Fair Weather Free Trader
CONTINETTI, MATTHEW
EDITORIAL Fair Weather Free Trader A few weeks back, the Washington Post wrote that Democratic frontrunner Barack Obama is running on a “platform of hope and change.” Which is true enough—if...
...Mexicans have broken the PRI’s stranglehold on political power and elected two pro-American reformers to the presidency...
...By almost any measure, the economies of the United States, Canada, and Mexico have improved since they agreed to NAFTA...
...The American worker deserves nothing less, we are told...
...By almost any measure, the economies of the United States, Canada, and Mexico have improved since they agreed to NAFTA...
...It is, upon close inspection, the most specifi c piece of evidence to which he can point when he claims that NAFTA has been “devastating...
...NAFTA was far off in the future when he showed up on the South Side...
...economy” . . . before voting against it...
...Campaigning in Wisconsin, Ohio, and Texas, Obama touted his opposition to NAFTA and pledged to “renegotiate” the 1993 treaty between the United States, Mexico, and Canada that established the largest trading bloc in the world...
...And while consumer prices have been rising in recent months, the average annual infl ation rate is down from where it was in 1993...
...The manufacturing sector has lost jobs, but it is producing more goods than it was in 1993...
...The skills revolution that has made a graduate degree more important than union membership has increased inequality...
...The way Obama tells it, however, he has borne witness to the chaos wrought by free trade for some time—a quarter century, in fact...
...In a “major economic address” in Janesville, Wisconsin, on February 13, Obama said that “decades of trade deals like NAFTA” included “protections for corporations and their profi ts,” but none for “our workers,” who have “seen factories shut their doors and millions of jobs disappear...
...Commerce Department models and see how many jobs those imports—had they been produced in domestic factories— might have sustained...
...Barack Obama was correct in his assessment when he wrote those words in 2005...
...The American worker deserves nothing less, we are told...
...All is not well with the global or the U.S...
...146 million of them are employed...
...And so it was that Barack Obama—Columbia ’83, Harvard Law ’91—became a populist...
...The (still high) poverty rate has fallen...
...Mexico was spared the worst effects of the 1998 international monetary crisis...
...Rising health care costs have eaten up wage gains...
...This is an enviable achievement...
...One of her husband’s signal achievements is now just a bag of sand to jettison from her defl ating balloon...
...His opponent, Hillary Clinton, agreed completely...
...Matthew Continetti, for the Editors...
...Just as it is wrong to assign blame to NAFTA for all of our economic woes...
...That writer goes on to say that unless we fi nd “strategies to allay those fears” and send “a strong signal to American workers that the federal government” is “on their side,” then “protectionist sentiment would only grow...
...So is the unemployment rate...
...There are roughly 146 million Americans employed...
...makers...
...The fi gure comes from the folks at the left-wing Economic Policy Institute...
...In Youngstown, Ohio, on February 18, Obama said “NAFTA didn’t put food on the table...
...That “one million jobs” fi gure should not be overlooked...
...Democrats like Obama say they want to emphasize America’s infl uence via “soft power” rather than the projection of military force...
...Nothing else has mattered...
...In a John Kerry-like straddle, he acknowledged in 2005 that a trade deal modeled on NAFTA—the Central American Free Trade Agreement (CAFTA)—was “probably a net plus for the U.S...
...Mexico’s infl ation rate is lower than our own...
...His rhetoric is increasingly heated...
...And most economists point to several other studies that show NAFTA contributing small but real job gains to the United States...
...Obama claims that NAFTA was “oversold” and vows to “stand fi rm” against similar agreements that “undermine our economic security...
...Of course it would be wrong to credit NAFTA for all this good news...
...Today there are roughly 150 million Americans in the workforce...
...In a 2006 “briefi ng paper” entitled “Revisiting NAFTA: Still Not Working for North America’s Workers,” the institute’s director of international programs, economist Robert Scott, wrote that “growing trade defi cits with Mexico and Canada have displaced production” that would have supported “1.0 million (total) U.S...
...jobs since the agreement took effect in 1994...
