Does Trump’s NAFTA Correct the Damage Clinton Did to Workers?

Listen to her full interview with Scheer below, and read the transcript beneath the audio panel.

Robert Scheer: Hi, this is Robert Scheer, and this is “Scheer Intelligence,” where I hasten to say the intelligence comes from my guests. In this case, it’s Lori Wallach, who is the director of Public Citizen’s Global Trade Watch. Now, watching global trade might sound boring, but in fact, as Donald Trump has demonstrated, very key issues are dealt with under this guise of trade; how much people get paid, whether jobs disappear, what happens to the economy. And Lori Wallach has been on the front line of this debate, going back to the original NAFTA agreement. She graduated from Harvard Law School, and instead of going to Wall Street and ripping us all off, she actually decided to get into using the law to help people. So welcome, Lori. And I would like to begin by asking, you know, here’s Donald Trump, who campaigned probably most effectively on getting rid of NAFTA, which he said was a terrible agreement. And then we’ve just had, amazingly enough, the renegotiation of NAFTA. And I must say, even though I’m quite critical of Donald Trump, it seems that he’s negotiated a better deal than the original. Would you agree, or not?

Lori Wallach: I think in some respects it’s better. There’s some things that are worse than the original NAFTA. And the bottom line is it still remains to be seen, because it’s a work in progress, whether the final package is going to be able to stop NAFTA’s ongoing damage. And that’s the real test. Will a new agreement, if implemented, stop the ongoing outsourcing of jobs, which is continuing to happen to Mexico every week under NAFTA, after already 1 million U.S. jobs have been certified by the government as lost to NAFTA? Will the new version be able to stop the corporate attacks in the investor state dispute settlement system, after hundreds of millions have been paid out to corporations by taxpayers, after attack on North American environmental and health and water and toxics and energy laws? That’s going to be the test, and right now, with the text that was released last week, one week ago, they’re not there yet. But if there’s some improvements made, they might pass that most basic test.

RS: It seemed to me, one great weakness of all of these trade agreements is they celebrate some notion of a free market, but they turn out to be very good for multinational corporations and their profit. They don’t do much for the environment, and they certainly don’t do much for workers who lose jobs, who are under pressure from lower paid jobs. And one of the things that was negotiated originally when they, in the current negotiation with Mexico, and now Canada has brought in in this new agreement, there’s a provision that requires that in the production of cars, 40 percent or 45 percent of a car’s content has to be built where workers earn $16 an hour. I don’t think that’s happened before, and isn’t that sort of a breakthrough?

LW: So that change, which is in the rule of origin portion of the agreement—the rules of origin are the rules that prescribe how much the value of a good has to be made within one of the member countries, to get the trade agreement benefits. It has a very important first-ever, which is linking the right to access the market under the favorable terms with a certain wage standard. So as a concept, it’s really a great improvement; it’s an idea that’s been kicked around for decades, and has never been in a trade agreement. But, it still remains to be seen whether that will actually really change either what workers in the U.S., Mexico, or Canada are paid, or where production happens. Because everyone is still waiting on the data, which only the car companies have, that will actually make clear where different components are made, so that it’s clear whether or not there have to be pay raises, relocations, et cetera. Another thing that is an improvement are stronger labor standards, including probably the best thing in the whole agreement, which is an annex that would require, for the first time, for workers in Mexico to be guaranteed by their government the right to have secret ballot elections on union contracts. So right now, Mexico’s constitution requires workplaces have to have a union, and a bunch of corrupt labor federations have set up a business of registering those very unions, unrelated to what the workers have to say. They’re called protection unions, and those unions do protection contracts, where before the first worker walks in, they’ve made a deal with the boss for low wages and bad conditions; they approve it, by simply registering it; and a worker comes in to a high-tech, multimillion-dollar plant, a cutting-edge plant you’d see in any U.S. city, and finds out they’re being paid a buck fifty-eight an hour. I’m not making that number up; that is what the Goodyear workers in Mexico, in San Luis Potosi, are now making, compared to in Topeka, Kansas, their counterparts are making $25 to $28 an hour. So they walk into the plant, they realize they’ve gotten terrible conditions and salary, they go on strike—and they’re thrown in jail and beaten up for breaking, quote unquote, their contract. So those fake contracts, under the agreement’s text, would have to be replaced, all of them, with real, secret-ballot election contracts within four years. Great, right? Problem is, that provision, as well as the other, improved labor standards, in the agreement, are not yet really subject to swift and certain enforcement. And that is what is missing. That’s when I say the agreement has, on paper, some important changes, but it’s still a work in progress. Because unless much-improved enforcement happens, you’ve got some ideas on paper, but you’re not going to have real changes on the ground.

