used in Mexico. After all, there are a lot of Hondurans looking for work, not infrequently because they have also lost access to the land and traditional farming economies.

While one may argue that NAFTA and American deindustrialization has created cleaner American environments, the Mexican environment has been severely denuded and degraded, particularly with the dumping of toxic chemicals and other pollutants. American environmental laws of the 1960s and 1970s forced companies to deal with pollutants responsibly. These companies did not see their profits depreciate significantly for this, but maximizing profit took priority to social and environmental responsibility. NAFTA also forced remaining Mexican farmers to depend ever more greatly on agrochemicals with poison both the land and the farmworkers who handle and are sprayed by them in the fields. Although it predates NAFTA, Angus Wright’s The Death of Ramon Gonzalez is a good primer on this issue.

The loss of manufacturing jobs due to NAFTA, other free trade agreements, and globalization more broadly has, I believe, helped contribute to the longevity of the economic downturn and threatens larger problems in the future. The promise of NAFTA was cheap products and information-based jobs that were easier on our bodies and allowed us to use our minds. But those jobs have hardly replaced well-paid manufacturing jobs and have left millions of older and poorly educated (disproportionately people of color) Americans behind. We managed to keep the charade of a successful new economy going for awhile, through the housing bubble and personal debt, but both have busted. Now we don’t know how to put people back to work. We have literally dismantled the infrastructure that would allowed us to put people to work in industrial labor. If the information economy doesn’t work and if there is little to no incentive for industries to open factories (or a government that doesn’t make it a priority), what is the long-term employment solution?

This series has also covered the merger of the AFL and CIO in 1955 and the Homestead Strike of 1892.

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  1. Bijan Parsia says:

    Erik, any thoughts about how Perot’s run affected NAFTA passage? I find the following passage from his Wikipedia article:

    Perot tried to keep his movement alive through the mid-1990s, continuing to speak about the increasing national debt. He was a prominent campaigner against the North American Free Trade Agreement, and even debated Al Gore on the issue on Larry King Live. Perot’s behavior during the debate was a source of mirth thereafter, including his repeated pleas to “let me finish” in his southern drawl. The debate was seen by many as effectively ending Perot’s political career.[35] Support for NAFTA went from 34% to 57%.

    That suggests that he was causal in the popular shift of opinion. Of course, I imagine that elite consensus was always quite firm for NAFTA, so perhaps it didn’t matter all that much?

    • Erik Loomis says:

      Yeah, I only have a gut opinion on this, but I doubt it mattered too much. Clinton and Gore already supported it and were going to twist enough arms to get it passed. It’s unfortunate that anti-NAFTA advocates didn’t have someone more intelligent than Perot debating Gore (talk about a mismatch) but in the end, popular opinion hasn’t ever much mattered in shaping trade policy.

      Though there is an interesting argument by the historian Kristin Hoganson that upper-class desire for exotic goods in the late 19th and early 20th century helped lead to American involvement overseas (as I recall the argument; I haven’t read the article in a few years), so maybe it’s more complicated than I suggest.

      • Bijan Parsia says:

        I was more wondering if Perot taking over anti-NAFTAery hurt alternative opposition, esp. from the unions. As I recall, the unions were pretty vocally against NAFTA and it had some effect, but I don’t recall how it played out overall.

        (This is obviously relevant to the Paul thread :)).

      • Bill Murray says:

        Clinton and Gore already supported it and were going to twist enough arms to get it passed.

        Sheez, it’s no wonder you had no posts in the year’s top posts if you won’t toe the company line

  2. Um…

    “Now we don’t know how to put people back to work.”

    Yeah…we do. That Bernanke and his merry Fed aren’t (plus Congressional Republicans, but that’s to be expected) willing to do it is not the same thing as saying we don’t know how to do it.

    • Erik Loomis says:

      I was talking about this from a policy perspective more than anything else, but point taken.

      • Well fair enough, but even then I think it’s slightly off the mark. To the extent we have a really big problem on our hands, it has nothing to do with the nature of jobs available or even trade agreements in the acute sense, but a mix of having a political system that’s incapable of adequately handling crises, a rank of political elite that’s dominated by the economically illiterate, and a Federal Reserve that quite frankly is just fine with 9%+ unemployment right now.

        • DivGuy says:

          I think it would be fair to say, though, that a political economy almost entirely dominated by a very small class of elites is much more likely to be unresponsive to the economic suffering of the underclass, particularly when many of the better measures to stimulate the economy would have a redistributive effect.

          The dominance of our political economy by this tiny set of elites is not new, but it has been clearly exacerbated by the decline of labor and the squeezing of the middle class. And NAFTA has played a real part in that decline.

        • I just don’t get the focus on Bernanke. Rates are at zero, have been for years, and will remain there for years. He’s done two rounds of QE, and may do a third. Helicopter Ben has been pushing an extremely activist, stimulatory monetary program.

          It’s not the Fed that isn’t holding up its end; it’s Congress. There just isn’t a whole lot more bang we could be getting out of the Fed, and with a more activist Congress, we wouldn’t need more from the Fed.

          • mpowell says:

            I think the fed could do a lot more. More QE- pretty simple really, or a new inflation target. But I’m not sure the blame lies with Ben. It’s tough to say.

  3. wiley says:

    Another sad effect of NAFTA and the farm subsidies is hundreds of varieties of corn that were being raised in Mexico becoming extinct. Though it’s good for business, from the perspective of biological survival, monoculture is dumb as a box of rocks.

