Press Release: Council on Hemispheric Affairs | Tuesday, 4 October 2011

Race to the bottom: Maquiladoras, free trade, can of worms

US-Mexican relations lead the way in the hemispheric race to the bottom: maquiladoras, free trade, and a can of worms

In a section of President Obama’s address to Congress that received relatively little attention, he observed that “it’s time to clear the way for a series of trade agreements that would make it easier for American companies to sell their products in Panama, Colombia, and South Korea… If Americans can buy Kias and Hyundais, I want to see folks in South Korea driving Fords and Chevys and Chryslers.” Obama followed his speech with a press conference, which asserted that the free trade agreements (FTAs) should be passed by the end of the year. He did not mention the disturbing thought that FTAs traditionally have prompted U.S. companies to transfer their manufacturing processes to countries with lower wages, rather than noticeably creating jobs in this country. While proponents of free trade often cite the creation of U.S. jobs in export-oriented industries, the U.S. is at least as likely to import products from overseas countries where manufacturing and labor costs tend to be cheaper.

In fact, these imbalances typically have created a large trade deficit under the North American Free Trade Agreement (NAFTA) among the three signatories: the U.S., Mexico, and Canada. NAFTA already has greatly increased the rate at which U.S. corporations have used both factory shutdowns and the threat of closure of additional facilities as anti-union strategies. This process also has prompted the outsourcing of U.S. jobs to Mexico as manufactured goods flowed from south to north. Overall, the Economic Policy Institute has estimated that NAFTA has cost the U.S. some 879,280 production jobs, “contributed to rising income inequality, suppressed real wages for production workers… and reduced fringe benefits,” which, all-told, has proved woefully detrimental to U.S. workers.

This analysis was prepared by COHA Research Associate Courtney Frantz.

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