RS: But let me ask you a basic question, because I introduced trade as boring, but of course its implications are anything but boring. This is, you know, to try to live on a buck-fifty-eight an hour anywhere in the world, and certainly including Mexico, is very difficult. And the disparity between a buck fifty-eight and $25 to $28 an hour is the difference between a somewhat decent life and a life of perpetual poverty. And yet in the name of free trade, and American consumers love the lower prices and so forth, this is the model all of the world. And as far as I know, it’s depressing that liberal democrats didn’t go there, you know? After all, these trade agreements have been negotiated by people who seemed a lot more reasonable than Donald Trump; why did it take this long to even assert the principle that if you’re going to bring a car in to this country, and you’re going to take advantage of the low or no tariffs, that you ought to meet some decent labor condition requirements. What’s been going on?

LW: There has been a bipartisan, elite, inside-the-beltway consensus in favor of a brand that has been sold, since NAFTA hatched it, as so-called free trade agreement. And these agreements have very little to do with trade, and they’re certainly not free trade. It’s a marketing brand. So packed into them are all kinds of corporate rights and privileges, and I want to get back to one of those things, because one of the real, certain changes in the NAFTA 2.0 is taking away some of those specific corporate rights and privileges in tribunals. But those rights and privileges include things that are just standard protectionism. So if you think of the classic definition of protectionism, it’s when the government issues some kind of a licensed protection or privilege so that a special, anointed party can basically seek extra rents. Get money that the market wouldn’t give them. So the new NAFTA, like the old NAFTA—but NAFTA 2.0 is even more extreme—grants all kinds of new rights and privileges to big pharmaceutical companies. What the heck is a bunch of protectionism for one industry, under license by the government, doing in a free trade agreement? Prepare Adam Smith and David Ricardo to roll in their graves. But the reality of that is, by using the brand “free trade,” over and over, democrats—the Obama administration—had these same outrageous pharmaceutical company protections in their Trans-Pacific Partnership, as you see the Trump administration put into their NAFTA 2.0. The bottom line of which is, those terms would lock in rules—for instance, a 10-year period of exclusivity for biologic medicines, the cutting-edge cancer drugs—that would mean the changes we need to make in the U.S. would become more difficult, and we’d export that extreme system to Mexico and Canada, the bottom line of which is cutting people off of life-saving medicines. What is that doing in a trade agreement? So you are spot on when you say that the brand “trade agreement” may seem snoozifying, but in fact, these so-called trade agreements affect every element of our lives. And it has been a scandalous shame that democratic administrations and republican administrations alike have had this elite consensus in favor of one model of these agreements, which is packed with all of these corporate rights. Really, it’s like a corporate attack via so-called trade agreement. It has very little to do with trade. I mean, the World Trade Organization, the global rule zeroed out tariffs; there are very few left, there are few, but not many. So when you think about what would be in a trade agreement, border, cutting border taxes—that’s not what’s in the old NAFTA text or the new NAFTA text. The new NAFTA text, like the old one, is hundreds of pages of specific rules, a lot of them that reach behind the border to tell governments what they may or may not do. And the notion that administrations that sold themselves as progressive, like the Obama administration, in a way doubled down on that model. And this is where the politics of this issue get so bass-ackwards. There are some elements of the NAFTA 2.0, as you started out by saying, that are better than NAFTA, and that are better than the TPP—the TPP negotiated by a democrat. And I say “better” from a progressive perspective. Some of the corporate power-grabs, though there are plenty of them in NAFTA 2.0, but some of the most extreme ones that were included in the TPP by the Obama folks, have been whacked in the NAFTA. And the NAFTA 2.0 has gotten an earful of opposition from the Wall Street Journal’s editorial page, and the Business Roundtable, complaining about these ways in which their special privileges for the big corporate, multinational corporate interests have been rolled back. But the problem is that even though that stuff is better, we still don’t have the real transformational replacement of the corporate-rigged NAFTA model. That’s why we don’t talk about the new brand name the president has given this deal. We call it NAFTA 2.0. Because it’s different, and in many respects different than any past U.S. agreement, in some ways that are very good, some ways that are bad. But it is not a transformation of the old model.

