Despite the efforts of Corporate America's foot soldiers in Washington, D.C. to brand it a huge success, the reality is that the North American Free Trade Agreement (NAFTA) has been an unqualified disaster for working people.

Widespread job losses, stagnated worker incomes, increased insecurity, and rising inequality have accelerated in Canada, Mexico and the U.S. since NAFTA took effect in 1994, according to "NAFTA at Seven," a new report from the Economic Policy Institute (EPI).

In the U.S., 776,030 jobs have disappeared as a result of NAFTA, according to the latest figures from EPI. California has been the hardest hit state, suffering 82,354 jobs since the agreement took hold in 1994.

While every state has lost jobs, states with high worker densities in motor vehicles, textiles, computers, and electronics have seen many of their plants move to Mexico, leading to especially severe job losses.

Michigan, New York, and Texas have lost more than 40,000 jobs each, while Ohio, Illinois, Pennsylvania, North Carolina, Indiana, Florida, Tennessee, and Georgia have each seen over 20,000 jobs disappear. The report says that a ballooning net export deficit with Mexico and Canada, which has increased by 378% since 1993, is largely responsible for this trend.

"For some people, NAFTA clearly has been a success," explained EPI President Jeff Faux. "This should not be a surprise inasmuch as it was designed to bring extraordinary government protections to a specific set of interests--investors and financiers in all three countries who search for cheaper labor laws and production costs"

"NAFTA, while extending protections for investors, explicitly excluded any protections for working people in the form of labor standards, worker rights, and the maintenance of social investments," said Faux. "This imbalance inevitably undercut the hard-won social contract in all three nations."

Low Unemployment Conceals NAFTA's Negative Effects

Although the U.S. unemployment rate has dropped to record lows in recent years, the underlying employment trend has been a shift away from jobs in the higher paying manufacturing sector to the lower wage service sector. As EPI data show, service sector workers earn on average only 77% of what they made in manufacturing. What's more, among non-college-educated workers, who make up 72.7% of the US work force, wages have dropped by an average of over 13% since 1993.

These structural shifts in the U.S. labor market have been exacerbated by corporate-driven free trade agreements such as NAFTA and the World Trade Organization (formerly GATT) that have eliminated trade barriers and increased capital mobility.

EPI also notes that free trade has created a "threat effect" in collective bargaining situations, which employers use threats to relocate plants, outsource work, or purchase directly from foreign producers. See LRA article on Plant Closing Threats

The View From Mexico and Canada

While NAFTA has destroyed well-paying jobs in the U.S., it has caused an explosion of employment in the horrendous maquiladora assembly factories that crowd Juarez ,Tijuana and other Mexican border cities.

In the 1990's, employment in the maquiladora sector skyrocketed from 420,000 to 1.3 million, according to EPI. At the same time, the Mexican minimum wage lost almost half of its purchasing power, and manufacturing wages decreased 21% between 1993 and 1999.

It should be understood that the maquiladora sector exists virtually outside the rest of the Mexican economy. The raw materials shipped to auto-parts assembly plants, toy factories and clothing manufacturers on the border are turned into finished products that end up on the shelves of Wal-Mart, K-Mart and other retail outlets that depend on cheap goods produced by low-cost labor.

The irony is that without free trade, the millions of U.S. workers sentenced to dead-end jobs paying $6 an hour would be even harder pressed without the brutal exploitation of labor in the maquiladoras and other low-wage areas that supply cheap goods.

In Canada, 276,000 jobs were destroyed, and in order to become economically competitive, the Canadian government cut public spending by 5%. Canada also saw unemployment reach its highest rate since the 1930's, and a dramatic increase in income inequality.

More Free Trade Is Not the Answer

The unfettered flow of good and services around the plant is often couched in Utopian rhetoric by the banks and corporations growing more rich and powerful in the global economy. They argue that free trade promotes democracy and will pave the way for improved living conditions in poorer nations. But so far, there is little evidence to support those lofty claims.

The global economy is not improving working conditions anywhere. Workers in counties such as Mexico, China and Indonesia are being forced into wage-slavery to produce cheap goods for export markets in the US and Europe primarily. Under the current terms of free trade, rising wages and living standards in poor countries are in direct opposition to the interests of investors.

In light of President Bush's plans to expand NAFTA into a Free Trade Area of the Americas agreement that would cover the whole Western Hemisphere, EPI's Faux warns that NAFTA has taught us the harsh lessons of unrestricted trade.

"The current imbalanced structure of NAFTA is clearly inadequate for the creation of an economically sustainable and socially balanced continental economy," concluded Faux.

"Rather than attempting to spread a deeply flawed agreement to all of the Americas, the leaders of the nations of North America need to return to the drawing board and design a model of economic integration that works for the continent's working people."