[Congressional Record Volume 141, Number 170 (Tuesday, October 31, 1995)]
[House]
[Pages H11563-H11565]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    VOLATILITY IN THE MEXICAN MARKET EQUALS UNITED STATES JOB LOSSES

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Ohio [Ms. Kaptur] is recognized for 5 minutes.
  Ms. KAPTUR. Madam Speaker, last week, the Wall Street Journal finally 
got around to printing what we all already knew to be true--that none 
of the promises made by NAFTA's supporters have come true. The promised 
200,000 high-skill, high-wage jobs have not materialized. Real wages in 
the United States have decreased by 3 percent, and in Mexico they have 
plummeted by over 50 percent. Even the Wall Street Journal now calls 
NAFTA ``a terrible disappointment.'' It's about time. The Journal 
itself made an awful lot of promises in regard to NAFTA.
  Yet NAFTA's supporters now incredibly claim that Mexico has ``turned 
the corner''--but the financial markets tell us something different. 
Last week, the peso lost 7 percent of its value in one day, and hit a 
record low of 7.5 pesos to the dollar--a depreciation to less than half 
what the peso was worth before NAFTA. At the same time, interest rates 
jumped 9 percent. And the Mexican Bolsa--their stock market--has 
continued to plummet in value. This 

[[Page H11564]]

volatility is clearly due to a lack in confidence in Mexico's economy. 
So who should we believe: NAFTA's supporters, or the market? I'll take 
the market.
  Why should Americans care about volatility in the Mexican market? 
Isn't it only the Wall Street fat cats and Mexican billionaires who 
play in that market? My friends, this volatility impacts each and every 
American as high-skill, high-wage United States jobs are continuing to 
be shipped to Mexico and our living standards continue to decline.
  What is the connection? Think about the volatility in the Mexican 
market like this: it is like a garage sale for United States 
corporations. Because pesos cost only half of what they did before 
NAFTA, for United States corporations, everything in Mexico--including 
capital, taxes and labor costs--is half as expensive as it used to be. 
And that is not the end of the story.

                              {time}  1845

  United States corporations who operate in Mexico then export their 
goods from Mexico to the United States still charge us high prices for 
them. In short, it costs United States corporations half as much to 
manufacture their goods in Mexico so they are able to earn twice as 
much when they sell those same goods back here. It is no wonder that 
our corporations are moving production to Mexico at an accelerating 
rate.
  NAFTA has become the deal of the century for them. In 1994, there 
were 2,000 maquiladora assembly plants along the border. At the end of 
this year there will be 2,600, an additional 30 percent. Just today, 
Lee jeans in St. Joseph, MO, announced it will terminate 479 workers, 
shutting production down there and moving those jobs to Mexico. 
Yesterday, Fruit of the Loom, an American staple company, said it will 
slash its U.S. work force, get ready, by 3,200 jobs to streamline 
operations here and boost profits, closing plants in Florence, AL, and 
Franklin, KY, Acadia Parish, LA, Batesville, MI and operations in 
Bowling Green, KY, Rockingham, NC, and the list goes on and on.
  Where is the work going? You guessed it. Most of us know it is going 
south of our border to Mexican plants where Fruit of the Loom can pay 
Mexican workers less than $1 a day. I guarantee you that the prices of 
their products will not come down in our country when they ship it back 
here.
  As our colleague the gentleman from Ohio, James Traficant, said 
today, America is now losing its pants because of trade agreements like 
NAFTA. Funny, but sad.
  We teach our nation's young people that, when they make mistakes, 
they should admit them and take responsibility for them, not deny them 
or try to cover them up.
  But NAFTA's supporters are in a state of serious denial. Let us hear 
no more empty rhetoric about Mexico's economy having turned the corner 
before NAFTA can be fixed. Those who foisted it upon us have to own up 
to the fact that it is broken.
  NAFTA's supporters need to acknowledge that Mexico's economy is 
fundamentally unsound and that the agreement is costing us jobs and 
holding down our wages, and it is destabilizing Mexico. They need to 
take responsibility for what they have done to the working families of 
our continent. That would be the first step in the right direction; 
that would be true leadership.
  Let me say that growing NAFTA job losses translate into real people 
like the 14,000 tomato farmers in southern Florida, the more than 2,000 
workers being scheduled to be laid off at Briggs & Stratton in the 
State of Wisconsin. I will include the entire list in the Record here 
this evening. It is time to wake up, go back to the bargaining table 
and strike an agreement that works for working people across this 
continent.
  Madam Speaker, I include for the Record the following information:

             [From the Wall Street Journal, Oct. 26, 1995]