RS: You know, the reason I wanted to do this podcast with you is because I saw quotes from you—you were one of the few individuals out there that said, hey, wait a minute. This is a mixed bag, and in fact there are some things here that are long overdue. And you just mentioned a very important one that I’ve been ignoring. And one of the treacherous things about these trade agreements is they allow private companies to go outside of the judicial system and ignore governments, whether it be the government in Mexico or Canada or China or anywhere else, and go to private courts, and get a different hearing for what they’re doing there by ignoring, being able to ignore what citizens in a country like Mexico might decide, or Canada, about their environment or working conditions. That’s not—and this is the first time, I think, that that has been scaled back. Is that not the case?

LW: And that is the single best thing. The reason, when this agreement came out, I was very, as much as I really dislike Donald Trump and almost everything he says or does, credit was due in the NAFTA 2.0 for really reining in the threats posed by what is called technically the Investor-State Dispute Settlement system, ISDS for short. This is a regime that empowers multinational companies to sue governments in front of tribunals of three corporate attorneys. The corporate attorneys can rotate between acting as so-called judges and suing governments. And these tribunals are empowered to order taxpayers to reward the corporations with unlimited sums, including for their claimed expected future profits, for any violation of a set of extraordinary rights and privileges the trade agreements grant them. Effectively to operate without being regulated, to be free of risk—they basically get free risk insurance that subsidizes outsourcing, but worse, these corporations under NAFTA alone have collected hundreds of millions of dollars in successful attacks on oil and gas policies, toxics bans, water and timber policies, zoning rules relating to toxic waste dumps. And there are ongoing challenges of a Canadian fracking ban; there are payouts over mining policies—it’s really a crass corporate power grab. And those provisions in NAFTA, for the first time, as compared to their continual expansion, including in the TPP, have been whacked back seriously. So with a three-year phase-in, if this agreement gets approved and goes into effect, three years after it goes into effect the ISDS system is altogether terminated between the U.S. and Canada. And that is a big honking deal. That would eliminate 92 percent of all current U.S. ISDS exposure, the investment in the U.S. that is subject to those corporate attacks under NAFTA, and the lion’s share of total U.S. ISDS liability. As well, all but one of all the major NAFTA environmental attacks using this corporate regime, have been U.S. corporations attacking Canada. And so shutting down ISDS between the U.S. and Canada for good will prevent an enormous number of horrific cases that would otherwise go forward absent that change. With respect to Mexico, the existing system is replaced by an approach that includes some of the major reforms that progressives have long demanded. The most important is removing these extreme investor rights that have been used by corporations to attack these domestic environmental and health laws, and only allowing cases to happen if and only if a domestic court system or administrative hearing has failed. Which is to say, you have to go as a foreign investor, not skirting the courts like ISDS, but you have to go to the domestic courts. And under NAFTA 2.0, you have to spend two and a half years, all the way up to the highest court, or trying, to get your issue resolved. And only if you have done that, may you go for a review. And only for claims that your property was actually directly expropriated. Seizure of title, nationalization, full occupation, is the definition. Or after you invested, some direct discrimination against you as a foreign investor was enacted. So all of the broad rights there, all of those standards under which the NAFTA cash has been paid out to corporations, are gone. And then there are procedural reforms. So, the judges cannot also be attacking countries for corporations; the rotating, the double-hatting of the lawyers in the system is forbidden. The damages cannot be the future expected profits of the company, but for the challenged act, which is the current standard; rather, inherently speculative damages are explicitly banned. There are other reforms, the bottom line of which is, the number and types of cases would be extremely reduced. Now, all of that was great. And then there was a little backtrack, and it ain’t little. Which is, there is a special annex that got added that ostensibly is to take care of the situation of the nine U.S. companies that have obtained oil and gas contracts from the Mexican hydrocarbons authority under the partial privatization of that sector, under the outgoing Mexican government. There are nine companies with 13 contracts, and the question was, what rights would they have if those were cancelled without any cause? How do they get their money back? Well, my perspective is, they try to go to court, and if it doesn’t work, they should have risk insurance. But a variety of policymakers decided, given the NAFTA protections were in place when they signed the contracts, and they didn’t think they needed risk insurance, there should be some coverage of those contracts. So there’s a new annex which allows those companies to have access to the full, bad, huge, outrageous set of rights with respect to their covered contracts with the federal government. And the language in that annex is written in a slightly fishy way, so that it may even have broader potential threats. So what was a beautiful outcome—the best it could be, short of just altogether whacking ISDS, which would be the best outcome—is a little bit marred. Now, for folks who are listening to this and saying, holy hell, what is that lady talking about—you can actually read all of this. So go to the text.

