NAFTA's Corporate Con Artists

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WITH THE TREATY INK BARELY DRY, THE VERY CORPORATIONS THAT LED THE PRO-NAFTA FIGHT IN CONGRESS WITH PROMISES OF MORE JOBS AND A CLEANER ENVIRONMENT MOVED SHOPS TO MEXICO. THE COST, SO FAR, IS MORE THAN 35,000 LOST JOBS.

It was not hard to figure out who was who in the halls of the congressional office buildings on November 15, 1993, two days before the vote on the North American Free Trade Agreement (NAFTA). There were clusters of people wearing labor union caps and jackets; they were lobbying against the trade pact. Then there were the crowds of dark-suited men in matching red, white, and blue neckties; they were with the pro-NAFTA business coalition, USA NAFTA. The patriotic neckties were just a minor tactic in one of the most expansive lobbying efforts in the history of corporate America. Calling itself a grassroots organization, USA NAFTA gave new meaning to the term by enlisting Fortune 500 companies as captains to whip up support for the agreement in each of the 50 states. An army of more than 2,000 member corporations provided backup.

The USA NAFTA coalition promised that the free trade pact would be all things to all people. It would improve the environment, reduce illegal immigration by raising Mexican wages, deter international drug trafficking, and most importantly, create a net increase in high-paying U.S. jobs. In the final days of the battle for passage, USA NAFTA worked closely with the White House NAFTA war room to sway undecided members of Congress. According to the Wall Street Journal, coalition members studied the fence-sitters' campaign contribution lists and urged the top corporate donors to turn up the heat. Many firms complied by promising new jobs in the member's district or threatening to withhold future contributions. Today, less than two years after the agreement became law, USA NAFTA's own members are blatantly breaking the coalition's grand promises. Many of the firms that only a short time ago were extolling the benefits of NAFTA for U.S. workers and communities have cut jobs, moved plants to Mexico, or continued to violate labor rights and environmental regulations in Mexico.

The best available information on NAFTA layoffs comes from the U.S. Department of Labor's (DoL) NAFTA Transitional Adjustment Assistance (TAA). This program provides retraining and other benefits to U.S. workers after the DoL certifies that they were laid off because of a shift in production to Mexico or Canada or an increase in imports from those countries. Between January 1, 1994, and July 10, 1995, 62,000 workers filed claims for this assistance; 35,000 of them were certified. It should be noted that recipients of NAFTA-TAA benefits are only a fraction of the total number of NAFTA-related layoffs, since many workers are not aware of the program or apply for a general retraining program with more generous benefits. A University of Maryland study estimates that in 1994, more than 150,000 U.S. jobs were cut as a result of increased consumer imports from Mexico. Even these limited data reveal that USA NAFTA members have carried out NAFTA-related layoffs at a rate surprising even to cynics. If only for public relations purposes, they might have held off on the job cuts until the ink on the agreement was a little drier. However, by July 10 (only 18 months into the agreement), USA NAFTA firms were already responsible for 40 NAFTA-related layoffs affecting 7,785 U.S. workers. Another 4,626 workers from 24 plants operated by coalition companies applied for NAFTA-TAA benefits during this time and were rejected, in some cases simply because the Department of Labor was unable to verify a shift in production. Dozens of USA NAFTA companies carried out NAFTA-related layoffs, but a few member firms deserve special attention for their ability to quickly harness the agreement's benefits for themselves at the expense of workers and communities.

ALLIEDSIGNAL - At the helm of USA NAFTA was Lawrence Bossidy, CEO of AlliedSignal, a diversified manufacturing firm which produces auto parts and defense equipment. As chief spokesperson, Bossidy made countless public and media appearances to persuade Americans that NAFTA would be good for them. While lauding the benefits of the agreement for society at large, Bossidy was quick to deny any suggestion that it would provide incentives for his own company to move jobs to Mexico. In August 1993, CNN anchor Lou Dobbs asked him, Do you think jobs will move to Mexico [under NAFTA]? For example, would your company, would you put jobs in Mexico? Bossidy replied, I think quite the contrary, Lou. I think the jobs that were to move to Mexico have already moved there. I mean, there's more than 700,000 employees in the Mexican maquiladoras now! Less than two years later, Bossidy's firm could boast the most NAFTA-related layoffs. As of July, AlliedSignal workers in five cities have petitioned for NAFTA-TAA benefits. The DoL approved the claims in three communities (Greenville, Ohio; El Paso, Texas; and Orangeburg, South Carolina). Claims from workers in Danville, Illinois, and Eatontown, New Jersey, were rejected, even though the New Jersey workers say that AlliedSignal left little doubt that the company was moving jobs south. In the months leading up to the layoffs, New Jersey workers were sent to provide training in one of the company's Mexican plants, while Mexican managers were brought to New Jersey for training.