Two Years Later, the Promises Used to Sell Nafta Haven't Come True, But 
                        Its Foes Were Wrong, Too

                             (By Bob Davis)

       Washington.--Promises, promises.
       Here's what was predicted two years ago for the North 
     American Free Trade Agreement, followed by what really 
     happened.
       Prediction: ``I believe the Nafta will create 200,000 
     American jobs in the first two years of its effect,'' 
     President Clinton said, flanked by three of his predecessors 
     in the Oval Office.
       Reality: No evidence of any overall job gain as a result of 
     trade with Mexico.
       Prediction: Quaker Oats Co. said it would add 61 U.S. jobs 
     in Dallas, Cedar Rapids, Iowa, and St. Joseph, Mo., if Nafta 
     passed, by shifting Gatorade, pancake mix and oatmeal 
     production from Mexico.
       Reality: Quaker Oats continues to make the stuff in Mexico. 
     No new Nafta related jobs at the factories.
       Prediction: ``I believe that you have to just say that the 
     peso would become stronger if Nafta passes,'' said Mr. 
     Clinton, ``because it would strengthen the Mexican economy.''
       Reality: He should leave futures trading to his wife.


                          views of nafta foes

       Hardly anything anyone said about Nafta during the 
     congressional fight, including Nafta foes, has turned out to 
     be true. That's a problem for all the big players in Nafta, 
     particularly President Clinton. Meantime, many Nafta foes 
     consider the trade pact a symbol of fat cat Washington, where 
     promises aren't kept and the little guy always loses. For 
     them, says Nafta-opponent Pat Choate: ``Nafta was their first 
     real issue. They lost by a hair. They feel the vote was 
     stolen by the president. And it's turned out worse, than they 
     expected.''
       Of course, Nafta's ultimate impact won't be known for 
     years. But measured by promises used to sell it. Nafta is a 
     colossal disappointment. Jobs haven't materialized, border-
     area congestion has worsened, and environmental cleanup 
     remains haphazard. But Ross Perot had it wrong, too. He 
     warned that Nafta would put six million U.S. factory jobs 
     ``at risk.'' Instead, U.S. manufacturers have added about 
     300,000 jobs since he made the prediction. Nafta probably 
     limited the length of the Mexican recession by boosting 
     exports to the U.S., while also helping some chronically 
     depressed border towns.
       At its core, Nafta is a pact to eliminate tariffs among the 
     U.S. Canada and Mexico over 15 years, and protect investments 
     in all three countries. Judging strictly by these criteria, 
     it works. Two-way trade between the U.S. and Mexico--Canada 
     already had its own free-trade pact with the U.S.--has grown 
     30% since 1993.
       But Nafta's significance was always greater than trade 
     statistics; it was a new model for economic development. A 
     big industrialized nation would merge economically with an 
     impoverished neighbor, without paying billions of dollars in 
     aid as the European Union did when pulling in poorer 
     relations. Liberalized trade and investment would make Mexico 
     weathier, the White House said, opening markets and creating 
     jobs. Results were promised--fast.
       Improvements should be most obvious at the border, where 
     trade's impact is the strongest. Lured by cheap wages and 
     tariff breaks, U.S. companies have run factories on the 
     Mexican side for 30 years--and aggravated health hazards 
     as factories and a burgeoning population poured refuse 
     into canals on the Mexican side. By cutting tariffs 
     throughout Mexico, the White House argued, development 
     would extend inland, while environmental funds would clean 
     up the border.
       What really happened?
       So-called maquiladora border factories--which import auto 
     parts and electronics, process them and send them north 
     again--have boomed. Foreign investment in the interior has 
     withered. In the nearly two years since Nafta took effect on 
     Jan. 1, 1994, maquiladora employment rose 20% to 648,000, 
     according to the Mexican forecasting arm of WEFA Group Inc. 
     By the year 2000, it will reach 943,000, the consulting firm 
     predicts.
       Maria Luna takes home $31 a week assembling seatbelts at a 
     TRW Inc. factory in Reynosa, Mexico, a few miles south of 
     Brownsville, Texas. How has her life changed since Nafta? A 
     niece from Veracruz recently joined her to seek work and 
     crowd into Ms. Luna's garage-sized shack with 10 others. 
     ``People still come,'' she says. ``They though they'd stay 
     here a little time, but they stay.''
       The border boom results largely from Mexico's peso 
     devaluation, which cut overall labor costs, including 
     benefits, to $1.80 an hour from $2.54. Human factors 
     contribute, too. U.S. managers can live in comfortable homes 
     in Brownsville and El Paso in Texas or in San Diego, sending 
     their children to American schools and commuting across the 
     border to work. That can't be duplicated in Mexico's 
     interior, whose lousy roads and telephone lines also scare 
     off U.S. companies.
       One expanding shantytown is Colonia Salinas de Gortari, 
     named for the former Mexican president, on the outskirts of 
     Reynosa. Workers there so they can't afford city rents 
     anymore, so they seize land and build plywood shacks the size 
     of tool sheds, with no running water, no sewage, no 
     electricity, no paved streets. Maria Del Carmen Garcia Luna, 
     who isn't related to Ms. Luna, lives in one of the shacks 
     with her toddler and husband, a Zenith maintenance worker.


