April 22, 2008 1:17PM
NAFTA Bashing Heats Up
By Elizabeth MacDonald
It’s an election year, US workers are under duress and NAFTA bashing has hit the boiling point.
But try to affix a bulls’ eye of blame on NAFTA, even just for job losses, and you’ll find it’s a moving target.
Both Democratic presidential hopefuls Hillary Clinton and Barack Obama promise they will get the US to back out of NAFTA unless it’s amended if they win the White House. Clinton now says her husband did “make mistakes” when signing NAFTA into law, adding “we have to change the basic provisions.” President George W. Bush and the leaders of Canada and Mexico are defending NAFTA and its $930b in cross-border trade at a summit meeting today in New Orleans.
Millions of Americans, many with thoughtful positions, oppose what they call a globalist agenda. For instance, GOP presidential candidate and Congressman Ron Paul opposes both the World Trade Organization and NAFTA, saying they are not about so-called “free trade…in practice,” but are really about free trade for special interests (such as agriculture, Big Pharma and financial services).
The fear is NAFTA is merely a delivery mechanism to lock in a sweeping corporate rights agenda, with frightful talk of more trucks from Mexico given wider latitude on US highways, a supposed new NAFTA Superhighway cutting through the US to connect Mexico to Canada, even talk of a new North American Union, all of which many say would be dreadful for this country and all of which is just now buzzing through the blogosphere.
It’s time to get a fresh take on this controversial issue.
First, job losses. The US added 22m private sector jobs since NAFTA was enacted. According to stats from the Bureau of Labor Statistics, the US had 93.1m private sector jobs in December of 1993, the month before NAFTA went into effect. Private sector jobs now stand at 115m in March 2008, notes Fox Business senior economist Mark Lieberman.
To be sure, real hourly wages are moving at a glacial pace, up from $13.66 in December 1993 to $15.08 today, in constant 2003 dollars.
But you can’t blame slow wage growth solely on NAFTA. More jobs were lost to China than Mexico, economists note, with China’s low pay having an effect on wages here.
Also, economists now say that any jobs lost to NAFTA were made up in other sectors of the US economy.
Better pay in the private sector would be better, of course, and it’s not such a good thing that taxpayer funded public sector jobs are growing. The fear is it’s easy for the US government to artificially create job growth by hiring bureaucrats to dig holes and refill them (what one analyst calls the inverse of Joseph Schumpeter’s economic theory about creative destruction, the government is all creation and no destruction).
Next up, the US trade deficit arising from NAFTA. Media commentator Pat Buchanan, a protectionist with an open-pored hostility to free trade, recently wrote a letter to a newspaper decrying the fact that “where Canada’s sales to the US, around $320b in 2006, amount to nearly 25% of its GDP, US sales to Canada, about $260b, amounted to about 2% of our GDP. If we shut the border tomorrow, there is no doubt who goes belly up.”
Buchanan adds: “Why are Americans upset? Since NAFTA, but by no means solely because of NAFTA, we have run $5,000b in trade deficits.”
But Donald J. Boudreaux, chairman of the economics department at George Mason University in Fairfax, VA says you should look at it this way. Since NAFTA, $5,000b worth of capital has flowed into the US, capital that has “helped to create and modernize many US companies, to fund research and development, to train workers, and to ease the burden imposed on Americans by Uncle Sam’s profligacy,” Boudreaux says. “Does Mr Buchanan really lament this capital inflow?”
And while protectionists are on the march free traders are not on the run. Instead, they are scrutinizing what the data really say. John Engler, president of the National Association of Manufacturers and former three-term governor of Michigan, points out in an editorial in The Wall Street Journal that 95% of the $62b increase in the US’s NAFTA deficit, a trade deficit that now stands at $140b, up from $77b in 2000, is due to energy imports.
We need this oil from Canada and Mexico. Who else is going to step in. Venezuela? Iran?
Engler also notes that after you strip out energy, the remaining trade deficit due to NAFTA has hardly budged since 2000 and that the US has exported an equal amount of agricultural and manufactured goods to NAFTA countries. And Engler asks why complain about that $3.5b when our trade deficits with Europe and China are far bigger?