RS: I take your point, people tune out when they hear this. But this is life and death to people all over the world. It really determines, you know, whether they’re in China assembling your iPhone or whether they’re in Mexico assembling your car, these kind of trade agreements internationally set the stage for whether people get ripped off, whether they go hungry, whether they have—this is the ball game with the multinational economy. We’re going to take a quick break, and we’ll be right back with Lori Wallach of Public Citizen. [omission for station break] We’re talking about a subject, I have to warn people, you’re going to sound like—oh, my goodness, this is why I didn’t study economics in college, and so forth. But you know, this is the dismal science that determines whether people starve or live, whether we have famines, whether we have unions, and so forth. And the provocative point here that I’m making, and I think you’re agreeing with me, this rather dramatic change in how we negotiate trade agreements, NAFTA 2.0, the rewrite of a trade agreement that you dealt with when you first started as a lawyer on the public interest side. But the bad provisions continued in other agreements, and they finally were getting a little bit of relief from an improbable source: Donald Trump. And for the first time, in NAFTA 2.0, this improbable president of ours, who we didn’t think would care about that, has actually made a very big concession on two points so far that I can see. And it seems to me on the Canadian side as well as both the outgoing and incoming president of Mexico, that these folks got Donald Trump to go along with some reasonable provisions. Am I overstating it?

