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Our Evaluation of the Formal Negotiations of the Free Trade Agreement
La Red Mexicana de Accion Frente al Libre Comercio
The Mexican Action Network on Free Trade (La Red Mexicana de Accion Frente al Libre Comercio—RMALC), was born in April, 1991. The objectives of RMALC are: (a) to fight for the timely dissemination of information during the negotiation of the FTA; (b) to foster the participation of society in formulating, debating and implementating a trade agreement; and (c) to promote an analysis about alternatives for development that are economically viable, socially just and compatible with the environment.
RMALC represents includes over 100 organizations—labor and peasant organizations, urban movements, ecologists, Chicanos, women, educational organizations, human rights organizations, nonprofit organizations, cooperatives and worker-owned businesses, and micro and small business persons.
1. The negotiations demonstrated who were the winners in the Agreement: the large transnational corporations, especially the US automotive industry. The Free Trade Agreement protects the interests of the large export industry under the logic of forming trade blocs. This means that it has been designed to confront European and Asian competition but does not protect small and medium size business interests vis-a-vis large corporations. The Free Trade Agreement can be opened or closed according to the interests of the US.
2. The Free Trade Agreement is not based so much on trade. In the case of Mexico, it basically deals with investment. Our average tariff is 10% and in the US they are less than 8%. Over three-fourths of our trade is with our northern neighbor.
3. The Treaty contains no compensatory mechanisms that would permit the modernization of Mexican industry, the creation of social programs or guarantee the transference of adequate technology.
4. During the negotiations, the Mexican people have witnessed a lack of political willingness on the part of the US government to comply with international agreements. This is true with the agreement on extradition and in relation to trade rules in effect around the world. They have extended their laws to our country, as in the case of the laws regarding tuna fish and dolphins. They have also imposed non-tariff barriers on our products. Our foreign policy has been affected. The Free Trade Agreement, even before it has taken effect, has started to play a role in the alignment of positions that correspond to our sovereignty. The government has placed little importance on such events. It thus denies what is in store for us in the future.
5. The Free Trade Agreement has affected our capacity for self-determination and has modified our Constitution. With the FTA, the State will be severely restricted in regulating the economy because they can be considered unfair practices.
6. One of the purposes of the negotiations was to eliminate non-tariff barriers for our exports to the US. The establishment of a Technical Commission on this matter is an achievement, but these barriers will not be totally eliminated because they are related to state laws. In both the US and Canada, states have a real autonomy. In Mexico, our centralizing culture does not allow a real independence of the states to generate legislation that protects their resources and productive sectors.
7. One of the great myths of the FTA is the idea that it can contribute to an increase in jobs and an increase in wages. The growth of exports, especially in the manufacture and agricultural sectors, including the maquila industry, has created only a limited number of jobs. It has not been able to absorb the displacement of workers from other sectors or the peasants who have been pushed out of their agrarian activity so that this sector can be modernized and productivity can be increased.
On the other hand, the FTA favors the use of intensive and cheap labor as a way to generate jobs. Thus this resource will become a comparative advantage. If growth in the economy means a parallel increase in wages then the real problem in Mexico becomes one of distribution of income. This would mean a greater sharing of the wealth that would truly guarantee the recovery of the worker's purchasing power. This is social justice. During the last few years, the economy has grown, but the workers, the common people have not felt any growth in their pocketbook.
8. In the farming and cattle-raising sector, the FTA does not protect the country's food supply or ensure a more rational use of our national resources. In the countryside, we have renounced the idea of appropriate technology and a strategy for our food supply. Countries such as Japan and indeed all countries of the first world have tried to maintain their food supply through subsidies. At times these subsidies have been much higher than the economic resources being allotted to the Mexican countryside.
9. In the textile industry the fees on Mexican products in the US have been eliminated. In our country we have a textile industry that has been greatly affected by the opening up of the market. There is a huge technological backwardness within an industry that is trying to be competitive by lowering working conditions even further in spite of legal contracts.
The FTA does not guarantee access for the modernization of technology. In the textile industry, the rules of origin favor the large US and Canadian business interests. Once such persons or industries obtain national treatment, they can maintain their competitive technological advantage vis a vis Mexican industry. The large export industry of production goods and the maquiladoras (that are now the characteristic of our industry) will be the ones, if any, which will benefit in this sector in Mexico.
Small and medium size clothes producers will have only temporary respite vis-a-vis used clothing imports which enter the country as contraband. This is part of the usual consumption of boarder area inhabitants.
