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Net Loss With NAFTA

By Byron Dorgan
Friday, April 12 1996; Page A25

James ("Ain't NAFTA great!") Glassman would've been perfect as a scout for Gen. Custer. I can almost hear him say, "Things look mighty good at the Little Big Horn, general."

Just like Custer, Glassman misses the important details in his column about NAFTA's success ["Free Trade: Strip the Myth Away," op-ed, March 26].

Far from stripping away the myths about NAFTA, he creates the biggest myth of all: that NAFTA is a good deal for America.

Glassman beams that after NAFTA, total U.S. exports to Mexico jumped from $42 billion in 1993 to $47 billion in 1995. It's probably inconvenient to mention that many of those new "exports" to Mexico are made of U.S. raw materials shipped to factories in Mexico where lower-paid Mexican workers – who replaced higher-paid workers at U.S. factories, now closed – turn them into finished products that are then imported back into the United States. Some exports!

By that definition, when a U.S. auto company closes a U.S. plant and builds a new one in the Maquiladora Zone on the Mexican border, it would be scored as a net gain for us. This logic reminds me of the way the Federal Reserve Board scores costs incurred by hurricanes and heart attacks as economic growth.

Glassman argues that a trade deficit with any one specific country doesn't really matter because countries trade with many nations. He likens it to a lawyer buying laundry services from someone who does not buy the lawyer's legal services. It all comes out in the wash as the entire economy hums along. He might have a point if the United States had a trade surplus. But last year, America's overall worldwide merchandise trade deficit reached a record $174 billion.

Glassman maintains that it doesn't really matter to the American consumer whether the trade deficit is growing, shrinking or staying the same – agreements like NAFTA benefit the consumer because things like shorts, shoes and shirts end up costing less. But the unemployment checks American workers are frequently forced to live on when their jobs race off to low-wage countries rarely stretch as far as the paycheck they used to earn at well-paying factory jobs. Less-expensive shorts, shoes and shirts are little consolation to those who have lost their jobs as a consequence.

The wages of American workers are inevitably driven down when they are forced to compete with workers in other countries who toil for pennies an hour, few benefits and no workplace or environmental safety protections. Whatever benefit American workers gain in the form of cheaper shorts when Fruit of the Loom moves to Mexico is more than offset by the loss of purchasing power as real hourly wages drop.

In a rare nod toward reality, Glassman no longer maintains that NAF\TA is creating new jobs in the United States. Rather, he says, the agreement allows us to shed lower-paid, relatively unskilled jobs and focus on high-skilled sectors where the United States has the advantage.

In fact, not only did NAFTA fail to create U.S. jobs, it lost them. Increased trade deficits with our NAF\TA trading partners (Mexico and Canada) have so far cost the United States 377,000 jobs – approximately the number of new U.S. jobs its backers promised NAFTA would create.

The argument that we now have the special advantage of being able to concentrate where we have the advantage – on high-tech and high-skilled jobs – also is undermined by the facts about our trade with Mexico. In fact, electrical equipment and vehicles now top the list of Mexico's imports to the United States. These products are not manufactured in low-skilled sectors of our economy. The fact is that NAFTA, like other so-called free-trade agreements, makes possible the rapid transfer of both technology and capital. We may have a short-term lead on high-skilled jobs, but we have no long-term hold on the high-skill sectors.

Finally, Glassman's article resurrected the thoughtless old rhubarb that the trade debate is between two worlds: "free traders" and crusty old "protectionists."

Nonsense! The real debate is about fair trade. The real question is whether America's trade agreements provide not only open markets – which we all favor – but also fair trade rules. Our produc\ers and workers can't compete when the trade rules are stacked against them.

The writer is a Democratic senator from North Dakota.

© Copyright 1996 The Washington Post Company

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