On Trade and NAFTA, a Few Facts, Please

By February 26, 2008Trade

It’s been a discouraging spell on the campaign trail for advocates of competition, prosperity and trade, as the Democratic candidates for president strain to outdo one another in anti-NAFTA rhetoric.

Rich Lowry’s syndicated column this week focuses on Sen. Barack Obama’s misguided and misleading criticisms of NAFTA, the 1993 trade ageement.

Since 1993, the U.S. economy has grown by 54 percent. The jobless rate has dropped from 6.9 percent in 1993 to 4.9 percent today. Manufacturing output has increased by 63 percent. Canada and Mexico are our first- and second-largest export markets, and U.S. merchandise exports to them have increased at a slightly faster clip than exports to the rest of the world.

NAFTA has clearly been a (small) benefit to the economy of both the U.S. and Mexico. Critics focus on the large U.S. trade deficit that opened up with Mexico shortly after the adoption of NAFTA, but that had more to do with the decline of the peso and a steep Mexican recession that dampened demand for our exports. Since 2001, our manufactured-goods deficit with NAFTA countries has been stable, making the agreement an implausible villain in the hollowing out of America.

And quoting the NAM’s top trade expert, Lowry writes:

As Frank Vargo of the National Association of Manufacturers points out, when manufacturing jobs drastically declined from 2000 to 2003, manufactured-goods imports essentially were stagnant. Trade affected the manufacturing recession not through an increase in imports, but a decline in exports. That, coupled with a decline in domestic consumption of manufactured goods coinciding with the U.S. recession, accounted for the large job losses.

Trade agreements make for good targets on the campaign trail because there certainly are cases where companies relocate facilities to less costly, overseas locations. The negative consequences of trade, lost jobs, are particular and personal. In contrast, the benefits of trade accrue more broadly across the entire economy in such things as growth in export-related industries.

But you have to really stretch your arguments and work hard to ignore facts — like those cited above — to make trade the all-purpose scapegoat it has become on the campaign trail.

Leave a Reply