[Congressional Record Volume 141, Number 182 (Thursday, November 16, 1995)]
[Senate]
[Pages S17183-S17185]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DORGAN (for himself, Mr. Byrd, Mr. Heflin, and Mr. 
        Campbell):
  S. 1417. A bill to assess the impact of the NAFTA, to require further 
negotiation of certain provision of the NAFTA, and to provide for the 
withdrawal from the NAFTA unless certain conditions are met; to the 
Committee on Finance.


                      the nafta accountability act

 Mr. DORGAN. Mr. President, the North American Free-Trade 
Agreement [NAFTA] has been a total disaster for our Nation. Virtually 
all of the promises made when it was passed have turned out to be 
hollow and shallow rhetoric.
  We have gone from a trade surplus with Mexico to an unprecedented and 
unbelievable trade deficit. Our economy is being drained, while jobs, 
plants, and opportunities move out of this country. It is time to admit 
that NAFTA is a lemon. When we get a lemon we take it back. We demand 
that the promises made when it was sold be kept. If not, then our only 
choice is to withdraw from NAFTA.
  This coming Monday will be the 2d anniversary of the passage of the 
North American Free-Trade Agreement [NAFTA] by the Senate. Today I am 
pleased to introduce the NAFTA Accountability Act. I am also pleased to 
have Mr. Byrd, Mr. Heflin, and Mr. Campbell as original cosponsors of 
this legislation.
  As we approach the second anniversary of NAFTA, we need to remember 
the promises of NAFTA. The advocates of this trade agreement promised a 
more vibrant economy, a stabilized economic framework, more high-paying 
jobs, increased exports, improved 

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living standards, reduced trade distortions, and improved 
competitiveness for the United States in global markets.
  At the same time we were promised, the environment would be 
protected, the public welfare would be safeguarded, and basic human 
rights would be enhanced.
  Yet, the facts show that NAFTA just doesn't measure up to its 
promises. It is clearly evident that NAFTA has been a colossal failure 
for the American people.
  It is what used car dealers politely call a lemon. We have been sold 
a bill of goods. Like most lemons from a used car lot, it is costing us 
way more than we expected, and it is not getting us where we want to be 
going.
  It is time to make NAFTA accountable. We need to measure the actual 
results of NAFTA after 2 years of operation against the promises made 
to get NAFTA passed.
  In fact, we should compare NAFTA's performance against the goals set 
forth in NAFTA's own preamble and statement of objectives. In 
introducing the NAFTA Accountability Act we are setting some benchmarks 
for NAFTA.
  We would establish eight benchmarks. Three of those benchmarks would 
direct the President to renegotiate critical areas of failure within 
NAFTA including: Trade deficits, currency exchange rates, and 
agricultural trade distortions.
  Five of those benchmarks would establish specific measurements by 
which NAFTA would be judged, including: Jobs, wages and living 
standards; the manufacturing base of our country health and 
environment; illegal drug traffic; and basic individual rights and 
freedoms.
  If the President cannot renegotiate NAFTA, and if the administration 
cannot certify that these benchmarks have been met by December 31, 
1996, then Congress withdraws its approval of NAFTA.
  The record of NAFTA is very clear. We have gone from a trade surplus 
with Mexico to a trade deficit. In 1992, we had a $5.7 billion trade 
surplus with Mexico. By the end of this year, we will have at least a 
$15 billion trade deficit. Some are now estimating that deficit closer 
to $17 billion. The total trade deficit this year with Mexico and 
Canada will be over $30 billion.
  One of the underlying reasons for the trade deficit has been the 
devaluation of the Mexican peso. This past week, the peso plunged once 
again down to a record low of 7.8 pesos to the dollar. it is estimated 
that the Mexican peso is now being supported through $30 billion in 
loans, much of it from unwilling U.S. taxpayers.
  Another critical front is the trade distortions in agriculture. This 
past year, Canada exported 85 million bushels of wheat and 75 million 
bushels of barley into the United States, despite the fact that the 
United States itself is the major exporter of wheat.
  In contrast, you can't move a single bushel of wheat across the 
Canadian border without being stopped and turned back. In one case a 
woman who was bringing a grocery sack of wheat across the border into 
Canada so that she could make some whole wheat bread had to dump out 
the wheat, before she could enter Canada.
  When NAFTA was being debated, its promoters promised at least 220,000 
jobs. Those numbers have turned totally upside down. Rather than job 
gains of 220,000, we have job losses of at least 220,000. Some predict 
job losses by the end of the year of 300,000 and more.
  Recently there was a survey of companies that had said they 
anticipated job growth under NAFTA. Fully 90 percent of those companies 
now admit that there has been no job growth with NAFTA.
  I think one of the most striking examples of the promise versus the 
reality of NAFTA, are the estimates made by a trade economist as 
reported by the Wall Street Journal.
  Gary Hufbauer is an economist with the Institute for International 
Economics. His estimates of job growth were used extensively prior to 
the passage of NAFTA. In one Wall Street Journal article prior to the 
passage of NAFTA, he had predicted 130,000 new jobs in 5 years.
  In April of this year, Hufbauer had to eat his rosy scenario 
estimates. Here is what he said in the Wall Street Journal:

