A North American road to the middle class

As considerable uncertainty continues to swirl around negotiations on a revised North American Free Trade Agreement (NAFTA), including whether Canada will even be included, we must not lose sight of the central problem that any new accord must address: the outsourcing of U.S. industrial jobs to Mexico’s system of suppressed wages. There have been efforts by some to dismiss or downgrade this issue and by others to focus on less central concerns relating to trade with Mexico. Any new agreement that fails to directly and forcefully address this issue of labor rights will only lock-in the status quo for many more years to come. 

For proof, you need look no further than San Luis Potosí, an emerging hub of industrial production in central Mexico. Eight hundred workers there make tires at a state-of-the-art Goodyear plant. But here’s where the promise for prosperity takes a detour around most Mexicans. These workers have a compliant union and a so-called “protection agreement.” They earn about $1.50 an hour for a 9-hour shift with anemic benefits, hardly a route to the middle class.

{mosads}On April 24, they walked off the job because of dangerous conditions and a promised raise that wound up being only 50 cents a day. That’s right, 50 cents a day! Fifty-seven leaders were promptly fired. One of us (Rep. Levin) met with fired leaders last month in San Luis Potosí and heard their disturbing grievances.

Down the road, 1,500 workers at a Continental Tire plant have an all-too-rare independent democratic union. They earn almost five times the Goodyear wage—$6 an hour—for an 8-hour shift, with far more generous benefits.

Mexican workers today can’t make a free choice between these two alternatives. They risk being fired and blacklisted or far worse. The overwhelming majority of the tens of thousands of labor agreements in Mexico are “protection agreements”, which are signed by an organization controlled by the ruling party of the government and which workers have never seen, signed or voted on. The result isn’t simply low wages, but an entrenched industrial policy of suppressed wages.

Let’s not forget the flip side of suppressed wages is low purchasing power, which not only harms workers and their families, but throttles economic growth. Moreover, in a highly integrated economy, suppressed wages in San Luis Potosí push down on wages in Akron, Indianapolis and Long Beach, and provide a magnetic attraction for new investment.

NAFTA was supposed to change all this when it went into effect in 1994, but instead it supercharged the problem. Trade has soared since then, but labor rights promises evaporated before the ink on the agreement was dry. Instead, NAFTA locked in a dysfunctional labor system for the next quarter century that’s led to an $80 billion trade deficit with Mexico in the auto sector.

Mexican workers have produced more and earned less under NAFTA. Manufacturing productivity rose by 60 percent between 1994 and 2011—an impressive achievement—while real wages dropped 20 percent and continue to slide. This was not necessary to compete in this key sector with China, but rather to lure industry from the U.S. to Mexico.

Mexicans overwhelmingly elected a reform-minded government this July that offers the promise of restoring rights for Mexican workers, thereby helping to protect conditions for workers in the U.S. and Canada. The new president, Andrés Manuel López Obrador, doesn’t take office until Dec. 1 but a new Mexican Senate, which his party dominates, has already been seated. On Sept. 20, the new Mexican Senate unanimously ratified ILO Convention 98 on the “Right to Organize and Collective Bargaining”, which the International Trade Union Congress (ITUC) has hailed as a “major victory for Mexican Workers.”

Although this move is a positive sign, much remains to be done. Mexico passed a constitutional amendment last year outlining important new rights for workers but the critical implementing legislation went backwards in the previous Senate. New legislation has yet to be drafted in the new Senate and what will happen once this takes place is unknown. Absent clear benchmarks and effective enforcement, large elements of the status quo once again could be locked in for decades, especially given the buzz saw of opposition to real change from entrenched interests.

It is therefore imperative that any new NAFTA agreement provide clearly for the prompt termination of the tens of thousands of protection contracts now in place in Mexico starting with the critical auto sector, ensure that all workers can have real representation at the bargaining table, and provide a transparent, enforceable process for carrying out these vital objectives.

The new agreement needs to lay the basis for a growing continental middle class with independent unions vital for vibrant democratic societies across North America. History has shown that an important way to protect U.S. workers is to protect Mexican workers and the other way around. We need a North American road to the middle class, not expanded exit ramps.

Levin is a senior member on the House Ways and Means Committee. Harley Shaiken is a professor at the University of California Berkeley specializing in labor and the global economy. They recently returned from Mexico.