NAFTA and OPIC: Corporate Welfar

OPIC is a global leader in providing political risk insurance to protect American investments. By helping U.S. investors manage political risks, OPIC helps them to enter new and unfamiliar markets. OPIC offers innovative insurance coverage, advocacy, and a strong claims payment record.

OPIC insurance can cover the following three political risks:

• Currency Inconvertibility -- deterioration in the investor's ability to convert profits, debt service and other investment returns from local currency into U.S. dollars and to transfer U.S. dollars out of the host country;
• Expropriation -- loss of an investment due to expropriation, nationalization or confiscation by the host government; and
• Political Violence -- loss of assets or income due to war, revolution, insurrection or politically motivated civil strife, terrorism and sabotage.

• Citizens of the United States;
• Corporations, partnerships, or other associations created under the laws of the United States, its states or territories, and beneficially owned by U.S. citizens;
• Foreign corporations at least 95 percent owned by investors eligible under the above criteria; and
• Other foreign entities that are 100 percent U.S.- owned.

What this means is that we citizens of the United States are helping to support the risky business of building industrial plants in developing countries.

Street in Maquiladora Area of Mexicali

NAFTA enables the manufactured goods produced in Mexico to be brought into the United States without duties or other costs. It's as if there were no U.S.-Mexican border at all.

The low wage rates and lax environmental controls in developing nations are attractive to large manufacturers in the United States who feel constrained by our high wages and relatively tight pollution controls. Hundreds of thousands of good paying manufacturing jobs have left the United States for the low wage developing nations. Manufacturing wages in the United States averaged $18.74 per hour while in Mexico the same jobs brought workers only $1.51 per hour. Mexican workers are paid less in a day than a U.S. worker is paid in an hour. This has been a blessing to large corporations that relocate their plants to Mexico.

U.S. job loss is especially significant among border communities. Textile workers in depressed border towns such as El Paso must compete with Mexican workers just a few miles away whose daily wage (about $5.15) is the same as the hourly wage of the U.S. workers. El Paso alone has lost over 10,000 jobs to NAFTA.

During the debate on passage of NAFTA, U.S. citizens were promised 200,000 new jobs each year because of NAFTA as well as a growing U.S. trade surplus. However, after five years the results have not lived up to the promises.

Though the promise was made that there would be mutual job creation in both the United States and Mexico, most new jobs are found in Mexico. As of late 1997, the estimate of net U.S. job losses due to NAFTA was 400,000. Some measures of job losses and gains place the losses at 800,000 and the gains at 400,000. A disproportionately high 24,000 jobs were lost in Michigan alone. Two-thirds of U.S. citizens believe NAFTA has cost U.S. jobs and has helped large corporations. Government spokesmen are no longer touting NAFTA job creation, but are focusing on the opportunity to shed lower paid, unskilled jobs and concentrate on high-tech and high-skilled sectors where the United States still has the advantage.

The magnitude of NAFTA's influence can be seen by trade between the U.S. and Mexico. Prior to NAFTA in 1993, the U.S. had a $1.7 Billion trade surplus with Mexico. Last year, after 5 years of NAFTA, we had a nearly $15 Billion trade deficit (even after the peso devaluation). This simply means that more U.S. jobs have been lost as a result of Mexican imports into the U.S. than have been gained because of U.S. exports to Mexico.

Even these trade numbers are misleading. It is true that the total U.S. exports to Mexico did jump from $42 billion in 1993 to $47 billion in 1995. But, 35% of these exports were not destined for now prosperous consumers in Mexico. Instead, they were destined for factories in Mexico where low-paid workers assembled them into finished products to be imported back into the United States.

U.S. manufacturing jobs lost due to NAFTA are typically among the highest paying jobs. Although the U.S. economy has produced many jobs in the 1990s, many of these jobs are lower paying positions such as cashiers, waiters and waitresses, janitors and retail clerks that pay only 77% of the manufacturing's average. Those who lost jobs due to NAFTA are likely to find employment in these lower paying areas.