LW: So that’s what you’d probably assume from the outside. The actual story is totally the other way around. Trump, while he gets what is the outcome that is unacceptable of this race to the bottom, has a totally wrong analysis of how this happened. He has this whole mantra of “we got taken to the cleaners, we got these rules imposed on us.” As if! The NAFTA was the idea of Reagan. He started with the U.S.-Canada Agreement. George Bush the first ended up finishing NAFTA and signing it. Clinton, the democrat, fought tooth and nail and passed it, his No. 1 priority; it’s how they lost the House in ’94. So NAFTA is made in America. It is a Reagan-Bush-Clinton coproduction of rules with over 600 official U.S. corporate advisors who had access to the text; they called the shots; and then we imposed it on Mexico and Canada. So Trump’s notion of this nationalistic “they stuck it to us”—no. Actually, workers throughout North America got steamrolled by corporate America united with some big Canadian and Mexican counterparts. So then we jump to the current. So given Trump doesn’t have the right analysis of how this disaster got cooked, he knows the outcome’s been bad; how does, you know, how does he possibly get any of this right? And again, long way to go, but there are some things that are better; how did that happen? So, ironically, it wasn’t Canada and Mexico pushing on him. And the Mexican government’s very conservative, like Trump is conservative; but you know, the Canadians are supposedly a liberal party, not a right-wing party. It comes to pass that the one and only, I would say, good cabinet appointee in the entire Trump administration is the U.S. trade representative, a fellow named Robert Lighthizer. And he is a guy who is super conservative; he worked for the Reagan administration in the trade agency. But he is a guy who also believes in the importance of manufacturing jobs, and he actually designed a set of U.S. demands that literally caused spontaneous combustion of every hair follicle in the Chamber of Commerce when it got tabled. Because it looked much closer to the demands of progressives and unions, with respect to getting rid of ISDS, adding a wage standard, adding rules that would have gotten rid of a waiver that’s in NAFTA, of Buy America rules that were in place since FDR. Sadly, that one they caved on, so those Buy America waivers are still in place. He’s the one who insisted on the labor rules, and he even planned to have a sunset clause, where the whole NAFTA would go away every five years unless reauthorized, to make sure it actually delivered. Unfortunately, again, Canadians and Mexicans said no way on that one, either, and the U.S. caved. In the end—and this is not what you’d expect—Chrystia Freeland, the person who ostensibly is from the progressive government, is the person who was dying to save those investor state corporate tribunals. She was the person most against having a sunset clause and accountability. She totally caved and was happy to have the outrageous corporate protectionism patent extensions, even though her country is the one who loses. We already have those terrible policies—her country, with its lower medicine prices, more generic competition, is the one that is going to get clobbered; her consumers are the losers in this. Yet, she fought to try and stop the good changes, and was totally willing to go for the outrageous, bad things that the U.S. was demanding. And it’s heartbreaking, because that, sadly, is very much like the mindset that got us to loop back to where you started, with President Obama and his trade representative, a guy named Michael Froman—who’s a very good friend of Chrystia Freeland’s; the two of them helped write the TPP, the Trans-Pacific Partnership. That agreement, and that mindset, is exactly the problem you described. Which is this bipartisan, elite consensus. Which has created an opportunity for the likes of a Donald Trump to exploit people’s legitimate rage with the totally corporate-rigged agreement’s terrible outcomes. It was not rocket science to predict that NAFTA would lead to a million lost jobs. It was designed to do that. It has investor protections that make it easier to outsource jobs. It waived the Buy America rules. It was an active decision to have rules in NAFTA with all these corporate protections, but no labor rules; as you put it, no wage standards, a race to the bottom. I mean, contemplate this: wages in Mexico, which were not survivable before NAFTA, in real terms are lower. In fact, wages in Mexico are now 40 percent lower than in manufacturing in coastal China. Wages in Mexico are now lower, under 25 years of NAFTA, than parts of Central America. This is the set of rules that were designed with certain intent, with certain players in mind, and the result is you have furious people in communities across the country. And by the way, it’s not just the Rust Belt; the No. 1 concentration of lost jobs under NAFTA is El Paso, Texas. It’s Latinas. It’s women who are in the sewing industry in Texas, is the No. 1 geographic concentration of NAFTA-certified job loss. Southern California is another huge pocket in high-tech, high-tech manufacturing—aerospace, computers. So this race to the bottom that these agreements unleashed, in the economic sphere in addition to—you said a lot of people think, well, this is a snoozer, who can care about trade. Let’s just talk through a very short day. You wake up, you have breakfast—oh, thanks to NAFTA and the WTO, you now have food on your table that doesn’t meet U.S. standards. Because before NAFTA and WTO, the rule was, we didn’t import any meat unless it was equal to, if produced in another country, the standards were equal to U.S. inspection and safety. No! Under NAFTA and WTO, that was replaced; the new standard, we must import food if the other country says its system is equivalent. So before NAFTA we imported from one Mexican meat processing plant inspected by the USDA. We now accept all of Mexican food processing plants, meat processing and poultry plants, as equivalent, and we ship from all of them. So as you bite into that breakfast sandwich of whatever poultry or meat is on it, you have just had a NAFTA food safety potential disaster. You go to your job. Boy, you work two or three jobs now just to try and make the same kind of salary that one person could get full time 25 years ago. That’s because the biggest impact of trade is not on the number of jobs, but on the wages. Wages are determined, basically, by where money is invested in the economy. So if the kind of investment that occurs is offshore for higher-wage jobs, at a lower cost, then what’s remaining for the workers who had been in the higher-wage jobs is to compete with each other. So that even in sectors where the number of jobs are growing—so in the service sector—wages are flat, because all those displaced workers from the higher-wage jobs are now competing with workers who already were in the non-offshore-able service sector, and wages are flat, which gives you a headache. So you dig into your purse or your pocket and you pull out some Ibuprofen, the miracle headache cure. Except you don’t have Ibuprofen. Because actually, thanks to a trade agreement, they’ve extended the patent. And so instead of being able to buy a whole bottle of them, 12 bucks, it’s back to the old patented price, where each tablet was over $10. So you go on with your headache, at which point you get into your car. And you’re driving along, and if you’re in a border state, thanks to NAFTA, there could be a truck domiciled in Mexico that doesn’t have to meet U.S. standards for pollution or safety or licensing, and the poor driver is being paid pennies on the dollar of his U.S. counterpart, and he’s having to work for three days in a row instead of having the mandatory federal rest breaks. You’re driving along, and that truck comes right by your car. You’re lucky—you don’t have the accident—but the poor driver drives off the road, highway’s closed, and you’re stuck there. And as you’re stuck there you think, well, I’m stuck here, I’m going to start paying some of my bills online. At which point, thanks to the rules in the trade agreements that could undermine your privacy and mess up e-commerce, you cannot pay your bills online—because you’ve been hacked! And then you finally get onto your bank account, and you realize [Gasps]—my bank’s been closed. Why? Because the trade agreements mandated we get rid of some basic financial protections. And you thought trade didn’t affect your life!

