NAFTA: Bureaucracy Unlimited
Thomas R. Eddlem
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The New American, October 18, 1993
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Adoption of the North American Free Trade Agreement (NAFTA) and its side agreements by the U.S., Canada, and Mexico will create a lot of new high-paying jobs. Unfortunately, most of them will be government positions for bureaucrats working in the more than 30 new international government committees, subcommittees, councils, working groups, and subgroups mandated by NAFTA. If adopted, NAFTA and its side agreements will cost U.S. taxpayers billions of dollars, raise the national budget deficit, increase restrictions on free trade, and diminish our national sovereignty.
NAFTA itself would establish the Free Trade Council -- a continental government-in-waiting with enormous discretionary powers -- with at least eight permanent committees, six "working groups," and five subcommittees and subgroups. NAFTA's side agreement on import surges would add a permanent "Working Group on Emergency Actions," and the side agreements on labor and the environment would create two additional regional law-making bodies, each with its own bureaucracy and advisory committees.
At the conclusion of the negotiations for the parallel agreements to NAFTA on August 13th, U.S. Trade Representative Mickey Kantor boasted that NAFTA and its side agreements would guarantee that America's burdensome environmental and labor regulations could never be lessened: "No nation can lower labor or environmental standards, only raise them, and all states and provinces can enact even more stringent measures...." Thus, NAFTA locks in all existing federal labor and environmental regulations -- no matter how costly or oppressive -- forever.
Import Surges
The most overlooked side agreement to NAFTA is the Understanding on Import Surges. Prepared in order to streamline four of the protectionist provisions contained in the NAFTA agreement and the global GATT trade structure, this side agreement would establish a new international committee called the "Working Group on Emergency Measures." The U.S. trade representative reports that the Working Group on Emergency Actions would be accountable to the Free Trade Commission and charged with overseeing "how well NAFTA's safeguard provisions are working" and making "recommendations for revisions, as appropriate." In other words, the purpose of the working group is to insure that major free market adjustments from NAFTA tariff reductions are not allowed to affect outdated, obsolete domestic industries. It is no wonder this side agreement is being ignored by NAFTA's proponents. Modernization and lower prices ought to be the whole purpose of a free trade agreement.
James Sheehan of the Competitive Enterprise Institute accurately compares NAFTA to the Clinton Budget proposal, which raised taxes immediately and promised future spending cuts that were unlikely ever to materialize. Notes Sheehan, "[NAFTA] promises to reduce tariffs over the next 15 years -- that's the year 2009 -- but raises an army of trade obstructing NAFTA-crats immediately." Chapter 8, section 2(c)(ii) of the NAFTA treaty states that tariffs may remain in place beyond the 15-year transition period "with the consent of the Party against whose good the action is taken...." That provision, combined with the side agreement on import surges establishing the working group, opens the door to perpetual backroom dealing and compromises which will continue protective tariffs for Insider-connected American and Mexican multinational corporations beyond the year 2009.
Labor Legislation
The Council on Labor Cooperation, like the Free Trade Commission created under NAFTA itself, would be led by a Council comprised of "a top cabinet-level labor official" from each of the three participating nations. According to a summary of the side agreement provided by the Office of the U.S. Trade Representative, the Council has a "broad mandate" to work on a range of labor issues such as "occupational health and safety, child labor, benefits for workers, minimum wages, industrial relations, legislation on formation and operation of unions and the resolution of labor disputes, and many others." Not much is beyond the purview of the Council.
Speaking recently about the NAFTA side agreements, James Sheehan warned that "NAFTA creates vast bureaucracies with vaguely-defined powers that override the authority of our federal, state, and local governments. Unelected tri-national 'NAFTA-crats' are given the authority to manage and oversee labor and environmental matters across the entire continent, from the Yukon to the Yucatan." And the Labor Council will have a bureaucracy of "NAFTA-crats" called the International Coordinating Secretariat (ICC). The ICC is charged with providing technical support for the Council and will be headed by an executive director. The executive director of the ICC, appointed unanimously by the Council for a fixed term, will be largely insulated from the electorate of any particular nation. Empowered to appoint all of the staff of the ICC, the executive director will be insured a significant agenda-setting influence within NAFTA's labor commission. By creating a government commission with extraordinary powers far removed from the oversight of any electorate, trilateral elitists will be largely freed from having to win approval of voters or their representatives when making policy changes.
This high-handed power will be useful to coerce nations into enforcing costly labor regulations. The Office of the U.S. Trade Representative notes, "Dispute Settlement Panels, backed ultimately by fines and trade sanctions, can be invoked if a party believes that another is demonstrating a persistent pattern of failure to effectively enforce labor laws." The Council on Labor Cooperation will have the power to impose sanctions of up to $20 million per infraction upon the United States if it fails to enforce the present labor laws.
Recognizing a danger to its national sovereignty in allowing an appointed international commission the power to fine companies or governments within its borders, Canada wisely chose not to accept this provision. So Canadians will be allowed to enforce NAFTA's labor and environmental provisions in their own court system, while Americans and Mexicans will be forced to subject themselves to the whims of the mostly foreign Council on Labor Cooperation.
Under the labor side agreement, an Evaluation Committee of Experts (ECE) may be convened at the request of any nation. Composed of "independent experts," the Committee's responsibilities would include investigating and reporting on another country's controversial trade practices, and making recommendations on the matter. Chairmen of ECEs "shall be appointed by the Council from a roster of experts developed in consultation with the ILO [International Labor Organization]," guaranteeing they would be extensively staffed with big union officials and Insider corporate executives recommending ever increasing regulatory controls over both domestic and cross-border trade. James Sheehan of the Competitive Enterprise Institute wrote in the September 9th Wall Street Journal that under the ECEs, labor officials "would enjoy an unprecedented degree of access to commission proceedings. Non-governmental organizations would be able to use this privileged position to clamor for trade restrictions, acting as an inside lobby on behalf of domestic industries seeking protection from their competitors."
