Portrait of a
by the Council of Canadians
Ontario -- Remember the great free trade debate? Remember the assurances that the US-Canada Free Trade Agreement (FTA) was going to bring us jobs -- not just any jobs, but good, high-paying jobs?
In the seven years since Canada entered into free trade with the US (including two years of partnership with Mexico under North American Free Trade Agreement), unemployment has averaged 10 percent and 334,000 manufacturing jobs have been lost.
The new jobs that have been created since 1989 are almost all low-wage and part-time positions. Flipping hamburgers or working as a clerk in a convenience store is a far cry from the new high-tech economy that was supposed to emerge under free trade.
NAFTA's big-business boosters promised the economic windfall from free trade would allow us to preserve and strengthen our social safety net. Yet over the last seven years, the same corporations that lobbied for free trade have pressured governments to slash unemployment insurance, post-secondary education, social services and pensions. Even Canada's Medicare faces risks from giant US health corporations looking north for new markets.
Remember when our politicians said that the FTA's side agreements made it the "greenest" trade agreement in the world? But within two years, the rollback of regulations protecting our environment was all the rage, and environmental conditions have worsened.
Free trade also was supposed to give us better access to the US market, but NAFTA failed to protect Canadian interests in the steel and softwood lumber battles. As the head of Canada's largest steel company, Stelco, said: "Anybody exporting to the US who believes free trade gives them some kind of protection or special status is putting their company at risk."
Canadians were promised that our cultural institutions would be protected, but today, Canadian films have access to only 3 percent of screen time. Only 17 percent of books and magazines sold are Canadian, and 90 percent of English language school textbooks are imported from the US.
You won't read the real story of free trade in the mainstream press or see it on TV. Big business, right-wing economists and the politicians don't want to tell you the truth about how free trade devastates our economy, undermines our cultural and political sovereignty, erodes our social programs and harms the environment.
Jobs... Going, Going, Gone!
Free trade was going to deliver more jobs and better jobs. Seven years later, more than half a million Canadians are still waiting in vain for the payoff.
The 1990-93 "free trade recession" was the longest since the Great Depression. Unemployment rose from a "low" of 7.5 percent in 1989 to double digits from 1991 to 1994. It remains barely below 10 percent today. Despite the "recovery," average family incomes are lower than in 1989, and poverty rates -- particularly among children and single women -- have risen sharply.
Meanwhile, most of the new jobs today are low-paying, low-skill and part-time. Not the kind of work you can plan a future around -- let alone feed a family.
Since 1988, almost all of the firms belonging to the Canadian Business Council on National Issues (BCNI, the corporate lobby group pushing free trade) laid off more than 200,000 workers while boosting their revenues by $32.1 billion (US $23.4 billion).
The business media regularly hails Canada's "record" exports to the US as evidence that free trade is working. Exports are up (largely due to a low dollar), but the so-called "boom" hasn't resulted in many jobs because the big growth in exports has been in machinery and equipment -- highly automated industries that employ few workers. In other sectors, free trade has meant plant closures and major job losses.
In the US, layoffs have sped up since NAFTA. Rural communities and working women have been hit especially hard. In Mexico (which was supposed to be the big free-trade winner), a quarter of a million jobs have vanished. The number of unemployed has jumped by nearly 1.5 million. Since NAFTA, the minimum wage in Mexico has fallen by 16 percent.
Free trade has given corporations more power to drive down wages and to practice "whipsaw bargaining" -- threatening to move factories to lower wage areas unless workers take concessions. The US multinational Xerox used this form of blackmail in the first year of NAFTA to bargain down the wages of employees. Meanwhile, the company posted a $794 million profit.
The US telecommunications giant AT&T lobbied hard for quick passage of NAFTA. Just one month after NAFTA's passage, AT&T announced that it was laying off 15,000 employees. The company's CEO, Robert Allen, then rewarded himself with a 40 percent pay increase -- hiking his salary to $3.4 million a year. On January 2, 1996, the company laid off 40,000 more workers, saying it needed to be more "competitive." Within two days, AT&T's stock gained $6 billion.
Massive layoffs, huge stock price gains for rich investors and bloated CEO salaries are all just part of doing business the free trade way. Free trade has been great for corporations and wealthy investors, but the working people of Canada, the US and Mexico are paying the price.
A Shredded Social Safety Net
The most heated moments of the 1988 free-trade debate came when critics warned that the FTA threatened Canadian social programs like Medicare and Unemployment Insurance. Pro-free traders accused critics of fear-mongering and outright lying, but Canadians remained worried. If free trade threatened our cherished social programs, most of us wanted no part of it.
These concerns prompted the corporate lobby to buy ads in newspapers and magazines claiming that the FTA posed no threat to social programs. Free trade, they said, would never force us to lower our social standards to that of our trading partners, nor would it give corporations the excuse to demand spending cuts.
Only a month after the election, the corporate power brokers changed their tune and began campaigning for deep cuts in social programs. As the chairperson of the Canadian Manufacturers' Association (CMA) said at the time: "If a policy is anti-competitive, dump it."
"Dumping" is precisely what's happened. Social programs have been gutted. Family allowance was eliminated. Public pensions have been cut back and are no longer universal. Welfare has been slashed. Health care and post-secondary education are being robbed of federal dollars.
UI Cut to US Levels
The clearest example of the shredding of the social safety net is what's happening to Canada's Unemployment Insurance system. In 1989, the year the FTA took effect, 87 percent of unemployed Canadians qualified for UI. In contrast, only 52 percent of US workers could collect unemployment benefits. But after changes introduced by first the Mulroney government and now Jean Chretien's Liberals, less than 40 percent of jobless Canadians will be eligible for UI. All this in just seven short years.
