CE Week #6: “Dem Myths Collide with NAFTA Reality”
February 28, 2008
Democrats often pillory Republicans for their economic errors. From the 1930s on, they reminded Americans of Herbert Hoover’s Great Depression. In 1960, they blamed Dwight Eisenhower for slow growth. In the 1980s, they decried the “trickle-down” policies of Ronald Reagan. And today, they excoriate the damage caused by the North American Free Trade Agreement passed under … Bill Clinton.
Even Hillary Clinton treats the accord with a warmth she normally reserves for Kenneth Starr. She never misses a chance to denounce what she calls “the shortcomings of NAFTA,” or to insist she was always against it. But she has to deal with Barack Obama, who often gives the impression that his opponent’s name is Hillary Nafta Clinton.
So Tuesday’s debate in Cleveland devoted a lot of time to the question: Are you now or have you ever been a supporter of NAFTA? Both candidates denied any complicity, past or present, and both vowed to scrap the treaty if the Mexican government doesn’t agree to changes.
Obama makes a special theme of blaming this and other trade agreements for setting off a race to the bottom that destroys American jobs. “In Youngstown, Ohio,” he said in a Texas debate, “I’ve talked to workers who have seen their plants shipped overseas as a consequence of bad trade deals like NAFTA, literally seeing equipment unbolted from the floors of factories and shipped to China.” Why NAFTA would induce a company to move production to China is a puzzle, but you get the idea.
His campaign claims a million jobs have vanished because of the deal. That sounds devastating, but over the last 14 years, the American economy has added a net total of 25 million jobs — some of them, incidentally, attributable to expanded trade with Mexico. When NAFTA took effect in 1994, the unemployment rate was 6.7 percent. Today it’s 4.9 percent.
But maybe all the jobs we lost were good ones and all the new ones are minimum-wage positions sweeping out abandoned factories? Actually, no. According to data compiled by Harvard economist Robert Z. Lawrence, the average blue-collar worker’s wages and benefits, adjusted for inflation, have risen by 11 percent under NAFTA. Instead of driving pay scales down, it appears to have pulled them up.
Manufacturing employment has declined, but not because we’re producing less: Manufacturing output has not only expanded, but has expanded far faster than it did in the decade before NAFTA. The problem is that as productivity rises, we can make more stuff with fewer people. That’s not a bad thing. In fact, it’s essentially the definition of economic progress.
We’re not the only country facing that phenomenon. China makes everything these days, right? But between 1995 and 2002, it lost 15 million manufacturing jobs.
Even if the candidates don’t want to acknowledge the gains of the last 14 years, it’s hard to see how they can blame NAFTA for economic troubles in Ohio or elsewhere. The whole idea was to eliminate import duties in both the United States and Mexico (as well as Canada). What everyone forgets is that we got the best of that bargain, since our tariffs were very low to begin with.
“Mexico had very good access to the U.S. market” already, says Charlene Barshefsky, who was U.S. Trade Representative in the Clinton administration. “What NAFTA did was level the playing field.”
Critics complain that while exports to Mexico have risen, imports from Mexico have risen even faster. But that’s not because we embraced free trade. It’s because our economy has been more robust than theirs. Prosperous consumers buy more goods, from both home and abroad, than struggling consumers. Absent NAFTA, the trade imbalance with Mexico would not be smaller. It would be bigger.
None of this is a revelation to economists. The candidates’ broadsides require them to ignore not just a wealth of evidence but the overwhelming consensus of experts. Gary Clyde Hufbauer, an economist at the Peterson Institute for International Economics in Washington, estimates that 90 percent of the people in his profession regard the accord as a good thing.
Jagdish Bhagwati, a Columbia University trade economist, supports Obama and thinks his positions on trade are generally better than Clinton’s. “But on NAFTA,” Bhagwati told me, “he is dead wrong.”
