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NAFTA becomes a convenient pinata in politics

With Pennsylvania's primary looming, NAFTA-bashing is likely to continue. Sen. Hillary Rodham Clinton speaks to an AFL-CIO convention last week in Philadelphia.
REUTERS/Tim Shaffer
With Pennsylvania’s primary looming, NAFTA-bashing is likely to continue. Sen. Hillary Rodham Clinton speaks to an AFL-CIO convention in Philadelphia.

Iraq, health care, who’s ready to answer the red phone — they’re natural hot topics of a presidential campaign season, and they’ve been playing out. How ’bout gender and race? Given the surviving Democratic contenders, of course. But NAFTA?

Even with a shaky economy, the 1994 trade pact makes for a pretty unsexy scapegoat; surely for most voters the North American Free Trade Agreement is either a mystery or a yawner. Yet here we are, with U.S.-Canadian intrigue over signals sent by the Obama camp and the Clintons publicly split on the merits of the deal.

If both Sens. Barack Obama and Hillary Rodham Clinton have made worrying about NAFTA a mantra, there’s a reason. Voters in places like Cleveland and Pittsburgh are concerned about job losses in manufacturing. NAFTA bashing worked well in Ohio; that means we’re probably in for another week and a half of it, because the Pennsylvania primary is on April 22.

With the race close and Pennsylvanians focused on jobs moving elsewhere, one can see anti-NAFTA talk’s appeal. But is it on point? A number of people have been asking economists that question — and some have resurrected studies that evaluated NAFTA’s effects.

A variety of myths debunked

Let’s start with the studies. John Fout of writes, “The Congressional Research Service noted in 2004 that four studies had been released studying the economic effect of NAFTA, on its 10-year anniversary. The studies include the Carnegie Foundation, the World Bank, the Congressional Budget Office, and the United States International Trade Commission. The CRS found that all of the studies debunk a variety of myths surrounding NAFTA, including:

• It had a very modest effect on trade growth between the U.S. and Mexico.

• It had nothing to do with widening trade deficit between the U.S. and Mexico.

• It slightly increased growth and productivity in the U.S.

• It had little or no effect on aggregate employment in the U.S., and

• It had a small effect on real wages.”

Fout’s conclusion: “Democratic demagoguery on NAFTA proves to be misplaced.”

Michael Fletcher of the Washington Post canvassed economists for a Wednesday analysis piece  whose headline tells you their concurring summation: “Don’t blame NAFTA for downturn, many economists say.”

“It is true,” Fletcher writes, “that the United States has lost about 4 million manufacturing jobs since 1994, the year NAFTA went into effect and eliminated most hurdles to trade and investment between the United States, Mexico and Canada. Not only are items such as clothing, toys and televisions increasingly made abroad, but so are more complex goods. … But many economists blame the march of technology and the increasingly dominant manufacturing role of China, not NAFTA, for that shift.”

‘A net plus, if a modest one’
He continues: “Overall, they said, NAFTA has been a net plus, if a modest one, for the U.S. economy. Even as the number of factory jobs dropped, manufacturing output in the United States was up 58 percent between 1993 and 2006, as U.S. plants produced more goods with fewer workers. Exports are at a record high, and trade among the three NAFTA partners has tripled since 1994. Meanwhile, overall employment in the United States has grown 24 percent and average unemployment is down since NAFTA went into effect. Some cities along the border with Mexico have grown, and farm exports have gone up.”

Among the experts Fletcher cites is Anil Kumar, a Dallas economist who studied NAFTA’s impact. According to Kumar: “On balance, researchers have found NAFTA a slight positive for the U.S. as a whole.”

Robin V. Sears wrote in Monday’s Hill Times, a Canadian newsweekly, that “NAFTA did change relations between the three economies, and the losers were more often the weakest and poorest, especially in Mexico. By giving new incentives to scale, by opening a market of half a billion people for many goods and services, it shoved aside many smaller players. Canadian furniture makers, small to mid-sized Mexican farmers and American light industrial manufacturers have all been pushed to the wall by larger economic players. Would they have survived without subsides and without NAFTA? For a while, perhaps.”

But the real villains, Sears wrote, are “the wrenching changes that globalization is forcing on every economy.

“It is China, India, and Brazil that are responsible for the death of the furniture and textile sectors in North and South Carolina, not Mexicans. Canadians had virtually nothing to do with the decline of the auto parts sector in Ohio; Ontario’s own players in that space are reeling under unprecedented cost pressures themselves. The global economy is shifting west once again. Philadelphia iron and steel makers devastated Manchester and Birmingham in the 19th century. Shanghai and Mumbai are replacing the American and European producers today. Politically, it is much easier by far to blame NAFTA.”

Indeed, Robert A. Pastor of American University told the Post’s Fletcher: “NAFTA has become this piñata that everybody has put their frustrations into.”

It is undeserving of that fate for other reasons, several commentators note: It is critically important for the United States to be integrated into the global market, like it or not, and it helps strengthen U.S. neighbors — with benefits at home.

