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Robin Hood In Reverse: Free Trade and Immigration

Immigration, Free Trade and U.S. Farm Policy

On-Line Discussion, June 7-28, 2006

Robin Hood In Reverse: Free Trade Agreements and Immigration

by Anuradha Mittal

On June 6, 2006, the Canadian Members of Parliament from the NDP and the Bloc Quebecois met with their American and Mexican counterparts to declare that the North American Free Trade Agreement was a "continental tragedy." Marcy Kaptur, Democratic Congresswoman from Ohio, pointed to the "illegal" immigration problem between the U.S. and Mexico, as proof that NAFTA has failed. "If it were (a success) there would be no need to build the fence that the United States wants to build between the U.S. and Mexican border and there would be no need to militarize it either,'' said Mexican legislator Victor Suarez.

The ongoing debate on the fate of some 11 million undocumented immigrants in the United States, however, continues to ignore the structural issues that have forced millions to leave their homes: disastrous impact of the North American Free Trade Agreement (NAFTA) on the Mexican economy and absence of living wage jobs for workers on both sides of the border and the.

Free trade agreements such as NAFTA promised to bring more jobs, trade surpluses and an increased standard of living to member countries. But the reality is far from real. In the agriculture sector the United States practices its "do as we say, not as we do" policy. Wielding the World Bank, the International Monetary Fund (IMF), and international trade agreements, the U.S. is opening up foreign markets for exports by forcing poor countries to remove subsidies and lower tariffs. However, the U.S. shields itself from foreign competition by increasing its subsidies and maintaining tariffs. These measures have allowed the U.S. to dump its farm surplus on world markets.

Let's take the case of Mexico and NAFTA.

Mexico has been growing corn for 10,000 years. Under NAFTA which was supposed to 'level playing fields', Mexico opened its markets to imports from the U.S., including corn. Mexican farmers, mostly operating small-scale family farms, were unable to compete against U.S. large corn producers - the largest single recipient of U.S. government subsidies which amounted to$10.1 billion - some ten times greater than the total Mexican agricultural budget in 2000. This overall $10.1 billion production subsidy, resulted in an export subsidy for U.S. dumping on the Mexican market of between $105 and $145 million annually - a figure that exceeds the total household income of the 250,000 corn farmers in the state of Chiapas, Mexico. (Export subsidies are payments made by the government to producers to make exports artificially competitive with the purpose of expanding markets. For example, one of the main export subsidy programs in the U.S. is called the Export Enhancement Program (EEP), whose purpose is to help U.S. farmers compete with farm products from other countries and expand U.S. agricultural exports.)

Not surprisingly then, U.S. corn exports to Mexico have tripled and account for almost one third of the domestic Mexican market, leading to an acute crisis in the Mexican corn sector. The increase in imports has reduced real prices for Mexican corn by more than 70 per cent since 1994. Declining prices for the 15 million Mexican farmers who depended on the crop, have meant declining household incomes, followed by forced migration from land. In 1997,according to the Food and Agriculture Organization (FAO) figures, 47% of the population was engaged in agriculture. By 2010, FAO estimates that the number would have dropped to 18%.

Far from operating on a 'level playing field', NAFTA has been a death warrant for small farmers, placing small Mexican farmers at the wrong end of a steeply sloping playing field which runs downhill from the U.S. Mid-West. Since the passage of NAFTA, an estimated 2 million Mexican family farmers have been displaced from land while corn-based tortilla prices have increased by nearly 50%. Millions of people gave been forced to migrate, desperate to escape poverty, many of them intent on crossing the U.S. -Mexico border to feed their families. Women have suffered disproportionately. Falling incomes and male migration has increased labor demands on them as they take on responsibility of the household farms and seek other income-generating activities. Built on the backs of these rural poor and women are earnings for U.S. agricultural corporations like Cargill and Archer Daniels Midland (ADM) whose profits have tripled since the passage of NAFTA.

In addition to devastation of the countryside, some 28,000 small and medium-sized Mexican businesses were eliminated with NAFTA's service rules allowing multinationals like Wal-Mart to enter the country. Proponents of free trade agreements often point to job creation in Mexico as NAFTA's success. However, U.S. based Economic Policy Institute (EPI) points out that while work in low-pay, low-productivity jobs (e.g., unpaid work in family enterprises) grew rapidly since the early 1990s, by 1998, the incomes of salaried workers had fallen 25%, while those of the self-employed had declined 40%. This reflects the growth of low-income employment such as street vending and unpaid family work (for example, in shops and restaurants). Rather than improving living standards, Mexican wages have fallen. EPI points out that wages decreased by 27% between 1991 and 1998, while overall hourly income from labor decreased 40%. In addition, the minimum wage, which is set each year through a process of consultations between official unions, employers, and the federal government, lost almost 50% of its purchasing power in the last decade. Manufacturing wages also declined by almost 21% in this period, and the purchasing power of the minimum wage fell 17.9% through 1999. What is offered is employment in the maquiladoras characterized by abuse of workers rights and wages that run 60 cents to $1 an hour. Again worst hit are women - some 70% of all maquila workers are young women. So while NAFTA benefited a few sectors of the economy, mostly maquiladora industries and the very wealthy, it increased inequality and reduced incomes and job quality for the vast majority of workers in Mexico.

Failure of NAFTA to keep its promise of improved standards of living, more jobs, trade surpluses, coupled with failure of the U.S. to remove its trade distorting subsidies, has forced millions of Mexicans to the border. 1995 figure of 2.5 million undocumented immigrants from Mexico has increased by 8 million since then. Hoping for better lives, they are willing to risk crossing the border, if only to find slavery in the fields of the U.S., incarceration at the border, xenophobic legislators, and sometimes even death. In 2005 an estimated 400 Mexicans died trying to cross the border.

No fence will be able to keep pressure away from the U.S. border, which is bound to increase as more small farmers, and the working poor are displaced in Central American countries with the Central American Free Trade Agreement (CAFTA-DR). Mexico will be further affected as its assembly-for-export industry, which has struggled to compete with China, will be hurt further by CAFTA.

Given this context we are faced with some simple questions: should the undocumented immigrants be criminalized and our borders walled off or should we get rid of or renegotiate free trade agreements? Should we blame the victims of free trade agreements or ensure that as long as capital and goods can move freely across borders, so can the hungry, the destitute and the dispossessed?