       The best estimate for the jobs effect of NAFTA is 
     approximately zero. The lesson for me is to stay away from 
     job forecasting.

  Hufbauer was right, he should have stayed away from job forecasting. 
A couple of weeks ago, Hufbauer revised his estimate again. As reported 
in the Wall Street Journal, Hufbauer is now saying that the surging 
trade deficit with Mexico has cost the United States 225,000 jobs.
  These are real jobs, and real people losing their jobs. Within the 
last couple of weeks, we have seen a number of plants closing, jobs 
moving, and layoffs.
  The nation's largest underwear maker--Fruit of the Loom--at the end 
of October announced the closing of six domestic plants, a cut back at 
two other plants and lay off of 3,200 workers. A spokesman for the 
company, Ronald Sorini, was quite candid. He said, ``What you are 
seeing is the cumulative impact of NAFTA and GATT.''
  Take the case of Tri-Con Industries which operates a car-seat cover 
plant. Ten days ago, this company announced it was closing its plant 
and moving its 200 jobs to Mexico.
  Another firm, Ditto Apparel, announced this week that it would lay 
off 215 workers at its Colfax, Louisiana plant. They make private-label 
jeans at that plant. The personnel director at the plant, a fellow 
named Don Vann was also very candid.
  In speaking of NAFTA and GATT, he said, ``I'm telling you, those are 
the nails that are going to be in the coffin of the apparel industry in 
this country. It's going to be awfully hard for some people who have 
been long-term employees here. The sad part is, there is just nothing 
anyone can do.''
  Well, I don't agree that there is nothing anyone can do. We can hold 
NAFTA accountable. We can require that either NAFTA lives up to its 
promises, or we withdraw from NAFTA.
  The NAFTA Accountability Act is simple. If NAFTA does not live up to 
its promises by December 31, 1996 and if the President does not 
renegotiate key provisions, then the Congress will withdraw its 
approval of NAFTA.
  Essentially this would be a performance audit. If it doesn't pass 
muster, then it's ``out-the-door buster.''
  I hope that today's introduction of this bill, will bring about a 
nationwide grassroots review of the promises and the realities of 
NAFTA. It is time that America's body politic understood what America's 
grassroots already feels--NAFTA is undermining their individual and 
family security, and clouding future opportunities.
  While they have a deep concern about our nation's budget deficits, 
they are just as concerned with our nation's trade deficits. These 
trade deficits mean lost jobs, fewer opportunities for our families, 
and deficits in family budgets.
  In closing, I would also like to call attention to an excellent 
article which was recently published in the Journal of Commerce. Dr. 
Charles W. McMillion, an economist here in Washington, DC has a 
compelling message about the reality of NAFTA.
  Mr. President, I ask unanimous consent that the article be included 
in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                        Nafta: This Is Success?