Clinton is also in error, but on the question of which candidate has more consistently and vehemently denounced the accord, Obama has opened up a clear lead. Now there’s a race to the bottom.
Copyright 2008, Creators Syndicate Inc.
I am not an economist. All I know about free-trade agreements is what we’ve talked about in class and what Steve Chapman just told me. But I have been watching the Democratic debates and paying a fair amount of attention to the campaign, and it appears to me that both candidates have condensed a fairly complex economic issue into an infinitely replicable sound byte. They say NAFTA has been harmful to our economy and must be amended or revoked entirely. My guess is that this position is highly convenient when campaigning in states with large populations of blue-collar, union workers who would like a scapegoat for their industry’s misfortune. Maybe NAFTA is to blame, perhaps not; either way I suspect that outsourcing has many influential factors and that it is hasty to cite only one as the cause of job loss. This connects to Senators’ role as “generalists” who understand something of an issue and pick up specifics from interest groups or lobbyists who are more informed. Also, we have discussed how the American electorate likes its candidates to have very general platforms and not take definitive stances on many issues. Well, standing against NAFTA is quite definitive, but refraining from analyzing it and its relationship with the economy in detail is an example of election-year vagueness.
This article really surprised me. I just assumed that by us sending jobs over to other countries, that we would lose jobs here. Then if this is the case, why doesn’t Clinton try to shine some light on her NAFTA tag that she has already gotten. I don’t know how these statistics work but it sounds like NAFTA has been a blessing to our economy. And what happens when someone like Obama gets into office and tries to get rid of NAFTA? Will that bring our unemployment back up? According to this article we shouldn’t try to fix something that isn’t broken. I agree that states like Michigan and Ohio are definitely struggling with unemployment so if we are going to try to fix anything, we should try to just focus on those areas. Maybe NAFTA can be somewhat maneuvered to bring jobs back to those states while keeping everything else that is working. This article definitely opened my eyes on every belief I had about NAFTA and changed my whole perspective. Our next president should see these statistics and maybe focus his problems elsewhere. Because it looks like when sweat shops are involved, our economy makes great strides. Keep on keepin’ on.
I generally support free trade as a beneficial economic policy and especially in the case of NAFTA. Critics of free trade often seem to take isolated facts out of context, such as Obama’s claim that NAFTA caused one million lost jobs, when in fact millions more have been created. A more credible link exists between the agreement and the new industrial opportunities than between the removal of tariffs and the increasing imports from Mexico. Any economic expert would attribute that rise to the differences in our economies and in an indirect way, perhaps NAFTA should be given the credit for that because it has improved the strength of our economy. I ask you is that really something to complain about?? C’mon…
It seems that while the candidates are fast to distance themselves from any stance that could be devastating, they fail to notice an opportunity to take a unique stance that could help their campaign. If Hilary had instead come out and supported the agreement, presenting facts such as this article provided and giving perspective to the issue, voters would have more of a choice between the two democratic candidates. The current strategy Obama and Clinton have employed keeps them neck in neck as people choose based on race or gender, change or consistency, youth or experience. Hilary especially, being in office at the time of NAFTA’s introduction, should throw her support behind the accord in order to garner some offense in this race.
In the 18th and 19th century, the Agricultural and Industrial Revolutions across Europe allowed for numerous improvements in farming techniques and factory work. While the advent of the railroad or steam-powered machinery made work that previously required several men possible by one, the society ultimately benefited and eventually the labor market leveled out again once demand called for more exports. Similarly the increasing productivity fostered by NAFTA allows for greater opportunities for more workers. Making the market more competitive promotes the capitalism our nation thrives on and will continue to be important with the influx of immigrants.
The Senate could have struck down the North Atlantic Free Trade Agreement, signed during Clinton’s administration, since Clinton was required to submit it for their approval based on its status as a treaty. If he had wanted to bypass that congressional check or feared they would not agree to it, he could have passed an executive order instead, which only requires his consent.