US exports still comprise 25% of the US’s economic growth rate, analysts note. The US remains one of the largest exporters in the world, selling $1.6t in goods and services abroad last year–the fourth straight year of double-digit export growth, says US Commerce Secretary Carlos Gutierrez.
The Congressional Budget Office says the impact of NAFTA on US GDP has been miniscule. On average, the US’s GDP has grown 3.7% since 1993 and the economy has seen sharp drops in unemployment. Trade now accounts for 27% of American economic output annually, vs about 20% in 1993.
Canada has become a vital trading partner since NAFTA debuted. It is the largest trading partner for 36 to 50 US states, and Pennsylvania exports more to Canada than its next seven markets combined.
It’s been pointed out that the eight Great Lakes states including Ontario represent a big 30% of North America’s employment and output and a robust 36% of its manufacturing jobs. It’s been noted, too, that each day, about $900m worth of goods travel between Ontario and the US’s Great Lakes partners. Each year $122.8b worth of goods, 6.5m trucks and 6m cars cross the Detroit-Windsor gateway alone–the busiest in the world.
This, at a time when the region is hurting badly from the downturn in the US automotive sector.
And listen to the warnings about the can of worms the US would open up if this country renegotiated of NAFTA. Already it’s being reported that Mexico would present its own demands on easing legal migration or protecting corn farmers.
“If we are going to have a serious negotiation, it’s not going to be one-sided,” says Luis de la Calle, a former NAFTA negotiator for Mexico who is now a political consultant. “Let’s put labor and the environment back in NAFTA, but in exchange for what?”
Could Canada and Mexico also demand truly open borders, would Mexico then demand that any border fence be halted, could both demand special immigration exemptions and guest worker programs?
Could US agricultural growers face economic fines while other countries sign free trade agreements with our competitors?
As for workers losing jobs, aren’t we to blame for inadequately educating and training our workers to compete in the global economy and dooming them to a life of low-paying jobs?
How many jobs would the United States lose if it were to quit the global marketplace?
Won’t the jobs of the future increasingly come from selling our goods and services to a world economy that is growing inexorably?
And when are we going to outsource expensive, overpaid CEOs?
Comment by Paul
Apr 22nd, 2008 at 4:22 pm
Let U.S. farmers sell their goods world wide period.
Comment by althusius
Apr 22nd, 2008 at 5:02 pm
Is it not sad that those who have the least at risk from free trade and open borders are the biggest fans of this war on the American middle class? The elitists are as fervent for their globalism as the leftists of the 1930s were fond of Karl Marx. Ross Perot was right. This is a race to the bottom for most of us.
Comment by Bob
Apr 22nd, 2008 at 5:34 pm
22 million new jobs at Walmart, Taco Bell and Wendy’s…yea haa!!
Comment by Matt E.
Apr 22nd, 2008 at 5:38 pm
Just as important as NAFTA - and something the candidates aren’t talking about - is global trade. China, for example, is poised to become a major player in much more than manufacturing. Shanghai could be the next Wall Street (Wu Street?), and anyone who fails to see the importance of global trade will be surprised when the power shifts. We need a candidate who can handle global trade in addition to NAFTA.
Comment by A. Magnus
Apr 22nd, 2008 at 6:30 pm
“And when are we going to outsource expensive, overpaid CEOs?”
Never going to happen. You can’t have a socialist system without a party ruling over it; those expensive, overpaid CEOs are America’s version of the Soviet apparatchiki - the ‘old boy’ cronies who have to have their nosy little mitts in everything.
Comment by Darrell foley
Apr 22nd, 2008 at 8:44 pm
Miss MacDonald,
Your article uses alot of numbers. As we all know anybody can turn numbers around to support there side of view. Fact: Auto compamy’s an their supplier”s are getting workers wages cut in half (back to 1990 wages! example Delphi, American Axle, GM, Ford etc) while CEO wages are sky rocketing. Why is this happening because these big company”s are sending work over to Mexico, China etc. because of NAFTA!!!! Your article did not address this issue. NAFTA good for US worker, Tell that to a 20 year auto worker who has to start all over (with the loss of pay, benefits, vacation time etc.)because his job was sent over to China thanks to NAFTA!!!!!!!!
