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A Punching Bag Named Nafta


The trade deal's enemies are in full scream, but its benefits are simply undeniable

Is Nafta good for the U.S.? — Muhammed Usmani, Bayonne, N.J.

There can only be one reason you ask, and that's because the North American Free-Trade Agreement, in effect since 1994, has become a political hot potato, sparking all sorts of hooting and hollering for its demise, from union halls to the campaign trail. Regardless, here's our answer: absolutely yes.

Now, we don't want to sound extreme. But we've come to understand Nafta's opposition. In a recent column, we suggested that deporting 12million people was an unimaginable managerial task. Immigration amnesty opponents—which heavily overlap with the anti-Nafta crowd—e-mailed us in droves, saying things like: "I hope you are killed by a band of illegal immigrants."

The vitriol of this well-orchestrated fan mail made us realize how hard it is these days to debate matters involving organized labor. Temperatures rise. We'll try to stay cool, then, while making our case. To put it plainly, we see Nafta as one of President Clinton's greatest achievements. Opening it up for renegotiation would be wrong.

We realize Nafta's opponents would use the same word—"wrong"—to describe what has happened in some Midwestern states over the past decade. But Nafta alone is not the cause of pain in Ohio or any other state. Remember, Nafta frees up trade between Mexico, Canada, and the U.S. The companies in the Midwest that moved operations to Mexico did so to stay competitive with China, India, and Eastern Europe. Nafta made that possible. Global competition made it necessary.

Which brings us to the real reason people hate Nafta: It represents globalization. Indeed, maybe that's why we support it so much! Yes, it's possible more might have been done to replace lost jobs by supporting laid-off workers with a greater focus on retraining. And yes, globalization causes dislocations. But it also makes America healthier and the world overall a better, safer, more interdependent place. We've seen its benefits with our own eyes: countless product lines resurrected from heavy losses by the integration of U.S. and Mexican operations. And that process allowed certain industries to compete with an onslaught of Asian imports, saving thousands of U.S. jobs.

Statistics tell the same story. According to the U.S. Trade Representative, employment in America has grown 24% since Nafta took effect, and real wages have risen 19.3%, compared with only 11% in the 14 years prior. The USTR also reports that, due to Nafta, the value of U.S. farm and food exports to Mexico and Canada grew 165%, compared with 65% worldwide. Such data—and there's more like it—suggests Nafta has been a net positive for the U.S.

Nafta's opponents, of course, have their data, too, seeming to prove free trade's destructive powers and supporting some people's fears about globalization's impact on their future. Without question, in some quarters, these fears are justified. But the response should not be to kill Nafta or even to reopen trade talks with our partners in Mexico and Canada that would likely trod on their sovereign rights. It should be to use domestic legislation, if need be, to make useful adjustments, such as improved training and dislocation benefits.

With political causes, it's always so, well, politic, to take a hard line. But with Nafta, and all globalization efforts, that would be a mistake. They must be judged for their impact not just on our generation but on our children's, and not just on the U.S. but on the world. From that view, opportunities for those who embrace free markets and open competition don't look easy—innovation, hard work, and winning are never easy—but they do look bright indeed.

Jack and Suzy Welch await your questions. E-mail them at thewelchway@BusinessWeek.com For their video podcast, go to www.businessweek.com/search/podcasting.htm

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