INCREASING DISPARITY - Bossidy's NAFTA promises were not confined to U.S. workers. In congressional testimony, he also claimed that NAFTA will benefit the Mexicans; it will improve their standard of living. Unfortunately for Mexican workers, just the opposite has occurred. The peso devaluation of December 1994 cut the value of their wages by as much as 40 percent, making them far less able to buy U.S. goods today than they were before NAFTA. Interest rates on credit cards have climbed above 100 percent, and the Mexican government reports that retail sales in Mexico's three largest cities have dropped by nearly 25 percent. The continuing crisis is expected to cause the loss of two million jobs this year, and economic desperation is blamed for the 30 percent increase in arrests by U.S. border patrols between January and May 1995. Workers at AlliedSignal, like those at other Mexican maquiladoras operated by U.S. corporations, have lost significant purchasing power. At the corporation's Monterrey, Mexico plant, workers saw the dollar value of their wages drop from $1.30 to $.82 an hour in January 1995. Laboring 48 hours a week at $.82 per hour, AlliedSignal's 3,800-person Mexican workforce would make approximately $7.8 million a year. By contrast, Bossidy's personal pay last year was worth far more $12.4 million, ranking him among the top eight corporate earners in the country. AlliedSignal' s executive board justifies the salary as necessary to keep Bossidy from being lured away by other corporations. One union leader ironically concurred. Any CEO who could be the head of USA NAFTA and then turn around in the first year of the agreement and start laying off people and get away with it he's worth $12.4 million!

GENERAL ELECTRIC - GE, one of USA NAFTA's proud captains, made NAFTA history as the target of the first complaint filed under NAFTA's labor side agreement. On February 15, 1994, the United Electrical Workers (UE) charged that GE had fired about 30 employees at its Ciudad Ju rez, Mexico plant for union organizing. Workers in the border area report that the GE case reflects common practice. In fact, such violations seem to have increased. After NAFTA became law, companies no longer had to worry about generating bad publicity that might have jeopardized passage. According to UE, GE officials told one worker that he was being fired for distributing union fliers and for telling a MacNeil-Lehrer News Hour reporter that GE used chemicals in its Mexican plant that are banned in the U.S. The NAFTA agency responsible for investigating labor complaints, the National Administrative Office, dismissed the case, not because it found GE innocent of the charges, but because it could not prove that the Mexican government had knowingly failed to enforce the rights of the GE workers.

Before the Ju rez firings, GE management had reportedly warned the workers that the company had come to Mexico to get away from U.S. unions, so if the Mexican workers brought in a union, GE might as well pack up the plant and move it back north. Meanwhile, GE was busily shifting operations from the U.S. to Mexico. In March, it announced plans to cut 271 jobs at its Fort Wayne, Indiana facility. In May, the DoL determined that the layoffs resulted from GE's decision to move jobs to Mexico, and certified 95 of the workers for NAFTA retraining. Both GE workers and the community of Fort Wayne got swindled. In 1988, the employees had agreed to a $1.20 per hour wage cut to prevent their jobs from being moved to Mexico. Then in 1992, GE managed to squeeze a $485,290 tax cut out of the local government, claiming it was necessary to defray the cost of new machinery needed to preserve jobs. Once NAFTA passed, the wage cuts and the tax breaks were not enough to keep those jobs in Fort Wayne. As one longtime GE employee put it, You give them all your life, and this is what they give you. In a cynical recycling of Reagan's failed trickle-down policies, USA NAFTA predicted that NAFTA itself will improve working conditions by generating economic growth, which will enable all three countries to provide more jobs with higher pay in a better working environment. This theory hasn't held up well for workers at Xerox, another USA NAFTA member.

