NAFTA & GATT Crashed The Economy, Derivatives Sealed The Deal

Since December of 2007, the government and mainstream media have pointed to runaway spending and predatory lending practices as the cause of the economic meltdown. The fairytale we’ve been spoon-fed is that borrowing, lending and the derivatives debacle was brought on with the fiscal abandon of a frat boy with a free brewery pass at spring break. There is no doubt that all three lead to foreclosures and financial ruin for far too many US citizens. But that’s only part of the story. The real instigator that has so many of us dodging pink slips, fighting to put food on the table and scrambling to stave off foreclosure began with the restructuring of NAFTA and GATT agreements.

When President George W Bush handed the baton over to President Clinton to sign the beefed-up North American Free Trade Agreement (NAFTA) in 1992, it rang the death knell for America. At the time, concerned citizens were alarmed, for the agreement flew in the face of the constitution: article 1, section 8 that states tariffs are to be levied as a means to support the US government.

Many insiders warned NAFTA was less about improved investments and exchange of goods than it was a means for mega rich investors and multi-national corporations to grow richer and more powerful from the sweat of cheap labor. Others feared for US sovereignty and possible tariff deficits that would place greater burdens on US taxpayers. Simultaneously, warning cries were sounded over the safety of unregulated food imports from Mexican farmers whose growing practices include DDT and the use of human feces as fertilizer.

GATT was touted as the panacea that would promote US economic growth by breaking down barriers of trade and investment with other countries as well as dissolve “favored nation” status to steer trade that dissolve discriminatory practices against developing nations. The American public was promised job creation through the increased exports GATT would generate. However, not many in the public sector knew that GATT was negotiated by the United Nations, and through the consortium of nation member agreement, GATT was changed to the World Trade Organization in 1995.

Behind the Smoke and Mirrors

Before the restructuring of NAFTA, the US enjoyed a trade surplus with Mexico. A few short years later, the US economy was plunged into a $20 Billion trade deficit with Mexico and had suffered a 69% increase in trade deficits with Canada. Many growers, most notably California and North Dakota, lost their market share with grain, tomatoes and avocado distribution due to direct competition with Canada and Mexico. This was occurring simultaneously while the US bailed out the Mexico peso in 1994 during the Clinton Presidency.

NAFTA opened the floodgates for 4 billion of the world populace to join the world economy and stave off high unemployment for China, India, Vietman, Banglagesh. Today, we experience this shift, daily, with overseas call centers, outsourcing, and emerging financial mite as China gobbles up vast US holdings and real estate while our labor force suffers ever-growing unemployment.

GATT, however, was disaster on an even greater scale, for it threw aside the sovereignty of all nations in exchange for a global marketplace for cheap labor, capital, services and products. It served as master, turning into slaves those already living in squalor in third world countries through the use of sweatshops.

One example is Nike Corporation. When Nike moved offshore to Indonesia, they were able to reduce the cost of manufacturing a pair of tennis shoes to just $2.75, yet the price of their tennis shoes, after having moved offshore for cheap labor and lower taxes, remained at $70 to the public. Studies have shown that Nike’s Indonesian employees are not protected by their government, and due to the minimum wage of  $2.50 per day, many suffer malnutrition for lack of money to purchase nutritious food.

Nike is far from the only large manufacturer to jump ship for wage-friendly environs. Halliburton followed suit by moving its corporate headquarters to Dubai, Accentuate, a subsidiary of Arthur Anderson, are now headquartered in Bermuda and Foster Wheeler likewise moved its headquarters to Bermuda. Ingersoll-Rand, once headquartered in New Jersey, is now based in Bermuda, Tyco International has pulled stakes from the US to Bermuda, Cooper Industries jumped ship from Houston to Bermuda, Noble Drilling left Sugar Land, Texas for the Cayman Islands, Global Crossing moved to Bermuda, Seagate Technology now calls the Cayman Islands home, and Neighbors Industries proved to be less neighborly with a move from Texas to Bermuda. Hewlett Packard and Advanced Micro likewise abandoned the US for underdeveloped countries for cheaper wages and lower taxes.

Demographics show that a staggering number of factories and large businesses have vacated US borders, or have gone bankrupt in the attempt to compete when exporting goods made by higher US wage earners. In fact, the greed practiced by corporations is overshadowed by the necessity of an offshore move for manufacturers to remain competitive. As reported by The Economic Policy Institute, NAFTA was the direct result of lost or displaced jobs for 682,900 workers, which additionally added to the US trade deficit.