                       (By Charles W. McMillion)

       It might seem odd that someone would claim to explain the 
     ``reality'' of a global trade relationship without mentioning 
     the net export balance, its composition or change over time. 
     But John Manzella does just that as he shows very little 
     interest in the ``reality'' he claims to present. (Nafta 
     Hasn't Cost America Jobs, October 20)
       Manzella asserts that U.S. trade with Mexico under the 1994 
     Nafta agreement ``continues to deliver, on jobs and more.'' 
     Surely he excludes Mexico from his fantasy, where no one 
     doubts that over one million net jobs have been lost, incomes 
     reduced by 30-50%, the economy in its deepest depression 
     since the 1930s, political and religious leaders murdered and 
     more. . .
       But he also does not mention that U.S. net exports to 
     Mexico have been declining since 1992; that the U.S. now 
     faces net export losses to Mexico of well over a billion 
     dollars each month; or that U.S. trade losses to Mexican 
     production are now concentrated in high technology and high 
     value added industries such as electronics and autos.
       The fact is that the much celebrated U.S. pre-Nafta surplus 
     of $5.7 billion in net exports to Mexico in 1992 became 
     monthly deficits by the fall of 1994--even before the 
     December, 1994 collapse in Mexico's attempt to maintain its 
     overvalued peso by spending 