RS: When Donald Trump attacked NAFTA, the smart people, the best and the brightest, the people I know, they all said, what’s he doing? Trade is a good thing, it improves the life of people around the world, how could you be against it. He’s just an old-fashioned protectionist, or he’s just lying, or what have you. And the fact of the matter is, that we accepted a rejiggering of the world under the name of free trade that basically deprived people of their rights in this country and elsewhere. And I want to just take one little example of this. The guy who was in charge of President Obama’s jobs council was the head of General Electric, Jeffrey Immelt. So Barack Obama picks this guy who was running General Electric—General Electric was a company Ronald Reagan worked for, and he admired, but at least they made stuff; they made good stuff, and they made it here, and they paid decent wages, and they had a strong labor union. Here’s Jeffrey Immelt, and he presides over the destruction of General Electric, which is in big financial trouble, and GE Capital did a lot of these lousy mortgages, and they were responsible for about 80 percent of their profit. And they also, two out of three jobs went abroad. And yet, this is the man that Barack Obama picked to work on his jobs council. And then we have this surprise, this improbably figure of Donald trump took this lousy NAFTA agreement and made it somewhat better by opening up two basic issues. One is whether we’re going to pay people elsewhere a living wage, and also get rid of these phony corporate-controlled courts that make a hash of any of the environmental labor standards that people vote for in these countries. Is that not a major improvement?

LW: I don’t think we’re yet at a place, because of the lack of enforceability, say of those labor standards, where we can say, on that, the agreement that is on offer would stop the existing damage. So every week NAFTA is continuing to outsource more jobs, new laws are getting attacked under those investor tribunals. So an agreement that shut down the investor tribunals right away, not after three more years of attacks; and an agreement that actually subjected those labor standards, both the ones for the wages, but also the ones that would allow labor unions in Mexico to bring up wages there—that those rules were subject to certain and swift enforcement. If those two things happened—and those outrageous new pharmaceutical protectionist, monopoly expansions to raise medicines were taken out—you are right. We would have an agreement that would be better. But it’s still a work in progress. I mean, the thing I tell everyone is one of the few people now who’s probably read the whole, 900-page agreement, is that there are things in there that are worse, there are things in there that are the same, there are things in there that are better. And if we can get a little bit more change to actually enforce the improved labor standards and wages, and get rid of a couple of the outrageous corporate giveaways, this would be an agreement, as improbable as it might seem coming in the Trump administration, that would be worth harvesting. But we’re not there yet. I would say the fight continues, the fight to replace NAFTA continues. The agreement we have on offer doesn’t yet cut it, but it definitely has the potential for stopping some of NAFTA’s ongoing damage. If we really continue between now and when it’s up for a vote, which will be the spring of 2019. At this point, it basically is up in Congress’s court. So Congress is going to have to put a foot down and say, hey, we’re happy to vote for your agreement, but the labor stuff has to be enforceable so it’s not just on paper that there could be higher wages and better labor rights, but that if that doesn’t happen, a hammer comes down. And as far as the corporate tribunals going out, having that happen right away, not three or four years down the road—really important. And let’s take those outrageous new protections for the pharmaceutical companies out. That’s a deal worth having for sure.

RS: That’s it for “Scheer Intelligence.” My guest was Lori Wallach, and the producers for “Scheer Intelligence” are Josh Scheer and Isabel Carreon. Our engineers at KCRW are Kat Yore and Mario Diaz. At USC at the Annenberg School, it’s Sebastian Grubaugh. And at NPR D.C., the folks there helped us a lot. I’m Robert Scheer. See you next week.