...The subprime mortgage collapse and global credit contraction continue...
...It was, of course, a president from Obama’s party, Bill Clinton, who signed NAFTA into law over opposition from trade unions and protectionists in the Democratic Congress...
...Approximately 26 million of them work in jobs created after NAFTA...
...economy— it never is...
...There are many ways to measure the success of trade agreements...
...Whatever its uses as an analytical tool, however, it is not a good picture of the real economy...
...It had widespread political instability and a history of nationalizing industries...
...But the American worker actually deserves a great deal more: He deserves a forthright explanation of the tangible benefi ts of free trade...
...In Scott’s view NAFTA is solely responsible for the trade defi cit between the three countries...
...The presidential candidates of both parties need to deal with what one writer has called “the growing insecurities of the American worker...
...That vote may be seen as the beginning of his turn toward protectionism...
...Prior to NAFTA Mexico was a political and economic basketcase...
...NAFTA looks good by all these measures...
...And President Reagan had in fact imposed steel tariffs to protect U.S...
...And a silly one at that...
...During last week’s Democratic presidential debate, Obama went so far as to say that, as president, he would use “the hammer” of a “potential opt-out” to “ensure that we actually get labor and environmental standards that are enforced...
...By assuming that everything else stays the same except for imports, you can plug numbers into U.S...
...Is there a surer way to improve our ideological and cultural appeal than through free trade with our neighbors...
...And it is almost certainly bunkum...
...economy has grown by more than 50 percent...
...This is an enviable achievement...
...But that was then...
...It has become Obama’s mantra...
...Most economists agree that other factors— the business cycle, productivity gains, monetary policy—affect unemployment much more than trade...
...On February 24, in Lorain, Ohio, he said “one million jobs have been lost because of NAFTA, including nearly 50,000 jobs” in the Buckeye State...
...Mangling the facts, playing off peoples’ anxieties, and exploiting fear of foreigners do not lessen protectionist sentiment...
...Approximately 26 million of those jobs were created after Clinton signed NAFTA...
...The U.S...
...And they do not make the American economy any stronger...
...Obama has explained in the past that it is “not realistic to expect to renegotiate NAFTA” and that Americans “benefi t enormously from exports and so . . . have an interest in free trade that allows us to move our products overseas...
...And the trade defi cit has been solely responsible for job loss...
...Obama claims that NAFTA was “oversold” and vows to ‘stand fi rm’ against similar agreements...
...Productivity has increased...
...Which is true enough—if by “hope and change” the Post actually means “despair and a change for the worse...
...Even if Obama were right about the “one million jobs lost,” he would still be distorting reality...
...that number is trivial in comparison with the number of jobs gained in the years since NAFTA’s implementation...
...Productivity gains resulting from improved technology were, however, allowing fewer workers to produce more steel...
...Economists call this a “partial equilibrium” analysis...
...You can look at employment numbers, measure growth in the gross domestic product, or investigate whether a particular agreement increased comity between nations...
...But the American worker actually deserves a great deal more: He deserves a forthright explanation of the tangible benefits of free trade...
...More likely, once the son-of-a-millworker dropped out of the Democratic contest, the friend-of-the-steelworkers saw an opening and seized it...
...When I fi rst moved to Chicago in the early ’80s,” he said last week, “I saw steelworkers who had been laid off of their plants,” painful evidence that the “net costs of many of these trade agreements, if they’re not properly structured, can be devastating...
...Today, in nominal terms, Mexico’s GDP is about twice what it was when NAFTA came into being...
...That is certainly the case, anyway, when it comes to Obama’s recent arguments against the North American Free Trade Agreement (NAFTA) and free trade more generally...
...Even Senator Change-We-Can-Believe-In knows these benefi ts are real...
...What trade agreements Obama blames for 1980s deindustrialization, he did not say...
...Scott assumed that the trade defi cit between the United States, Canada, and Mexico would have remained frozen at 1993 levels had it not been for NAFTA...
...The jobs number is a hypothetical, in other words...
Vol. 13 • March 2008 • No. 25
