The NAFTA architecture of deregulation coupled with investor protections allowed companies to move labor intensive components of their operations to locations with weak laws and lax enforcement. This incentivized local, state and federal authorities to artificially maintain low labor costs by ignoring--or in some cases actively interfering with--such fundamental rights as the rights to organize, strike and be free from discrimination. This dynamic undermined organizing and bargaining efforts even in areas with relatively robust labor laws. Today, it is commonplace for employers to threaten to move south—whether to South Carolina or Tijuana—if workers do not agree to cuts in wages and benefits.
Multinationals are uniquely positioned to take advantage of the rules set down in NAFTA—everything from prohibitions on local input requirements to new ways to challenge regulations, including the investor-to-state dispute settlement process (ISDS). NAFTA guarantees that foreign investors get enhanced opportunities to fight laws and policies they don’t like that go far beyond the democratic processes available to citizens and domestic businesses.
The Trans-Pacific Partnership (TPP) and other forthcoming trade agreements do not have to repeat the mistakes of the past 20 years. Instead of facilitating corporate actions that exploit workers, pollute the environment and poison consumers, trade deals must move away from this flawed model toward a system that builds sustainable, inclusive development, fosters social mobility, ensures corporate accountability and encourages rather than hinders innovative social policy.
Trade is not an end in itself, but a means to enhance living standards and promote shared prosperity. Unfortunately, the legacy of NAFTA and the flawed U.S. trade policy it both shaped and reflects has been stagnant wages, declining social standards and increased inequality.