Don't Blame NAFTA for Downturn, Many Economists Say
Wednesday, April 9, 2008
The North American Free Trade Agreement is once again a prime scapegoat for the nation's growing economic troubles, drawing blame for sending jobs overseas and flattening wages for U.S. workers. That sentiment has intensified as the economy has deteriorated, a fall punctuated last week by the steepest job decline in five years.
Sens. Hillary Rodham Clinton (N.Y.) and Barack Obama (Ill.) have fed the anti-free-trade view in campaigning ahead of the Pennsylvania Democratic primary April 22. Facing voters in a state that has lost more than 200,000 manufacturing jobs since 2001, Obama has promised to stand against trade deals that cost U.S. jobs, while saying Clinton supported NAFTA in the past. Clinton counters that she has always opposed the deal, even as her husband signed it as president, and she has promised to call a "timeout" on future trade deals if elected president. "I don't think NAFTA has been good for America," she said.
But is that judgment fair?
Many economists do not think so. It is true 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 including sophisticated magnets that help steer military smart bombs and radio frequency identification chips embedded in new U.S. passports.
But many economists blame the march of technology and the increasingly dominant manufacturing role of China, not NAFTA, for that shift.
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.
"On balance, researchers have found NAFTA a slight positive for the U.S. as a whole," wrote Anil Kumar, a Federal Reserve Bank of Dallas economist who studied the impact of the agreement.
A Campaign Fault Line
The escalating debate over the future of free-trade agreements promises to be a stark fault line in the campaign. Sen. John McCain (Ariz.), the presumptive Republican nominee for president, is an unabashed supporter of free trade, and the Bush administration is pushing for a free-trade agreement with Colombia.
Even with all their objections to these trade deals, Obama and Clinton have been careful about where and when they have attacked NAFTA. Campaigning in Pennsylvania and earlier in Ohio, both places where trade is blamed by many for job losses, they have pledged to withdraw from the treaty if it is not renegotiated to toughen labor and environmental standards.
But the candidates were mostly silent on the deal in Texas, where economists said it has increased exports not only to Mexico, but also to Canada, Europe, Latin American and Asia.
Some top congressional Democrats have said that rather than renegotiate NAFTA -- which analysts call a difficult proposition likely to produce strong demands from the Canadians and Mexicans, who have their own problems with the treaty -- the candidates should focus on easing the transition of workers into the new economy.
"NAFTA is not the main reason workers today are hurting," House Democratic Caucus Chairman Rahm Emanuel (Ill.) wrote in the Wall Street Journal. Emanuel, who served as the point man for the passage of NAFTA under President Bill Clinton, called for a "new social contract" of improved health care, job training and economic development to gird workers for global competition.