The Democratic think tank Third Way has long defended centrist, pro-business policies -- including the North American Free Trade Agreement, which allowed many U.S. companies to ship jobs to Mexico.
Now, in arguing for a new trade pact being negotiated by the Obama administration, Third Way is making what appears to be a surprising concession about NAFTA, the most famous trade deal in American history: It hurt some blue-collar workers, the group says.
But, Third Way's Jim Kessler and Gabe Horwitz argue in a new analysis released Thursday, trade agreements since NAFTA -- which look much more like the massive pacts currently being negotiated with countries in Europe and Asia -- have shown much better results.
Kessler and Horwitz say that NAFTA, the Clinton-era agreement which expanded trade with Canada and Mexico, "fell short" in its promises to middle-class American workers. But they argue that more recent agreements, such as those with Panama (2012) and Singapore (2004), have proven much better for workers and the U.S. economy as a whole, improving the United States' balance of trade in goods with 13 of 17 countries.
"NAFTA was a mixed bag if you look at the data," Kessler said in an interview. "I think it was a plus if you worked in the office and a minus if you worked on a factory floor. There was a lesson learned that policymakers followed. It was, these agreements have to be different. We did make them better. And if you believe the administration, the Trans-Pacific Partnership will be the highest standards ever.”
He added: “I want to credit some of the original NAFTA skeptics, who wanted to demand more of these trade agreements, and got them.”
Dealing with NAFTA's legacy may present challenges for President Obama as he pushes for trade agreements with Asia and Europe, called the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership. Many Democrats on Capitol Hill oppose the proposed trade deals, saying they'll hurt U.S. jobs.
But supporters of expanded trade say they have learned the right lessons to make sure deals benefit America more than other countries -- and not to replicate what happened with NAFTA, which many free trade advocates acknowledge may ultimately not have worked to the United States' interest.
Third Way, for one, had long defended NAFTA, often vigorously, as it advocated for new trade deals. (Kessler says the group still supports NAFTA overall.) But by focusing only on trade deals reached since the turn of the century, Third Way is able to paint a picture of agreements largely helping the U.S. economy, if only slightly. It finds that last year, the United States exported a total of about $30 billion more in goods than it imported from the 17 countries covered by more recent agreements.
Effects have varied by country. The balance of trade in goods increased the most with Singapore, by about $12 billion in today's dollars. It worsened the most with South Korea, by about $5 billion. (The analysis excludes trade in services, where the U.S. tends to run surpluses with its trading partners.)
Progressive groups that have clashed with Third Way over trade -- and which oppose the TPP -- criticized the analysis, arguing that it’s too simplistic just to tally up each trade agreement as a win or a loss.
The magnitude of losses from NAFTA far outweigh gains from the later trade agreements, they say, and TPP has the potential to do the same, especially if it doesn’t include a way to prevent trading partners from subsidizing their industries by cheapening their currency. That has long been the worry with China.
Public Citizen’s Lori Wallach said the TPP most closely resembles the Korea framework. "The Korea FTA actually has the improved labor and environmental standards, and we are getting slammed by a massive new trade deficit since that one went into effect,” she said.
The AFL-CIO’s Celeste Drake argues that Third Way isn’t looking at the distribution of the gains from trade, which tend to favor business owners and shareholders, rather than workers. The labor federation also argues that some regulatory standards have gotten worse in more recent trade agreements.
"While labor and environmental provisions have generally improved since NAFTA, for example, provisions on access to medicines, rules of origin and financial services in many cases took a turn for the worse," Drake said. "None of the agreements are what we would call 'high standards.'”