XEROX - After taking a loss in 1993, Xerox profits rose to $794 million on sales of $17.8 billion in 1994. Rather than translate this gain into more jobs or higher pay, the corporation began both laying off workers and bargaining down the wages of those it kept. According to the DoL, Xerox has fired 50 workers in Oakbrook, Illinois, and another 13 in Peabody, Massachusetts, and moved the jobs to Mexico. Under the shadow of those job cuts, it's not surprising that Xerox was able to pressure workers at its Webster, New York facility to accept wage concessions by threatening to move to Mexico. Backed to the wall, the union agreed to reduce base pay rates by 50 percent for new employees and cut workers' compensation in exchange for job guarantees through the year 2001. In a similar move in May 1995, Xerox pressured 700 workers in El Segundo, California, to accept a 20 percent pay cut to save their jobs. The company even demanded the elimination of a paid five-minute break at the end of the day for workers to wash up.

ZENITH - Xerox employees aren't the only U.S. workers who have seen a drop in wages and working conditions. A June 1995 U.S. Department of Labor report revealed that real wages across the country dropped by 2.3 percent between March 1994 and March 1995, even though productivity had risen by 2.1 percent. Economists offer numerous explanations for the declining pay, but the increased power of corporations to bargain down their wages by threatening to move overseas is certainly a major factor. At Zenith's Springfield, Missouri plant, workers accepted an 8.2 percent wage cut in 1987 under threat of losing their jobs to Mexico. However, in spite of these concessions, USA NAFTA member Zenith has laid off 430 workers in Springfield and another 80 in Chicago after NAFTA took effect, and moved the jobs to Mexico. According to one of the Springfield employees, If [we] didn't give them the wage concession, they were going to move to Mexico. We just gave more. We just helped pay for it. South of the border, the TV maker is notorious for its rock-bottom wages. A March 1995 pay stub from one Zenith worker in Mexico showed he was making less than 50 cents an hour. On top of the low pay, Zenith's Mexican workers often face health risks. According to the Coalition for Justice in the Maquiladoras (CJM), thousands of child-bearing-age women work with lead solder in Zenith's TV factories without proper training about its dangers or adequate protective equipment. A 1994 inspection of one Zenith plant in Reynosa revealed that eye protection and gloves were unavailable and unidentified containers of glue sat open on the floor.

ALCOA - NAFTA critics claimed that the agreement would add extra incentive for U.S. firms in highly toxic industries to avoid expensive safety measures and lawsuits by relocating to Mexico, where they could take advantage of more lax enforcement. A firm like Alcoa, for example, might see the largely unregulated Mexican border area as a pleasant refuge. Ranked by the Environmental Protection Agency as one of the country's top 100 polluters (in terms of toxic releases), Alcoa has been the target of numerous environmental lawsuits. In 1991, it was forced to pay $7.5 million for environmental offenses at its Massena plant in upstate New York. At that time, it was the largest criminal penalty ever paid by a U.S. firm for hazardous waste violations. As a USA NAFTA captain, Alcoa dismissed fears of anti-NAFTA environmentalists, claiming that it was a myth that Mexico has lax enforcement of environmental laws and worker protections and that in any case, protections are strict, and getting stricter. During the first year of NAFTA, Alcoa revealed just how seriously it regards these safeguards. According to CJM, in September and October 1994, a series of three unexplained gas intoxications led to the hospitalization of 226 workers at Alcoa's plant in Ciudad Acu$a. Community activists and the local press accuse the company of threatening to fire workers if they talked publicly about their experiences. CJM also claims that Alcoa management prevented health officials from inspecting the facilities until it was too late to conduct meaningful air quality tests. Nonetheless, health officials found that the gases had caused sudden spells of nausea, headaches, dizziness and fainting. So far, these incidents have not resulted in legal action against Alcoa.

