Free Trade Area of the Americas is an expansion to the North American Free Trade Association formalized in 1994 and needs to be understood within a broader framework of NAFTA, privatization and trade barriers. FTAA is another free market theoretical framework that stresses privatization and deregulation and consequently may lead to wider disparities among the stakeholders like consumers, workers and multinational corporations. The central problem that hinders the success of FTAA is the development disparity among the member nations (Meza 2007) and it may eventually play the crucial role in influencing consumer and corporate behavior.
When we take United States and Mexico and situate both the nations within the FTAA framework, the following questions emerge: • Do the US or Mexican companies benefit from the FTAA? • Are the US or the Mexican workers the major beneficiaries of FTAA? • Do the US consumers have the advantage over their Mexican counterparts? The US corporations seem to have a distinct advantage over their Mexican counterparts as the cost advantage arising from the shifting of their manufacturing base to Mexico will make a positive contribution to the bottom-line.
It has been estimated that close to 1 million US jobs may have moved with the advent of NAFTA. While it may have affected the US workers more profoundly, it has indeed helped the US corporations to maximize their profit potential. The major advantage the South American, especially Mexican, corporations had in terms of cost seem to have been turned against them and favored US corporations. The FTAA also contains a series of commitments with regard to services sector and may encompass services like education, utilities, health care facilities and so on.
The US corporations have an enormous advantage here as well as they tend to have more experience and better operational structure in comparison to the Mexican companies. US corporations now have the freedom to invest in low wage countries and are not constrained by US regulations related to environment and workplace safety (Landau 2003). The “investor-status” envisioned in the FTAA provide a huge competitive advantage over the Mexican corporations. The US companies have the financial advantage and can quickly diversify into other sectors.
Under the “investor-status” guaranteed by FTAA US corporations can claim trade barrier and may seek to protect their investment, as evidenced by Metaclad vs. Mexico. This again works to the advantage of the US corporations as they are more likely to establish and diversify in Mexico than the Mexican operations setting up operations in US. The second question related to the workers indicates a completely different picture and also stands in contradiction to the benefits reaped by the US corporations.
The post-NAFTA data shows that US workers are deeply impacted by the free trade though the corporations have gained from the same. US workers are likely to be affected more than the Mexican workers as the trade barriers come down and the blue collar/low wage jobs move to Mexico. The US workers affected by NAFTA have one of the weakest safety nets in the developed economies i. e. they have no national health insurance, inadequate employment benefits and no public job creation programs (Friedman 1992) and the same situation can be anticipated with the advent of FTAA as well.
At the same time Mexican workers may not win in the long term as the “race to the bottom” will eventually shift their own jobs to ever lower cost locations. As evidenced by the Peso devaluation post NAFTA, the Mexican workers are not likely to gain from free trade and their average hourly wages may yet go down. From a workers perspective FTAA seems to be zero sum game, where except the multinational corporations nobody else can gain. On the consumer front the story gets even more complicated, as both the groups i. e. consumers in US and Mexico stand to lose.
But the US consumers may be affected by the FTAA far less than their Mexican counterparts. The free trade and the concomitant cheaper labor will be able to mass produce goods at much lesser cost and it may positively impact the consumer behavior in the US. Even this argument becomes circumspect when the job losses and lowered wages in the US are related to consumer spending. It remains to be seen whether the US consumer will really benefit in the long term, though they may make short-term gains. On the other hand Mexican consumers face a lot more problems in terms product safety, environmental hazards and consumer rights.
The services component of the FTAA may threaten the local consumers, as the US corporations seek to maximize their profits by diversifying into health care, education and utility services. The less-than-stringent local laws are likely to assist the US corporations and as a result the compromises in consumer safety can be made in order to increase the profits. The corporatization of services will affect the poor Mexican consumers, who will not be able to afford them and who may not have recourse to government aid as well. In conclusion it can be surmised that the US corporations are going to be the major winners with FTAA.
With unrestricted and deregulated free trade arrangement as foreseen in FTAA both the workers and consumers in US and Mexico are likely to be affected and Mexicans may have long-term impact stemming from the imbalance. Although Mexico as a country seems to have benefitted from NAFTA in terms of positive trade, the individual actors are certain to be affected by FTAA. The positive contribution could be establishment of governmental sanctions and regulations which preserve the rights of both US and Mexican workers and consumers. References
Mezo, Gilberto (2005). Is the FTAA floundering? Business Mexico, 15(2), 46-48. Landau, Saul (2003). FTAA: Good for Big US Corporations; Bad for the People. Retrieved March 29, 2009 from http://www. tni. org/detail_page. phtml? page=archives_landau_ftaa. Friedman, Sheldon (1992). Why a bad NAFTA is worse than No NAFTA. Labor Law Journal , 43(8), 535-239. The FTAA, the WTO, and the Assault on Public Interest, Services, and our Water. (n. d. ). Retrieved March 29, 2009 from http:// www. globalexchange. org/campaigns/ftaa/FTAAWTOServices. html.