These cuts mean more unemployed Canadians have to rely on welfare. But governments are busy shrinking these benefits, too. Some provinces are even introducing punitive workfare programs to force the most needy into degrading "make work" projects at slave wages.
The same assault on social programs is taking place in the US and Mexico. The US Congress cut Medicaid, education grants, social security and welfare. In Mexico, the arrival of NAFTA was greeted with the privatization of many health services. Mexico's public pension funds were turned over to the private sector to fatten the profits of financial corporations. (Canada is considering such a move, and some US politicians have made similar suggestions.)
At the same time as a record number of small businesses and individuals went bankrupt, the six biggest Canadian banks earned their highest profits ever -- $5.18 billion (US $3.8 billion).
Cutting social programs is a big part of the low-wage economic strategy of free trade. The cuts are meant to weaken support for people so much that they will accept any job no matter how low the pay or how poor the working conditions. The corporations call it becoming "competitive," but more and more Canadians are seeing it for what it really is -- an all-out attack on our quality of life.
The "Greenest" Deal On Earth?
Supporters described NAFTA as the "greenest" trade deal anywhere. But two years into the deal, with a 20 percent jump in industrial activity in the "maquila-dora" factories lining the southern side of the US-Mexico border, therehas been an alarming increase in water and air pollution, and the incidence of birth defects and respiratory disease in the area is rising.
NAFTA has given corporations an excuse to push for the rollback of environmental standards, and the US Congress is bowing to corporate interests by drastically weakening environmental protections.
Here in Canada, big business successfully campaigned against attempts to strengthen the Canadian Environmental Protection Act. The BCNI also defeated new regulations to reduce the carbon dioxide emissions linked to global warming. Only intense lobbying by environmental groups headed off the passage of the Regulatory Efficiency Act. The REA, a bill designed by the CMA (now amalgamated into the Alliance of Manuafacturers and Exporters of Canada), would have allowed corporations to sidestep existing regulations by dealing directly with government ministers and proposing their own standards. If industry subsequently violated its own standards, the REA stipulated that the taxpayers -- not the industry -- would be liable for damages. [Update: As this issue went to press, a new version of the REA was being introduced to the Canadian Parliament.]
"It's Not About Culture..."
When was the last time the average Canadian saw a Canadian movie or play? Read a book by a Canadian author? Leafed through a Canadian magazine or listened to a local recording artist? Chances are it's been a while. That's because, with few exceptions, our TV and film screens are filled with US products and our magazine racks are choked with foreign titles.
US multinationals enjoy a stranglehold on Canada's cultural market. Canadian books often are hidden away in corners of bookstores marked "Canadiana." Many video stores now routinely stock Canadian releases in the "foreign film" section.
Because many Canadians feared that our cultural industries would be overwhelmed by US multinationals, the Mulroney government was compelled to negotiate a "cultural exemption" in the FTA and NAFTA. But these "safeguards" give US corporations the right to seek "compensation" for any measure Canada takes to promote local culture. That's why, whenever we try to do something to help our cultural community, the US threatens to retaliate.
Take the ongoing dispute over the "split-run" edition of Sports Illustrated. ("Split-runs" are Canadian issues of foreign magazines that have virtually the same content as the parent magazine. Because the content is almost identical, there are little or no extra editorial costs. Consequently, split-runs can offer advertisers far cheaper rates than Canadian magazines and drive them out of business.)
Under public pressure, the Liberal government used the cultural exemption to impose a hefty tax on these magazines. But Time-Warner, the publisher of Sports Illustrated, responded by taking legal action against Canada, and Washington is filing a complaint with the World Trade Organization, the body that rules on international trade disputes. Even if Canada wins the case, the US has threatened to retaliate. Why? The editor of Sports Illustrated put it bluntly when he said: "This has nothing to do with culture. It's about money."
Standing Up to Corporate Power
More and more, Canadians are questioning politicians and business leaders who use free trade to say there are no choices. "We must cut spending to remain competitive," they claim. But we look around and see programs for the needy being cut while politicians promise tax breaks for the wealthy, and we wonder if there really is "no choice."
Labor and community groups from across Canada have produced two alternative federal budgets detailing how to reduce the deficit without cutting programs and services -- by focusing on job creation, lowering interest rates, building fairness into the tax system and investing in social programs and public services.
In 1993, citizens' groups from all three NAFTA countries met to develop real alternatives to free trade. They rejected the "race to the bottom" model and called for a new trading relationship based on fairness, cooperation and mutual benefit.
Trade, they agreed, should not be used to drive down wages, weaken workers' rights or exploit the environment. A just and sustainable trade agreement would include codes of conduct for corporations and would set out strict, enforceable environmental standards and global labor rights. "Side agreements" are not enough.
If we are going to stop this headlong race to the bottom, we cannot let our governments be held captive by big corporations. If enough of us speak out and work together -- community groups, labor, farmers, women and environmentalists -- we can build a movement across the hemisphere and around the globe -- a citizens' movement that cannot be ignored.
Adapted from "Challenging Free Trade," a special issue of Canadian Perspectives published by the nonpartisan Council of Canadians. For copies of the full report, contact the Council of Canadians, 904-251 Laurier Ave. West, Ottawa, Ontario K1P 5J6, Canada, (800) 387-7177, firstname.lastname@example.org, www.web.apc.org/~coc.