BAXTER INTERNATIONAL - The effects of NAFTA in the U.S. are also increasingly toxic not so much to the health of workers (U.S. environmental standards have yet to fall because of NAFTA) but to the health of communities around the country. Last year Baxter International, a medical equipment manufacturer and USA NAFTA member, laid off 830 workers in Kingstree, South Carolina (population 4,000), after deciding to shift production overseas. About 120 of the workers, who made medical procedure trays, qualified for the NAFTA retraining program because their jobs were moving to Mexico. The rest, whose jobs were destined for Asia, were rejected. The layoffs dealt a devastating blow to the entire county, which already had the state's lowest per capita income ($10,255) and highest unemployment rate (13.6 percent). The layoffs also contributed to racial tensions in the county, which is 65 percent African American. Angered by the possibility that the loss of so many jobs might drive up local taxes and crime, residents of a small, predominantly white town tried to secede and join a neighboring county that is predominantly white and more affluent. The Justice Department refused the request, but the secession attempt created deep wounds in the community. Baxter CEO Vernon Loucks, Jr., is far removed from the type of day-to-day economic struggles faced by his company's former employees in Kingstree. A Wall Street Journal article on imperial perks featured Loucks and reported that in 1993, Baxter paid him $79,600 for personal travel by him and his family on the company jet, and kicked in another $33,450 for club membership fees. Loucks was also reimbursed nearly $100,000 for taxes attributable to use of aircraft, a car allowance, a financial counseling allowance, and the maintenance of a home security system. With all those angry unemployed workers out there, the company apparently feels obligated to pay for Loucks' personal security.

USA NAFTA MARCHES ON - The groups that fought against NAFTA particularly the citizens' coalitions formed by labor, environmental, consumer, family farm and other groups are proud that they took on practically the entire Fortune 500 and nearly won. (The vote was 234 to 200 in the House). At the same time, the experience was a chilling reminder of how things work in Washington. USA NAFTA representing more economic clout than many nation- states wrapped its self-serving lobbying campaign in an American flag. During the past two years, that flag has proved to have an exceptionally slick Teflon coating. The group has suffered neither negative publicity nor political disfavor, despite NAFTA's miserable results so far. Nor have USA NAFTA members drawn fire for the way they contributed to and benefited from the failure of NAFTA to fulfill its stated promises. Their star-spangled report, NAFTA: It's Working for America, opens with a quote from USA NAFTA Chair and AlliedSignal CEO Lawrence Bossidy. Today, it is clear that NAFTA is a success, he proclaims. Exports to Mexico and Canada are up, and we've been able to create thousands of new jobs here in the United States. By any standards, NAFTA is surely a winner.

As Bossidy indicates, U.S. exports to Mexico did indeed increase in 1994. However, what the report fails to point out is that during that time, U.S. imports from Mexico increased at a faster rate and displaced U.S. jobs by muscling out American products. Since the peso devaluation in December 1994, the U.S. trade surplus with Mexico has turned into a large and growing deficit expanding from $885 million in May 1994 to $6.9 billion a year later, and thereby wiping out any basis for claiming that NAFTA is a net job creator for U.S. workers. The bulk of the USA*NAFTA report is a state-by-state listing of jobs created by NAFTA. However, a careful examination reveals a sleight of hand. Almost all of the job claims are empty statements by USA NAFTA firms that they intend to hire more workers, not that they have already created actual jobs. Although USA NAFTA's work was completed with the passage of the agreement, the coalition continues to play an important political role in supporting the free trade model. When President Clinton was attempting to mobilize congressional support for the financial bailout of Mexico in January 1995, he arranged for lobbyists from 150 USA NAFTA firms to meet in Washington. Business Week reported that Rep. Robert Matsui (D-Calif.), Clinton's chief congressional strategist on NAFTA, told the group, You got us NAFTA. Now you can deliver on this one, too. The article described USA NAFTA's strategy as two-fold: mobilizing its troops to voice their support for the bailout package, and fear-mongering among border state legislators by claiming that an aborted bailout might trigger a flood of illegal immigrants. In the end, Clinton did not need USA NAFTA's help on the bailout, since he opted to bypass Congress with an executive order. However, the administration is clearly confident that the old USA NAFTA gang can still wield enough influence and con artistry to help push another free trade agreement through Congress. Otherwise, the administration might not have rushed into its latest round of trade negotiations aimed at expanding NAFTA to include Chile. President Clinton reportedly would like to push the expanded NAFTA through Congress before the 1996 election. When that bill comes up for a vote, USA NAFTA's patriotic neckties will no doubt reappear in the halls of Congress. CovertAction Quarterly has won numerous awards for investigative journalism. It is read around the world by investigative reporters, activists, scholars, intelligence buffs, news junkies, and anyone who wants to know the news and analysis behind the soundbites and headlines. Recommended by Noam Chomsky; targeted by the CIA (NAFTA's Corporate Con Artists by Sarah Anderson & Kristyne Peter).