                     Not Enough money for children

       In the U.S., jobs like her husband's are the backbone of 
     countless blue-collar neighborhoods. But he takes home only 
     $26 a week, and merely buying powered milk for the child 
     consumers 15% of it. ``We don't have 

[[Page H11565]]

     enough money for meat or chicken,'' she says.
       About the best Nafta has done so far is to limit the impact 
     of the Mexican crisis on the U.S., while offering Mexico a 
     chance to export its way out of trouble. During the last 
     crisis in 1982, U.S. border communities were crippled as 
     Mexico sharply raised tariffs and restricted imports. This 
     time, Mexico kept tariffs at Nafta-reduced levels and pushed 
     exports.
       In Brownsville, retailers complain that few Mexicans can 
     afford to shop there for clothes and electronics anymore. But 
     Brownsville's port, which serves the industrial hub of 
     Monterrey, is booming. Cranes load five-foot-high coils of 
     steel into the black-hulled ``Sunny Success,'' bound for 
     Italy. Port managers lobby for a new bridge to ease border 
     transport. Local unemployment remains distressingly high, 
     around 11%, but it hasn't surged, as in 1982.
       However, Nafta has failed to deliver on the biggest White 
     House promise: creating U.S. jobs.
       During the Nafta debate, Fortune 500 companies forecast job 
     gains, which now look foolishly naive, Johnson & Johnson says 
     it can't locate the person who in 1993 forecast ``800 more 
     U.S. positions'' as a result of Nafta. ``If there is job 
     growth, I don't think that's because of Nafta,'' says a 
     spokesman.
       Some big-time exporters do report gains, General Electric 
     Co. says sales of power equipment and locomotives are up, as 
     Mexico upgrades its infrastructure. But the company notes 
     carefully that this work ``isn't creating jobs, it's 
     supporting jobs.'' In other words, Nafta makes it less likely 
     that GE will have to lay off workers.


                           special nafta math

       U.S. Trade Representative Mickey Kantor gamely argues that 
     Nafta ``created a huge number of net jobs.'' But he needs 
     special Nafta math to do so. He counts just export growth--
     not jobs lost through imports--and adds in Canada. Mr. 
     Clinton only cited trade with Mexico in his job-growth 
     prediction, and for good reason. Canada's free-trade 
     agreement with the U.S. dates to 1989; Nafta barely affected 
     their trade relations.
       Gary Hufbauer, an economist at the Institute for 
     International Economics whose predictions of Nafta job gains 
     were embraced by the Clinton and Bush White Houses, now 
     figures the surging trade deficit with Mexico has cost the 
     U.S. 225,000 jobs. But such estimates are suspect, too. With 
     the U.S. economy near what's considered to be full 
     employment, it's difficult to know how many workers actually 
     lost jobs as a result of Nafta and whether they found new 
     ones quickly. The Labor Department has certified only 21,500 
     workers for special unemployment benefits because they lost 
     their jobs as a result of trade with Mexico.
       The Clinton administration pins much blame for missed 
     promises on the peso's collapse last December, when Mexico 
     ran out of dollars to support it. The country had become to 
     dependent on short-term borrowing to finance imports and 
     didn't recognize enough that it had to devalue.
       Some economists say Nafta helped cause delay. It let Mexico 
     see itself as part of the industrial elite, a self-image 
     reinforced when it joined the rich-nation Organization for 
     Economic Cooperation and Development. In August 1994, an 
     internal U.S. Treasury analysis found the peso overvalued by 
     10%, but noted Mexico didn't agree because it expected a 
     Nafta surge.
       Optimists contend the Mexican economy will start growing 
     soon. Yet the peso mess and ensuing recession have pushed the 
     benefits far into the future. ``If people notice anything 
     with Nafta, they notice more traffic because there's more 
     trade,'' says Alfredo Phillips, who runs a border development 
     bank, ``Expected improvements haven't occurred.'' He then 
     adds a new prediction: ``We expect we'll see them next 
     year.''

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