10. The auto-parts sector, which is basically composed of small and medium size businesses, will be damaged. The situation will become worse with the acceptance of deficit trade balances. This is not trade for growth, nor is it trade that recognizes the differences between the two countries. It is the subordination of the strategy of national development to the interests of the large corporations.
11. In the area of services, activities that use cheap and intensive labor have been set aside for Mexico. Those activities that use complex technology have been given to our northern neighbors. This just shows the division of labor that the FTA offers us.
12. What the US could not achieve in relation to farming and cattle raising and in the area of power generation, they obtained in telecommunications. The radio and television industry remained untouched as well as the basic telephone network and the operation and establishment of networks and public services. However, those industries with a high degree of added worth will be opened up in relatively short periods.
13. In the area of Financial Services, the US laws, under which Mexican investors would eventually operate, are dated and protectionist. It would allow them to do as we do here in Mexico: the integration of financial groups that can function as banks.
14. Investment will no longer play a complimentary role in the solution of national priorities but will work for transnational strategies. We will thus have to join in in this strategy with no possibility of regulating its course. The competition for investment money endangers our existence as an independent nation.
In the area of services, activities that use cheap and intensive labor have been set aside for Mexico. Those activities that use complex technology have been given to our northern neighbors. This shows the division of labor that the FTA offers us.
15. The immediate opening of our borders to capital goods will contribute to the disappearance of national industry in this sector. In this way, the technological infrastructure that was achieved will be discarded and substituted by foreign technology. We are practically forfeiting the possibility of consolidating and fostering the development of our own technology.
16. The chapter on government purchases opens the door to the acquisition of production goods and construction and service contracts of State businesses and institutions through international contract bidding. This affects national small and medium size businesses that had developed through public investment which had a sizable influence in these industries. There are industries that live entirely off of their sales to the public sector. The effects, gradual as they may be, will be catastrophic in terms of employment.
There is no reciprocity by the US and Canada which corresponds to the opening up of our market in this area. Our national industry lacks the competitiveness to participate in bidding between these countries.
17. The term "national treatment," which appears throughout the FTA, tries to justify it as a nondiscriminatory treaty. We could talk about discrimination if equal sides were taking part in negotiations. It is evident that this is not the general rule.
18. In relation to intellectual property there is protection for large corporations which makes the transference of technology even more difficult. The Mexican government has given up on excluding patents for genetic material and for inventions related to living material and the human body. The FTA will make it difficult to produce basic medicines with no brand names. Previously such medicines could be produced at low costs fcr the social health sector. At the same time, the rights of local communities over their plants and the traditional knowledge of their medicinal use have been forgotten. Many of these plants are the basis for industrialized medicines.
19. We are concerned about electricity within the general energy sector. The agreement permits the cogeneration of electricity. This means producing electricity as a sub-process of another industrial process which makes its commercialization viable. It is clear that the investment which the FTA permits in the area of electricity will not be in strict compliance with our Constitution or with our laws.
The Mexican President did not fulfill his promise of excluding the theme of oil and its derivatives from the negotiations. Rather, the government converted this strategic resource into merchandise.
In the case of the GATT, Mexico has the obligation of maintaining a supply to the US even when domestic supply is low. In aligning our foreign policy with the US bloc, we would have to respond in solidarity by raising our capacity of production in the case of crisis in the US. This is what happened even without the FTA at the time of the Persian Gulf War.
20. Due to all of the above, the Mexican Action Network reiterates that the FTA is designed for the industrial and financial elite of this country and for transnational business. Small and medium size businesses must bow to the new demands of the opening up of the market at the risk of disappearing.
Employment and wages will not recover if we do not have government programs that generate social cushions such as unemployment insurance and training. If this does not happen, the perspective is not only one of greater contrasts between rich and poor but also an increase in immigration and growth of underemployment and informal employment. The just distribution of wealth and the generation of well-being continue to be a responsibility of the State, with or without the FTA. This Agreement may also signify a greater deterioration in environmental conditions.
Any Free Trade Agreement should have broad and pluralistic social participation as an essential requirement. This is true not only in the area of its planning but also in its implementation. Thus, representative social organizations must be included -- social organizations that are committed to productivity and sustainable development.
We envision trade not as an essential element for growth, but as a part of a development strategy that should consider the interests of the people as its first priority. The most important considerations should be the generation of jobs, decent wages, education, health and social security, democracy, human rights and the conservation of the environment. Thus, we are in favor of a trade agreement that promotes social well-being.
The above has been excerpted from a November, 1992 draft document of RMALC. We would like to thank Juan Tomas Reboch of the Green Party of California for sharing it with us.