03.14.08
Trade Policy and the US Presidential Election
As the Democrat party race for the nomination has tightened, trade became a major issue in the debate. Hillary Clinton claims that the US needs to take a second look at NAFTA and negotiate a better deal. Barak Obama made similar statements while campaigning in Ohio, although an aide explained to a Canadian diplomat that the statements were just political posturing.
The bulk of the academic studies come to the conclusion that NAFTA had little impact on employment in the US and that there was a net contribution to economic growth. In fact, the greatest growth in imports came from China and the value increase in oil imports as crude prices have soared. In the traditional manufacturing areas of the mid-west, jobs have been dwindling for decades as new technologies have moved in and high-labor content has moved off-shore. Many manufacturing processes have been automated. I remember touring a Caterpillar factory in the 1990’s in which an entire line used to make transmission gears had been automated. What was surprising was not the absence of workers but the fact that the machine could consistently manufacture gears to tolerances that were 10x better than the best master lathesman could do. The sad fact is that most of these jobs would have gone in any case and the workers were caught in the middle. The frustration by the states which had lost many of these jobs without seeing new opportunities replace them focused on NAFTA. States like California which also lost manufacturing jobs were able to replace them with new jobs scarcely mention free trade arrangements.
I do think there is one issue about NAFTA and job losses that does bear discussion. Mexico opened its borders under NAFTA, particularly to agricultural products. The result was that traditional subsistence level farms in southern Mexico failed and the peasants fled to large cities in Mexico and to the US. Some studies of immigration in the US suggest that over 8 percent of the Mexican population has moved to the US in the past 15 years. Many African countries that have experienced civil conflicts have not displaced such a large percentage of their populations.
The US could have learned an important lesson from the EU with its expansions. The EU gave billions in development aid to the new entrants to build infrastructure and jobs to avoid large migrations of workers for jobs. This clearly worked with the expansion to Spain and Portugal and to a good extent with admission of the former East Bloc countries. The US should make part of its policy a determined policy to help out with economic development in Mexico and Central America to ensure that local citizens find good jobs at home where they will buy goods manufactured in the US.
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Joan Keston said,
March 22, 2008 at 1:57 pm
WHY ARE WE BLAMING NAFTA?
I have been hearing much rhetoric in the presidential campaign, especially coming from Senators Clinton and Obama, that NAFTA is the root of our economic woos in the US; that our jobs are being outsourced because of NAFTA. I wish that the cause were that simple.
NAFTA
NAFTA stands for “North American Free Trade Agreement” and the member nations to NAFTA are Canada, Mexico and the US. The issue of free trade and regional trading blocs are complicated subjects that can not be adequately addressed or understood in this context. However, the outsourcing of jobs and the future of the US economy is a subject that concerns us all, and should not be addressed by our politicians with an emotional, vote-getting objective. Shame on them for using NAFTA as a scapegoat!
We have all felt the effects of the outsourcing of manufacturing and hi-tech jobs to India and China. The last I checked, NAFTA was an agreement among the North American countries, which do not include China and India, nor our neighbors in Latin America. While there are some adjustments that might be necessary to that Agreement, we can hardly blame NAFTA for the outsourcing of jobs to China and India.
Free Trade
Free trade is not the correct topic to be discussing when we are addressing the BRIC (Brazil, Russia, India, China) countries and their effects on 21st century global economy. While free trade issues will affect how we all work and trade together, it is not the reason why the BRICs are projected to be part of the top six economies in the world over the next several decades.
We Need Responsible Leaders
Instead of preying on our emotions and talking about reverting back to happier times, our politicians and leaders should help our businesses navigate the complicated global economy by identifying areas for US businesses to develop and focus, and by providing incentives and education so that we can maintain a vibrant place in the 21st century global economy. Being competitive globally and surviving in the global economy is a daunting and challenging task for many of our small and medium sized businesses; the very businesses that provide jobs to the overwhelming majority of US citizens and residents. It’s time our leaders in DC stopped being arrogant and stepped up to the plate with the truth and leadership.
Joan Keston
Partner, Paladin and Associates
America Central Information » Trade Policy and the US Presidential Election said,
March 31, 2008 at 11:22 pm
[...] Trade Policy and the US Presidential Election As the Democrat party race for the nomination has tightened, trade became a major issue in the debate … there is one issue about NAFTA and job losses that does bear discussion. Mexico opened its borders … farms in southern Mexico failed and the peasants fled to large cities in Mexico [...]