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     virtually all of its $30 billion in foreign reserves. Now, the peso is 
     supported by $30 billion of ``loans,'' mostly from unwilling 
     U.S. taxpayers. And still the global markets are rapidly 
     devaluing the peso as they have done for the past 20 years. 
     U.S. net export losses to Mexico will reach about -$16 in 
     1995.
       Manzella falsely claims that those of us who understand the 
     lunacy of Nafta do not mention U.S. exports to Mexico. In 
     fact, we tediously detail those exports. Most are component 
     parts contracted out for further manufacture in Mexico and 
     re-exported back into the U.S. According to the Government of 
     Mexico, these parts now account for 81% of Mexico's global 
     imports, up from 72% last year, and perhaps 90% of US-made 
     exports to Mexico, up from 75% last year.
       Since contracting out work to Mexico is even cheaper now 
     with the peso at market rates, it is not surprising that 
     exports of components to Mexico have continued to rise in 
     1995. The small fraction of exports of capital goods to 
     Mexico have fallen by -32% as construction of anything other 
     than export platforms has all but collapsed. The almost 
     insignificant export of global consumer goods to Mexico has 
     plunged by -41.5%--far more for any goods made in the U.S.
       Exports are usually considered to ``create'' jobs because 
     making additional goods in the U.S. to sell as exports--a car 
     or a computer--requires hiring additional U.S. labor. 
     However, most U.S. exports of components to Mexico do not 
     represent new production but merely the contracting out of 
     work previously done in New York, Pennsylvania or 
     elsewhere in the U.S. It is therefore quite likely that 
     even so-called U.S. ``exports'' to Mexico displace far 
     more U.S. jobs than they create.
       Manzella claims that the contracting out of component parts 
     to Mexico is a clever government strategy to counter ``fierce 
     competition from Asia and Europe.'' Yet, even with the dollar 
     far weaker in Asia and Europe than ever before in history, 
     U.S. trade losses have skyrocketed faster and higher than 
     ever before. Net export losses for U.S. manufacturing alone 
     soared from -$66 billion in 1992 to a record -$159 billion in 
     1994, and perhaps -$200 billion in 1995.
       In the first eight months of 1995, Mexico has a trade 
     surplus of $10 billion with the U.S. but a trade deficit of 
     -$5.5 billion with Asia, Europe and the rest of the world.
       Clearly, increased production by multinational corporations 
     in Mexico is not displacing production and jobs in Asia and 
     Europe but in Mexico and in the U.S.
       Manzella's belief that declining net exports under Nafta 
     have created U.S. jobs is based not only on his ignorance of 
     the nature of U.S. exports to Mexico, but also on his strange 
     view that imports do not displace jobs. (Although he 
     discredits his own strange view by noting that ``. . . more 
     U.S. jobs and production stay at home'' when imports have 
     some U.S.-made content.)
       When producers in the U.S. lose sales to imports they are 
     forced to produce less and to eliminate jobs. It is 
     unfortunate that Manzella, as many politicians, has not yet 
     learned this basic fact of business life. But it should not 
     confuse any serious analysis of recent U.S./Mexico trade.
       The most recent Department of Commerce calculus is that $1 
     billion of production supports 16,000 jobs. This would 
     suggest that the U.S. net export loss of about -$16 billion 
     to Mexican production in 1995 would displace over 250,000 
     jobs. But since most of the $40 billion in U.S. exports to 
     Mexico is not new production but merely contracting out work 
     that was previously done in communities across the U.S., this 
     figure is certainly far too low.
       Perhaps even more important is the depressing effect that 
     Nafta has added to the declining purchasing power of U.S. 
     wages. Throughout the economy, workers and their firms have 
     taken further cuts in real pay and benefits to keep their 
     jobs from being contracted out or to lower prices to meet the 
     cycle of reduced demand.
       Manzella repeats as fact the claim of embarrassed 
     politicians that Nafta had nothing to do with Mexico's 
     current account and peso crisis last December. Manzella seems 
     to think it was just coincidence that Mexico's external 
     balance became wildly unbalanced immediately after Congress 
     passed fast-track authority for Nafta. Does he believe that 
     after a generation of net capital flight it was coincidence 
     that over $60 billion of hot portfolio ``investment'' poured 
     into Mexico? Was Mexico's flood of imported component parts 
     just coincidence?
       In fact, there is no question but that Nafta created the 
     enormous and unsustainable short-term imbalances in Mexico. 
     For the longer term, Nafta's guarantees to foreign investors 
     are devastating local Mexican producers that must now compete 
     against Walmart, Microsoft and Sony's facilities in Mexico 
     but without their access to global capital. This will 
     continue to undermine employment and earnings in Mexico--
     and therefore consumer demand--for many years to come.
       It is a cruel, political joke to suggest that Nafta is 
     protecting U.S. exports contracting out jobs to Mexico. 
     Furthermore, even the net export U.S. trade deficit with 
     Mexico is already far worse than the previous record--$7.7 
     billion deficit following Mexico's 1982 crisis. The deficit 
     will be twice as severe for the full year.
       Finally, Mr. Manzella cites the gain of large numbers of 
     U.S. jobs during business cycles since 1982 to argue that 
     merchandise trade losses do not cause job loss. He seems 
     unaware that while the U.S. population has grown by 30 
     million since 1982, and 26 million net new jobs have been 
     created, all of these new jobs have been in the non-traded 
     service sector.
       Since 1982, the U.S. has accumulated manufacturing trade 
     losses of $1.3 trillion. Far from creating manufacturing jobs 
     to accommodate our growing population and economy, we have 
     1,300,000 fewer manufacturing jobs today than in 1982.
       Contrary to 18th century theory and modern political 
     rhetoric, U.S. trade with Mexico and other low cost export 
     platforms is destroying millions of high wage, highly 
     productive jobs and replacing them with low wage, low 
     productivity service jobs. It is sharply undermining growth 
     and prosperity for all to provide leverage for a very few to 
     capture increasing shares of a slowing global economy.
       Manzella and anyone else who considers Nafta a success, for 
     Mexico or for the U.S., should reconsider their priorities. 
     We can do much better. America should lead the international 
     community in an urgent new effort to address today's new, 
     post-Cold War, information-age realities and to provide 
     growth and prosperity for ourselves and the world.

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