Comment by Samuel Ajamian
Apr 23rd, 2008 at 5:51 am
OBAMA’S ECONOMIC PLAN
SPEND 3 TIMES AS MUCH AND LOOSE BY 10 POINTS
I AM GLAD HE IS NOT PRESIDENT
Comment by Peter
Apr 23rd, 2008 at 11:07 am
We need Mexican and Canadian oil. We need true free trade, Ron Paul style. What we don’t need is huge trade deficits with China. What we don’t need is outsourcing of American companies to Mexico. What we don’t need is more globalism and a North American union. This is a fight ’til the death. NAFTA is a problem, but the bigger problem is the strength of American unions. Unions are no longer neccessary in this country, and they have to go before anything will change.
Comment by joey45
Apr 23rd, 2008 at 12:33 pm
My view on “Globalism” is a bit wider than pro or con:
1. I am, indeed, a gloabalist at heart…in theory.
2. We entered into the fray paying far too little attention to details that are seldom mentioned.
As to number one, I find it hard to accept that we are so xenophobic, that we would not, ceterus paribus, welcome a world in which humankind could live together in peace, sharing resources on an equal footing.
As for number two:
1. We entered into globalism too hastily, when more caution was called for.
2. We gave too little consideration to health concerns…”super bugs” and diseases, the We still have no clear answer to many of these issues. What and who should be able to cross our borders? What would it cost to monitor things enough to ensure safety? Do agricultural enterprises of our trading partners share our views and practices concerning cleanliness and safety (consider the current issues with China, and long-standing issues with the monitoring practices of even such issues as irrigation?
3. You are right when you say that a small percentage of jobs have been added do to the loosening of trade, and most globalists are correct when they point out that, given the methodology used when calculating unemployment, that unemployment is still at record lows. I don’t think unemployment is as much a problem as the protectionists would have you believe. The real problem, in my view, is not unemployment, but UNDER EMPLOYMENT. I believe that there are large numbers of people who have lost the well paying jobs they had, and have, out of necessity, have had to accept positions paying only a fraction of what they were making. And it strikes me that not that many lost those jobs because they weren’t doing well at what they were hired to do. Many fell victim to a cost reduction move to enhance their next quarterly balance sheets, earnings, and profit numbers, all of which were usually rewarded, and cheered by Wall Street through boosts in their stock prices, and profit pictures. Just how many of those individuals, who lost the jobs they had, and accepted less just to try to keep their heads above water, have become discouraged as they house loosing value, and their personal balance sheets slowly sinking from green to red Ink?
Why do we hear so little about Under employment and its effects? How do you think such voters will react in the coming election when caught in this squeeze?
I suspect that these are not just my opinions, but also those of many others as well. I also wonder how history will judge the descisions we have made in this area. And…not all of us who feel this way are xenophobes. Many are thoughtful, conservative, realists who are fearful of going too far too fast.
Comment by TJ
Apr 23rd, 2008 at 10:18 pm
I believe NAFTA has done great damage that is starting to really show. The pressure on wages and loss of production jobs is coming to bite us. Yes it lead to cheap prices and boosting Canada and Mexicos economy. But our terrible education system just has not kept up with the new age as well as we should have. So we are left with consumer jobs for the poor and working class. NAFTA fundamentally changed our economic structure. We have been able to patch it up so far. But it is very fragile.
Comment by Joe
Apr 24th, 2008 at 5:47 pm
NAFTA - the North American Free Trade Agreement. In school I was taught that China is in Asia not North America. But I could be wrong - after all it was an American public school.
Comment by Kevin, PA
Apr 28th, 2008 at 7:03 am
NAFTA is not the real problem…we could have absorbed the job shifts from a North American trade union. The real problem lies with the GATT treaty. GATT allows almost any country to circumnavigate the tarrifs of almost any other country. Add this to the use of unreasonable import standards being required by certain U.S. trade partners (trade standards that emulate import restrictions) and you end up with a disaster for the American worker…but overseas slave labor certainly makes for a great profit margin for CEO’s!