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Mexico exemplifies trade pitfalls

Late last month, Treasury Secretary Lawrence Summers, other key members of the Clinton administration's economic team and a Nobel Prize-winning economist all stepped into a White House briefing room to praise the virtues of expanding trade with China. The team produced an open letter, signed by 13 U.S. Nobel Prize winners and 136 additional economists, endorsing the entry of China into the World Trade Organization. These economic luminaries argued that China's entry into the WTO would grant U.S. companies unrivaled access to its market of more than 1 billion people and issue a strong signal of support for Chinese advocates of reform.

What about the systematic denial of human rights and the widespread repression of workers that have earned China its reputation as an undemocratic regime? Not to worry, the economic team argued, economic openness cures all ills. "This reinforces all the things we want to encourage in China," Summers offered. Almost seven years ago, an equally distinguished group presented a letter signed by 12 Nobel laureates and 283 economists extolling the benefits of the North American Free Trade Agreement. Then, as now, the argument was made that expanding trade would improve labor and environmental standards and bolster reformers.

Before Congress votes next week on offering China permanent normalized trade status, perhaps we should briefly review what has happened since NAFTA's enactment.

Post-NAFTA Mexico is far more important as a high-productivity, low-wage location for export plants, or maquiladoras, than it is as a market for U.S.-produced goods. U.S. shipments to Mexico have more than doubled since the agreement's passage, reaching $87-billion last year. But more than 60 percent of these are "revolving door" exports _ parts that stay in Mexico just long enough to be assembled into televisions, computers and automobiles that are then sold in the U.S. Instead of a projected $9-billion to $12-billion annual trade surplus, the United States had a record $23-billion trade deficit with Mexico last year.

What about the promised labor and environmental reforms in Mexico? Before its passage in late 1993, NAFTA's defenders and detractors agreed that independent unions were effectively banned in the maquiladoras. Supporters of NAFTA saw the trade agreement as a way to change this. Now, almost seven years later, employment in the maquiladoras has more than doubled to 1.2-million workers, but the same number of independent unions exist _ none. This lack of labor rights contributes to the 18 percent decline in real wages since 1993, depressing the purchasing power of Mexican workers and the market for U.S. exports.

With the economic argument faltering on the eve of the NAFTA vote, proponents of the trade agreement reinvented themselves as promoters of political change. A vote for NAFTA, the argument went, was a vote in support of Mexico's reformers and in the national interest of the United States. At the White House signing ceremony, former President Bush praised Mexico's President Carlos Salinas as a "truly courageous young leader." Echoing these sentiments, economist Paul Krugman wrote that rejecting NAFTA now "would be a devastating slap in the face to Mexico's reformers."

Although Salinas is now in disgrace and exile, Mexico has been going through a period of important political reform. These changes, however, are far more related to domestic pressures than increased trade flows. What the Mexican experience underscores is that reformers who push privatization and reformers who push labor and environmental standards are often not the same people; embracing markets does not necessarily lead to human rights.

China's further incorporation into the global-trading system could be a very positive step for everyone. But, the lessons of NAFTA tell us that realizing this potential requires a commitment to operate with clearly defined standards concerning labor, the environment and human rights. Without such an agreement, the Chinese government will assume that the standards currently in place represent all it will need to do. Until a Chinese commitment to change is secured, voting no on permanent normal trading status is necessary to ensure a more democratic future.

Harley Shaiken is a professor specializing in labor and the global economy at the University of California, Berkeley.

Los Angeles Times