  4. Erik, these labor history posts are awesome.

    /EOM

  5. [...] posted here: This Day in Labor History: January 1, 1994 : Lawyers, Guns & Money Tagged with: mexico • mobile • our-mobile • undefined • united-states • [...]

  6. Bart says:

    So, NAFTA further encouraged the transfer of wealth from workers to corporations. Could this trend be tempered if a portion of corporate shares were distributed without cost to citizens?

  7. c u n d gulag says:

    NAFTA was a chaperoned date that everyone warned against anyone going on, where, after everybody got f*cked, Canada watched the US pull a murder-suicide with Mexico,

  8. [...] One of my favorite American bloggers, Lawyers Guns and Money, does the best critique of NAFTA and why free-trade agreements actually prolong recessions. [...]

  9. Antonio Conselheiro says:

    American corporations had never bought into the Grand Bargain of the mid-twentieth century and looked to move away from unionized workplaces as soon as possible.

    During the Depression there was enough militant unionism and leftism to make the big businesses happy to accept a New Deal / AFL compromise. During WWII, even though labor peace was enforced in a fairly even-handed (not anti-union) manner and the corporations fattened up on war production, do they had no reason to complain.

    Post-WWII Democratic ideologues (Schlesinger, Hofstadter, Bell, Galbraith, Shils, et al) assumed that this fragile compromise was permanent even though business immediately began anti-union activity (Taft Hartley, 1947). They also all hated the radicals, populists, progressives, agrarians, and militant unionists who had made the progressive New Deal possible. The isolationist progressives had already left the coalition and some of the radical unions (Minneapolis Teamsters) had already been busted, and the radicals were purged in 1948. All that needed to be done was to break the rest of the militant unions, and this happened during the 50s.

    All of those named hated movement politics and popular insurgency. Galbraith, Shils and Bell were pretty much technocrats, Hofstadter dreamed of genteel British conservativism dominated by intellectuals, and Schlesinger frankly admired the urban bosses. But all of them wanted a many mediators screening between a divided pluralist electorate from the wise elected managers, with elections fairly thin on substantive content, especially not populist, anti-corporate, majoritarian, us-against-them.

    People blame Obama or Clinton or the DLC or Carter for the anti-populist pro-war of the Democrats, but it really goes back to 1948. The business-labor compromise held until 1968, but business jumped ship then or shortly after, and that was the end of New Deal liberalism.

    • wileywitch says:

      Do you know if the breakdown of the family wage began to be deliberately dismantled at this stage? More women had to enter the workforce in the late fifties and into the sixties, which is one of catalysts for the Third Wave. Fewer young men were marrying due to their starting incomes being inadequate for raising a family.

      • Erik Loomis says:

        The family wage was more a goal and a myth than reality. I don’t have the precise year in front of me, but remembering back to some lecture notes on the topic, I think more women were in the workforce by the early 50s than during World War II. Of course, the jobs they held were far less remunerative and often far less satisfying.

        But usually, the single wage family income has been a very hard to achieve goal.

        • mpowell says:

          It’s hard to imagine this ever happening for two simple reasons: housing costs and keeping up with the joneses. The analysis from Elizabeth Warren on household incomes from 1975 to today shows today’s two earner households earning more income in real terms. But they have higher fixed obligations on their income. Most of which is housing. People want to live in bigger houses and have shorter commutes so I think it’s unlikely that the median wage earner is ever going to be able to comfortably support a family by the definition of the era he/she lives in regardless of the absolute level of wealth that represents (within reason). People will just build bigger and nicer houses and bid up the prices on real estate in desirable areas until it is impossible.

  10. grouchomarxist says:

    Every one of these dire side-effects was predicted well in advance of NAFTA’s implementation. Clinton and Gore were either fully aware they were destroying the middle class, or — given the power entrusted them — criminally ignorant/disturbingly delusional. Of course, back then liberals and unions were slightly less accustomed to casual bitch-slapping by the president they helped elect, so Clinton swore up-and-down that their first priority would be to seek side-agreements on the labor and environmental issues.

    Which oddly enough went nowhere. And after the bipartisan elite concensus got away with blowing off these concerns, no subsequent “free trade” agreement has even bothered with that particular fig leaf.

  11. [...] Lawyers, Guns and Money, Erik Loomis writes about the effects of NAFTA. They are mostly deleterious in his [...]

  12. [...] A look back at the impact of NAFTA, passed 17 years ago. [...]

  13. [...] Mejor serie de entradas:  las del historiador Erik Loomis en el blog Lawyers, Guns & Money, en particular las dedicadas al mundo de la clase trabajadora. [...]

  14. [...] This series has also covered the Triangle Shirtwaist Fire of 1911 and the creation of the North American Free Trade Agreement in 1994. [...]

  15. Eamonn says:

    So what about the effects of free trade with Canada. It seems like the impact on manufacturing and agriculture just for the US-Canada part was a wash in the end with losses and gains on both sides.

  16. [...] series which I guess is some kind of mild milestone. Other events I’ve covered include the implementation of the North American Free Trade Agreement in 1994 and the Haymarket Riot of [...]

  17. [...] December 30, 1905–Murder of former Idaho Governor Frank Steunenberg January 1, 1994–NAFTA January 5, 1970–Murder of UMWA reformer Jock Yablonski February 6, 1919–The Seattle [...]

  18. [...] was a lot of denial and trying to ignore the problem of labor’s collapse in the 90s, although the defeat over NAFTA and the ascendance of John Sweeney to the head of the AFL-CIO were clear signs that at least some [...]

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