Jewish World Review
http://www.jewishworldreview.com | (KRT) When Congress grudgingly approved the North American Free Trade Agreement 10 years ago, Americans were deeply divided over whether the pact was a terrible idea or a good one.
They still are.
Since Jan. 1, 1994, when NAFTA dismantled many of the restrictions on trade between the United States, Canada and Mexico, commerce between the United States and its two NAFTA partners has exploded.
Beyond that indisputable fact, however, there's little that NAFTA backers and NAFTA bashers can agree on - even after a decade of real-world experience with the pact.
Has NAFTA been a success for the United States or a bust? Did it create more American jobs than it caused to be shipped to Mexico?
Long after NAFTA left the realm of the hypothetical and became U.S. policy, the answer to such questions continues to depend on whom one asks. Both sides claim that time has proven them right.
Because NAFTA has played a key role in eroding the nation's manufacturing employment, U.S. workers "have good reasons to be concerned as we enter NAFTA's second decade," said Robert E. Scott, an economist with the labor-oriented Economic Policy Institute.
"In general, we think NAFTA's been a positive" for America, countered Thomas J. Duesterberg, head of Manufacturers Alliance/MAPI, a business-affiliated policy and research group based in Arlington, Va. NAFTA has provided U.S. consumers with lower prices, he said.
In addition, he said, because Mexico dropped hefty import restrictions that had long protected domestic industries, NAFTA provided U.S. producers with substantially larger markets.
At least one issue has come into better focus, however. It seems clear that NAFTA has failed to generate anywhere near the number of U.S. jobs that many of its backers had projected.
NAFTA backers argue that America has gained enough economic benefits to easily offset the harm U.S. factory workers have suffered when their employers moved south of the border in search of cheaper labor. That argument may be true.
But anti-NAFTA forces' warnings that the pact would suppress U.S. factory pay and sacrifice hundreds of thousands of jobs on the altar of trade liberalization appear to have been borne out.
In practice, it appears that NAFTA has done less damage than foes predicted but also generated fewer economic gains than backers promised, said University of California-San Diego professor Peter H. Smith, co-editor of the recently released book "NAFTA in the New Millennium."
Although the "polarized debate" continues to muddy the waters, NAFTA on balance has proven to be a positive for the United States, Smith said, despite the fact that displaced workers "have been left in the lurch" because the labor market has proven less flexible than NAFTA supporters had expected.
The free-trade pact, he said, has turned out to be "a success from the standpoint of Washington and Wall Street, even if that's not the view from Main Street."
When most Americans think about NAFTA, he said, they tend to focus on the steady stream of negative announcements, such as Maytag's plan to close a 1,600-person refrigerator plant in Galesburg, Ill., and move production to Mexico.
Other examples aren't hard to find: Electrolux is considering closing a 2,700-employee appliance plant in Michigan and heading south of the border; only a few days ago, electrical products-maker Square D announced plans to close its 300-worker facility in Asheville, N.C., and go to Mexico.
Measuring NAFTA's impact is difficult, in part because many of its aims were geopolitical rather than financial. In the early 1990s the U.S. government, wary of the growing clout the then-new European Union, wanted to consolidate its own economic sphere.
Because of NAFTA, "the political and economic stability of Mexico is light years ahead of where it was 10 years ago," said Duesterberg. "It's a more stable economy and a more stable society," he said, adding: "For a country on our southern border to be more stable is a good thing."
For the Bush administration, which is promoting a proposed hemisphere-wide NAFTA-style accord known as the Free Trade Area of the Americas, the dispute is significant.
Less than a week from now, representatives from every nation in the western hemisphere (except Cuba) are slated to meet in Miami for talks on the proposed FTAA. Organized labor and other opponents of the plan are mobilizing for an anti-FTAA demonstration that is expected to draw as many as 20,000 marchers to Miami's streets.
Tellingly, as the FTAA move gathers momentum, both sides of the free-trade debate are citing the NAFTA experience.
The hemispheric pact represents "NAFTA on steroids," warns the AFL-CIO labor group. But the pro-free-trade Council of the Americas in Washington, D.C., calls FTAA a "blueprint for prosperity," a plan that is "building on NAFTA's success."
The NAFTA debate always has broken down along ideological lines. Organized labor led the fight against the free-trade measure, saying it would cost too many American jobs, with most of the benefits going to major corporations.
Presidential candidate H. Ross Perot captured that view with his famous 1992 warning that if NAFTA passed, the United States would hear "giant sucking sound," as jobs and investment capital fled to America's low-wage neighbor to the south.
Labeling such fears old-fashioned protectionism, NAFTA proponents had promised that scrapping tariffs and other barriers would expand markets for U.S. companies and farmers and lower prices for consumers. The expansion of trade, the first Bush administration and, later, the Clinton administration argued, would serve as a tide that would collectively raise all Americans' boats.
NAFTA was sold as a "win-win" proposition, based on the expectation that the United States would sell more goods to Mexico than it imported, said Thea Lee, chief international economist with the AFL-CIO. "But that isn't what happened."
Instead, the nation's once-modest annual trade deficit with its NAFTA partners has expanded dramatically since the agreement went into effect.
NAFTA advocates always had conceded that free trade between the three nations would cause some disruption among U.S. workers, particularly in the manufacturing arena. But they figured that after the economic dust settled, the expected U.S. trade surplus, which never materialized, would generate a net increase of 200,000 U.S. jobs.
The Economic Policy Institute, using the same methodology, calculates that since NAFTA was enacted, America's swelling trade deficit with its partners has cost about 766,000 U.S. jobs on a net basis. Those trade deficits, which show little sign of easing, represent "a continuing drag on U.S. growth and job creation," said Scott.
Both sides of the debate must wrestle with what economists refer to as the "causality" issue. North America's three economies are affected continually by a host of unpredictable economic developments from around the globe, ranging from shifts in commodity metal prices to movements in the Japanese yen.
Since NAFTA took effect, Mexico suffered a jarring currency crisis that essentially threw all trade forecasts out the window. The U.S. economy burned white-hot when the dot-com mania seized Wall Street, then bumbled into recession. China emerged with astonishing speed as a major economic force.
Such factors make it hard, both sides concede, to strip out exactly what role NAFTA has played in America's economic fortunes.
"Nobody can definitively say it's created `X' number of jobs," said Laura Baughman, president of the pro-NAFTA Trade Partnership research group, "but most people would agree that the benefits of NAFTA are greater" than the dislocations.
"The winners in any trade liberalization tend to be those who pay lower prices, whether for finished goods or (industrial) components," Baughman said.
The problem is that the benefits of NAFTA or other free-trade pacts are spread across a broad group of Americans in hard-to-discern form, she said, such as lower inflation, while NAFTA's losers - the ever-growing number of factory workers who have seen their jobs disappear to Mexico - are more concentrated, and their plight is highly visible.
More vocal too.
"We're not opposed to trade agreements," said the AFL-CIO's Lee. "We just think U.S. policymakers have an obligation to write agreements that protect the rights of U.S. workers and not just the interests of multinational corporations."
Of the three nations that signed NAFTA, said professor Smith, Mexico's economy has received the biggest jolt. The economy of Canada was the next most affected.
In terms of economic disruption, he said, the least-affected nation was the United States, "and that's where the NAFTA argument has been the loudest."
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