“If it hadn’t been for NAFTA and the U.S. free-trade deal with Central America,” noted Andres Oppenheimer of the Miami Herald, writing from Santiago, Chile, “America’s closest neighbors would have been much more vulnerable to economic crises and political chaos, which would have significantly increased illegal immigration and threats of a disruption of oil supplies to the U.S. market.”

His opinion: “Clinton and Obama should know better. As former [Chilean] president Ricardo Lagos, a lifelong Socialist Party member, told me, ‘Our Democratic friends are making a big mistake. Instead of defending jobs that are destined to disappear in the United States, they should focus on training U.S. workers to do more sophisticated and better-paid jobs.’ “

Susan Albright, a MinnPost managing editor, writes about national and foreign developments. She can be reached at salbright [at] minnpost [dot] com.

Comments (2)

  1. Submitted by Tony Newbill on 04/10/2008 - 11:58 am.

    Why Not , shake it up , and while you are at it , make sure the Multi-nationalism of Corporate Greed , and embarrassment not even paying a Living wage to the working class , not a Health plan not a Stable wage at all in any form , but still able to Import Tariff Free , this is just a Mess this Greed of all forms of Greed , and the funny thing is they don’t realize that without a Consumer in sound Financial condition , their market will devalue itself down to nothing …which is what is happening right before our eyes , because they are doing nothing to sustain their own consumer stock . Its like trying to grow a Herd of new born Calves through the season Barack , this something I know about here , but , in order to have a Healthy and Vibrant herd of Calves growing through the summer , you have to maintain the Mother cows , keep the flies down , the lice in check , maintain the reproductive systems with the vaccinations needed , do all the things needed with feed to maintain a surrogate that can then grow the Calves , this is the same principles with How the Importing Corporate wonders , that are only interested in Profits , should be looking at the Consumers , making sure they are healthy Financially so they have a stable market to sell to year after year .
    This Trade policy has been going on now for 14 years , and has not had a Solvent year yet . The IRS does not let a Taxable Entity Operate past 5 years , at a Loss , so why has this Trade policy been allowed to continue and run America Into the Ground , this goes against all the Capitalist Competitive systems and Operations ??????

    I still think that all this devaluation process is due to trading with a Currency Fixer country like China , and a 18 cents to our dollar value difference , is in effect the very example of Gresham’s Law of the 14th Century , Bad money , ( Lower valued ) drives Good Money ( higher Valued) out of circulation , if traded in the same market , so by Retail chains like the Big Box retailers having all their goods and services manufactured in the Lower valued country , and then able to Import tariff Free , into the higher priced market because of the currency exchange difference , with no fees paid into Infrastructures , and support mechanism , like SS and medicare , that would offset the loss in wage deductions if these Imported products were to have been made here in the USA , then we have a eroding effect , of money flows that do not spread into the masses enough to build and maintain sustainable growth in the higher priced markets like US and the UK , and look at how the market is eroding as the consumers purchasing power is eroding ………………the Trade policies of the USA need to be retooled to balance out these inequalities in the way the wealth of these trades are redistributing , and higher taxes won’t work , because of the Loop holes that can be bought in our Government through the Lobbyists and Special Interests . Its time for Change before its too late ………. , in the teaching of Gresham’s law of the 14th Century , which can be argued about the way we Interpret the way the Concept is possibly Integrated into the present Trade Policies we are Involved in , the one thing thats clear is when a currency is manipulated in whatever manner , for the reason of being controlling , it is a form of counterfeiting , like a trade partner that pegs a currency to another’s for the benefit of taking that persons work away from them so they don’t have to buy your goods , in balanced terms , like is the case with our biggest trade deficit holders China and India .
    The High Cost of the China-WTO Deal

    I have been Blue collar all my life proud of it too , and I think the Working Class people have been discounted by the way Trade Policy has been drafted over the years , that have really only favored Big Biz Importers with nothing to counter the devaluing process this has been eroding our economy too .
    Anthony J . Newbill, Wickenburg, AZ

  2. Submitted by Tony Newbill on 04/10/2008 - 03:15 pm.

    All Imports should pay a 12 % deduction on all goods and services entering into the US Markets , payable to the SS and Medicare systems , to make up the loss of these deductions that USA workers would have paid if the they would have manufactured the goods and services , because that’s the way the SS and Medicare systems are designed to be funded , regardless if we could have manufactured all these goods and services , it doesn’t matter when you factor in the fact that the Goods were consumed in the USA , and the system is designed to afford the products consumed by the society that makes the goods and services . So when you enter a port with a foreign made product the way we balance this loss is and has been in the past with tariff Fees associated with this principle of sustaining the Balance between what a society can consume based off what it can produce ,” The Needs Justify the Means ” of how a Society functions , so that waste is not the result . This Theory has been manipulated over the years of the current trade Policy , with subsidizing consumers with credit , the most egregious form of this being the Housing Mortgage Boom , and before this one , the Credit card Boom that drove the Tech Bubble in the 1990s . All one way trade with country of origin factors being the function of produce the product for the least in lower Currency valued countries , then convince the Government that Free Trade was a Opportunity , to take advantage of the currency differences , which started this process of Inequality in Currencies first , but now has led to the inequality in Incomes that support the market these Importers feed off of , you would have thought they would have seen this coming when they thought about how this would play out ?????

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