Plants do not need to move to Mexico to benefit from NAFTA. Threats by plant managers to move operations to Mexico have helped keep wages down. The Business Roundtable reports that two-thirds of U.S. employers have played the "NAFTA card" during bargaining sessions to successfully keep labor costs under control. The result it that millions of U.S. workers have experienced reduced wages, fewer benefits, and deteriorating working conditions.

Impressive increases in the number of manufacturing plants located near the Mexico-U.S. border have strained Mexico's infrastructure. Tijuana has seen a 92% increase in maquiladora employment under NAFTA. Untreated sewage is being dumped into the ocean only a few miles from shore. Some toxic substances found in the Tijuana sewage system include dioxins, DDT, solvents, and heavy metals.

Congressman Dick Gephardt Describes Maquiladores Pollution

New River -- Runs from Mexico to U.S. Most Polluted River in the United States

EPA estimates that hazardous waste imports in to the U.S. will continue to increase--at least for those plant properly disposing of their wastes products. Wastes imported into the U.S. increased 50% between 1996 and 1998. Much maquiladora waste is still unaccounted for as illegal dumping of hazardous wastes is well documented. Thankfully, slightly over 25% of maquiladora facilities now file compliance manifests indicating proper disposal of hazardous wastes.

The New River running northward from Mexicali, Mexico to Calexico, California is said to be the most polluted river in the United States. Seven days a week this river sends pollutants from the overburdened Mexican sewage infrastructure into California. Water and air pollution make life hazardous for those on both sides of the border.

This increasing pollution is having a measurable effect on U.S. communities. From 78% to 400% increases in hepatitis have been recorded with numerous outbreaks along the Rio Grande River. Birth defects jumped in some areas 50% to twice the national average. Water in many border communities is no longer safe to drink.

Health concerns due to NAFTA are not limited to the border. The amount of foreign grown produce and plants entering the United States has skyrocketed. At some Mexican border crossing points overworked inspectors examine less than 1% of incoming trucks. In some instances shippers are allowed to select parts of their cargo to be inspected and "tailgate inspections" are often used to inspect only the cargo stored near vehicle openings.

Lax inspections help expose U.S. residents to unsafe food, illegal drugs, and unsafe trucks crossing the border. NAFTA has no food safety standards for member countries. A 1997 shipment of frozen strawberries from Mexico, contaminated with potentially deadly Hepatitis A, affected 270 people in 5 states including 130 children in Michigan. Strawberries from Mexico now account for 96% of all imported strawberries.

What Should be Done?

While it is good to help others, it is not right for our government to harm its own people through export of jobs, importation of contaminated foods, increasing the number of potentially unsafe trucks on our highways, or encouraging companies to move their production facilities or headquarters abroad so they can eliminate the payment of taxes.

How can we reduce the negative effects of "free trade" and ensure a fair shake for U.S. workers? I believe we must do the following:

• The United States must cease encouraging the movement of jobs from the U.S. to developing nations by guaranteeing corporations against losses from risky ventures in developing nations. Risk insurance is available on the open market and need not be insured by the Federal government's Overseas Private Investment Corporation. This economic encouragement is tantamount to corporate welfare that benefits corporations and causes significant lasting harm to U.S. workers. We must give notice of termination of OPIC insurance and allow corporations to assume more responsibility for their own overseas investments.
• The Federal government must seek fair trade, not free trade. NAFTA does not provide adequate safeguards for economic stability, community health, or worker safety. We must trade with other nations on a level footing. We must not accept the importation of goods produced by corporations that recklessly pollute both land and sky or shed U.S. workers for foreign workers paid barely a living wage. We must insist that wages in NAFTA-related jobs rise to at least half the U.S. minimum wage within 3 years. We must repeal "fast track" approval of NAFTA and negotiate fair trade with our trading partners.
• We must not seek NAFTA "fast track" extensions to countries such Chile and other Latin American countries.

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