NAFTA: Time for a Trade-in
The North American Free Trade Agreement has taken too many U.S. jobs away from the Rust Belt. Pro or con?
Pro: So Many NAFTA Casualties
The most conservative estimates indicate that NAFTA has cost the U.S. a minimum of 525,000 manufacturing jobs, and some estimates range as high as 766,030. These jobs have not been replaced by other manufacturing opportunities. In general, those who have lost employment as a result of NAFTA, as well as the roughly 3 million workers who have lost manufacturing jobs during the post-1994 period, have “migrated” into lower-wage employment in the service sector.
Ross Perot famously talked about a “giant sucking sound” of jobs moving from the U.S. to Mexico, but the picture has been more complicated than that. Mexico has suffered severely from NAFTA with the depression of its agricultural sector—its products couldn’t compete with cheap foodstuffs from the U.S.—leading to a mass relocation of rural residents into cities and later to the U.S. The combination of documented and undocumented immigrants has served as a ready-made low-wage pool for avaricious U.S. employers seeking to cut costs and increase profits. In addition, and ironically, employers that did relocate to Mexico from the U.S. and Canada have now begun an exodus, moving to even lower-wage areas such as China and Vietnam.
What the NAFTA experience really points to is that steps such as NAFTA, allegedly taken to “grow the economy,” increasingly benefit a smaller and smaller segment of those societies, including the U.S., that follow a “neo-liberal economic model.” In comparison, little has been gained by those who have lost their jobs (or the communities that shared the benefits of their employment) because of NAFTA.
The time has come for a renegotiated relationship that places the interests of working people and the environment ahead of the corporate bottom line. The same myopia that has our financial markets in meltdown shaped the thinking and objectives behind NAFTA.
Con: NAFTA Opponents Bark up the Wrong Tree
Rewriting NAFTA is probably going to sound pretty good to the U.S. public these days. How and when the current financial meltdown will be stabilized can only be guessed. One might have hoped the example of the Smoot-Hawley tariffs of 1930 would have forever poisoned the notion that higher tariffs protect U.S. jobs. Those tariffs were part of the unprecedented downward spiral into joblessness that we wish to preempt now.
Today’s NAFTA-jobs debate is a little like rehearsing Hamlet without the Prince. Since 1995, imports from Mexico have slightly more the doubled, while imports from greater China (China plus Hong Kong and Macao) have more than quadrupled. So the question of how trade affects U.S. jobs and wages is an increasingly Asian issue rather than a Mexican one.
As far as unemployment is concerned, increased labor productivity—rather than trade agreements like NAFTA—ranks as the predominant cause behind the shrinkage of manufacturing employment across the globe. On a percentage basis, Chinese manufacturing jobs actually have contracted far more drastically than U.S. manufacturing jobs, and China certainly has no NAFTA to blame for its situation.
An equitable fiscal reform that removed the unfair burden of health and retirement payments from employers and put it on consumption (via a sales tax) would help U.S. manufacturers facing foreign competition and boost the low rate of U.S. savings that causes our trade deficits. Reform is certainly needed, but reforming NAFTA is a distraction we cannot afford.