As reported by CNBC June 14, 2011,US home foreclosures now stands at 33%, higher than that experienced at the height of the Great Depression, which climbed to 31%. In 2011 alone, food prices saw an increase of 37% and are slated to climb much higher due to extreme drought and weather-related extremes that destroyed vast swatches of cropland.

There exists other negative ramifications of global dependence on manufacturing that are rarely discussed. Namely, when Japan experienced the devastating 8.9 earthquake in April 2011 which resulted in tsunami and the meltdown of Fukushima, G.M., Toyota and Subaru production plants were crippled due to Japan’s inability to continue supplying these plants with auto parts routinely imported to them.

No Lessons Learned; AKA Pushing an Agenda

NAFTA and GATT were not the only free trade agreements that played a part in US insolvency. The Central America Free Trade Agreement (CAFTA), was signed by President George W Bush after a tough congressional battle in 1995. This agreement was entered into with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic for cheap labor, free tarriffs and increased commerce.

The Republic of Korea-United States Free Trade Agreement (KORUS FTA) is a free trade agreement between Korea and the US that was inacted in June of 2007 and renogotiated and signed by President Obamah in 2010.

Yet another free trade agreement called the Doha Development Agenda that stagnated under the tutalidge of President Bush was dusted off and promoted by The World Trade Organization at meetings held in its support in July of 2011. The Doha Development Agenda is esentially another free trade agreement between world leaders and developing countries, alowing poverty striken devoloping countries to get on the globalization bandwagon towards free trade and investment liberalisation.

The WTO is and always has been a bureaucracy that will remain borderless while they report to over 120 nations and answer to multi-national, powerful corporations.

Building Insolvency, One displaced Worker at a Time

As a result of NAFTA and GATT Michigan alone lost 315,200 manufacturing jobs by 2008, totaling a 35.5% reduction of manufacturing jobs, which lead the national decline as reported by the American Manufacturing Trade Action Coalition. The resulting job loss for Michigan was 489,900 due to the trickle-down effect.

Other huge hits resulting from the NAFTA agreement to the US economy are in computer and electronic parts, which accounts for 22% of job losses. Motor vehicle and parts workers have suffered a 15% job loss.

In the last decade, the United States lost some five million manufacturing jobs, a contraction of approximately one-third. In total, 42,000 US manufacturers have permanently closed their doors since 2001.

The public was not privy to the fact that unemployment rates had already begun to rise as 2.4 million jobs were lost between March 2001-October 2003 with the majority of displaced workers being in the manufacturing sector.

Today, the official unemployment rate stands at 9.10 percent. However, these rates are misleading. Those who have exhausted their unemployment entitlement are no longer counted as part of the US displaced work force. Neither do these reported numbers take into consideration that to stay employed, many workers have been forced to take steep pay cuts or accept the reduction of health benefits or both. Additionally, benefits such as retirement and profit sharing plans have been drastically reduced or curtailed. Many displaced workers seeking employment have had to settle for drastically reduced salaries and in some cases, have had to accept shorter hours just to re-join the ranks of the employed. Sadly, there facts are underreported to the general public. This underreporting makes it nearly impossible for the public to get a clear picture of the seriousness of the US economic condition, which is directly tied to employment.

The Solution

Recently M.I.T. did an investigation on the state of US manufacturing. Their consensus was the US must create17 to 20 million jobs over the next decade to see a full recovery of the current recession.

It’s difficult to fathom how as a nation we can expect to become fiscally sound when our leaders have proven time and time again their agenda does not always protect the interests of the nation’s infrastructure or its workforce. Evidenced with the continuing trend towards free trade agreements such as NAFTA and GATT. This practice has brought the US work force and our economic solvency to its knees as manufacturers flee the nation and employment continues to plummet to disheartening levels. With the outrageous tariff deficits and alarming reduction of the workforce, the decision to continue on this path of destruction with CAFTA, KURUS, and most likely the Doha Development Agenda, it holds terrifying indicators for the failure.

But should The US abolish free trade agreements and swap globalism for the return of manufacturing on US soil, we have a chance to reclaim the solvency we have enjoyed since the industrial revolution and we can then offer a future to the generations to come.


The preceding was a guest post for The Truth by author Barbara Fix.

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