PCDForum Column #48,    Release Date April 15, 1993

by Jorge G. Castañeda and Carlos Heredia

Mexicans, Americans, and Canadians have all been
told by their governments that the recently negotiated
North American free-trade agreement will benefit all.
But what these governments have claimed is wrong.
The negotiated agreement ignores the profound
implications that flows of trade, capital, and investment bring with them. The argument is presented that
as a commercial accord, NAFTA may disregard the
considerably more complex and substantive social
and political issues involved.

We are presented false choices for NAFTA:
either this agreement or autarchy. Actually the choice
is between the “bad” agreement already negotiated,
a right-wing agreement of a neo-liberal Republican
cast, and a “good” agreement, such as the social-democratic agreement on which Europe’s economic
integration is based. As the European’s have recognized, a good agreement must encompass social
issues and the relation between the state and the

The “bad” agreement lacks a regulatory framework, choosing to leave free trade exclusively to the
free market. It deliberately avoids addressing other
areas that will be affected by the commercial agreement: social, political, environmental and cultural. It
fundamentally opposes the idea of planning, of
choosing what each country will produce, of establishing how goals will be met, and of clarifying how
certain sectors will be protected or exposed in order
to reach long-term objectives.

The Mexican government asserted that Mexico
did not need longer time spans for removal of restrictions or protection for its products, because the
country was becoming part of the First World,
competitive and modern. So there is no recognition of
the disparities between Mexico and the United

A good agreement would recognize fundamental
issues such as the costs of adjustment. Compensatory financing would ease the painful adjustments of
integration, which will not be evenly distributed.
Mexico’s per capita income is eight to ten times less
than that of the United States, its distribution of
income is much more skewed, and levels of wages,
productivity, efficiency and technology are clearly
inferior. Other trade agreements, like the EC, have
sought to redress such disparities by funding infrastructure, worker training, and technology transfer to
bring less favored areas up to standard.

A good agreement would include a trilateral
industrial policy, creating an alliance between the
private sector and the three states to capture markets, develop technologies, and achieve dynamic
competitiveness. An economic commission would be
created to plan and monitor a regulatory framework.

Those who negotiated NAFTA almost completely
ignored Mexico’s main export: people. NAFTA currently says little about worker mobility. The governments are opening borders to goods and capital
flows, while barring labor from entry. Mexico should
have insisted on the gradual and selective liberalization of migration. A population flow that cannot be
stopped or controlled has to be legalized; it is not
possible to have an enormous undocumented population concentrated in 10 or 15 cities without consequential disturbances.

Beyond labor legislation is the question of upward harmonization of labor standards like collective
bargaining, labor tribunals, the right to strike, health
and safety standards, and wider union freedom.
Workers should be allowed to organize and negotiate
collectively at a continental level. NAFTA allows
General Motors to decide what to produce in North
America and where, but does not create conditions
so that workers in Michigan and Coahuila can act
jointly to influence industrial policy and wages in their
areas. Including a social charter is the best way of
starting to minimize differences between productivity
and wages. In the auto industry, a Mexican worker
with equal productivity will earn a wage between 20
and 25 times less than that of the U.S. worker.

The current accord glaringly fails to defend
environment and consumer concerns. A good agreement would establish an environmental and consumer protection charter. One of the biggest incentives for U.S. companies to move to Mexico is to
evade environmental regulation.

Finally, a good agreement would provide a
supra-national and autonomous dispute resolution
mechanism. This mechanism would have the power
to investigate violation reports, make rulings, and
determine sanctions.

It is still possible to negotiate a new, progressive
social compact. NAFTA need not divorce the free-trade agreement from labor, emigration, environmental, or human rights provisions on the ground that it is
only a “commercial agreement.” Indeed, economic
integration cannot be expected to produce beneficial
results if it is separated from questions of political
and social integration. The architects of European
integration have long recognized this. So must the
architects of NAFTA.


Jorge G. Castañeda is visiting professor of public and
international affairs at Princeton University. Carlos
Heredia is a member of the Mexican Action Network on
Free Trade and is currently associated with the Development Gap. This column was prepared and distributed by
the People-Centered Development Forum based on their
article “Another NAFTA" in World Policy Journal,
Fall/Winter 1992.

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