NACE Ain't Nice
The Agreement on Environmental Cooperation, like the labor side agreement, is headed by a council comprised of the top environmental officials from Canada, Mexico, and the United States (which will send its EPA administrator), but will be effectively run by an appointed executive director of a secretariat bureaucracy. The U.S. trade representative's summary of the agreement boasts that the "heart of the Commission is its Secretariat, housed in a single location and operating under the direction of an Executive Director. He will take broad direction from the Council, but maintain a high degree of independence." The agreement requires the United States (as well as Canada and Mexico) to report to the Council on the state of its environment and, as with the labor side agreement, calls for economic sanctions to back up a dispute settlement process. Canada, again, chose to enforce any sanctions through its own court system, but sanctions against the United States and Mexico would be handled directly by the environmental council.
The environmental side agreement also sets up a Joint Advisory Committee "made up of nongovernmental organizations from all three countries [which] will advise the Council in its deliberations." Like the Evaluation Committees of Experts under the Commission on Labor, the Joint Advisory Committee would endow inside lobbying powers to such groups as the Sierra Club, World Wildlife Fund, Greenpeace, and the National Audubon Society within the Commission on Environmental Cooperation.
Another element of the Advisory Committee which may emerge (though it was not described in the U.S. trade representative's summaries) would be the issuing of threats to the Council. The environmental side agreement guarantees "citizens access to petition governments to undertake enforcement actions and seek redress of harm." The mere threat of a lawsuit may prompt increased action -- in this case regulatory action -- on the part of state or national governments. Not only would the lawsuit method effectively ratchet environmental regulation in Mexico up to the excessive levels in the United States, but lawsuits could be used to facilitate extension of Canadian eco-regulations to the United States.
Border Commission
According to a U.S. trade representative summary of the environmental side. agreement, a U.S.-Mexican Border Commission will be created. Under the heading, "Environmental Infrastructure Projects in the U.S.-Mexico Border Region," the U.S. trade representative's summaries report that negotiations are still under way on the finer points of the commission. The new U.S.-Mexico Environmental Infrastructure Border Commission would work to alleviate cross-border pollution. Sources of funding have yet to be established, but the U.S. trade representative's report suggests that the Border Commission "could turn to the private sector, direct government support (loans, grants or guarantees at the federal, state or local level), and a border financing facility. Subject to future agreement, the institution could raise capital directly."
Despite the fact that the details of financing the U.S.-Mexican Border Commission are not nailed down, U.S. Trade Representative Mickey Kantor announced at a September 15th press conference that the NAFTA side agreements include an understanding that the United States would supply nearly $8 billion in foreign aid, much of it in the form of loan guarantees through the Word Bank or International Monetary Fund, for Mexican border environmental cleanup. In other words, the few dollars the American consumer might save at the check-out counter when buying Mexican-made goods would be more than offset on tax day. Americans would still have to pay, but they would pay the U.S. government directly instead of indirectly through private Mexican companies. Many environmentalist organizations are delighted at the prospect of what Jay Hair of the National Wildlife Federation describes as "having those billions of dollars -- billions, not millions -- that have now been committed to border cleanup put into place." Hair's organization is supporting NAFTA because the environmental side agreement "is unprecedented in what it will allow us to do to integrate environmental protection within the context of trade policy...."
Big Government
NAFTA would destroy U.S. national sovereignty by locking in a host of onerous federal environmental and labor-related regulations and government programs, and by allowing unelected and largely foreign commissions to make decisions concerning American national and statewide policies. In return, American businesses would be promised the elimination of a tax averaging a meager ten percent for products imported into a tiny economy four percent the size of our own by the year 2009, and American consumers would be promised elimination of an average five percent tax on Mexican goods imported into the United States by the same year.
Reducing the import tax America charges on the Mexican goods in NAFTA's tariff schedules would decrease tax revenue to our federal government by $2 billion to $3 billion over the next five years, according to a recent study by the Congressional Budget Office. This, along with any additional foreign aid payments, funds to accommodate the additional salaried officials for the customs and immigration services required to manage the increased cross-border trade, would have to be offset by higher taxes elsewhere. Otherwise, America's already outrageous national budget deficit would grow larger. Of all the studies released on NAFTA's effect on jobs, none has taken offsetting income or excise taxes into account.
The schedule for gradual abolition of tariffs included in the North American Free Trade Agreement is a pipe dream, only coming true in the unlikely event that the three national governments do not invoke any of the half-dozen escape clauses the treaty contains exempting phase-out of the tiny tariffs. Rather than abolishing tariffs in North America, NAFTA and its side agreements would transfer much of the power over America's trade policy from the U.S. Congress to a collection of unelected and misnamed international commissions. At a meeting of both free-trade and protectionist conservatives on August 26th, syndicated columnist Patrick Buchanan aptly observed that "NAFTA is a fraud. It is not a free trade treaty at all, but an Insider deal among transnational elites of three countries, an American Maastricht, and an economic Munich."
A lot will be at stake this fall when Congress votes on NAFTA, and Pat Buchanan is right in surmising that "NAFTA is about America's sovereignty, liberty, and destiny. It is about whether we hand down to the next generation the same free and independent country handed down to us; or whether 21st-century America becomes but a subsidiary of the New International Economic Order."
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