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The Obama administration is girding for big fights over two interrelated pillars of trade liberalism: free trade agreements and fast track authority.
We at WPG thought that both would be light lifts but now are left to wonder whether bad politics will trump good policy. A public education campaign needs to be launched soon, or growth in world trade could stall like blocked lanes on a New Jersey bridge.
Ever since the contentious passage of NAFTA in what seems like forever ago, though it was during the Clinton administration, presidents have been denied the ability to negotiate trade deals and have Congress review them on an up or down vote. It has been dubbed the tequila hangover.
Presidential candidate Ross Perot warned of a “giant sucking sound” from south of the border, meaning the agreement would allow Mexico to suck in U.S. Jobs and impoverish U.S. workers.
To read the editorials and interest group attacks on the 20th anniversary of NAFTA, the two agreements being negotiated now, and the proposed fast track authority that would prevent these and future agreements from being amended to death, you'd think Perot's discredited predictions were accurate after all. They aren’t.
Jobs down the drain
Critics of free trade and deals to generate more of it, and they include a coalition of labor unions, environmental groups, and most democrats in congress, point to trade deficits with Mexico and Canada as proof that the deal was bad for the U.S. Worse, they say, has been a torrential loss of manufacturing jobs. Suck. Whoosh.
It's true that there are deficits, but it's unclear to what extent NAFTA is to blame if at all. U.S. Exports have also grown, up 80 percent to Canada, while Canadian exports to the U.S. grew 100 percent. You could call this detrimental to the U.S. but prior to NAFTA 80 percent of goods crossed the northern border duty free anyway. Canadian exporters gained from other benefits of NAFTA, such as free trade in services, more open direct investment policies and better IPR protection--areas that played to Canada's strengths. But they also played to those of the U.S. in trade with both Canada and Mexico.
So was it Mexico that benefited disproportionately? It doesn't seem so. Fully half the population is below the poverty line, about the same as before NAFTA. You could say that without NAFTA, even more Mexicans would be impoverished. A scary thought when you consider the potential political instability, worse drug violence, and even more illegal immigration. No, the biggest deficits are not with NAFTA or other FTA countries--but with China.
What about manufacturing job losses? There have been some but again more have off-shored to Asia than to FTA countries because of at what time was the huge cost of labor disparity. Anyway, the loss of U.S. manufacturing jobs has been a slow dribbling rather than sucking away. As a percent of the entire economy, manufacturing was 30 percent of the economy. It is 10 percent today, taking a further hit during the recent recession, which had little or nothing to do with free trade.
Hollow out, suck, then sink
Manufacturing jobs began to fall at the end of World War II and have ebbed gradually to the present day. Many of those jobs were not off shored us much as they were automated. Smart machines have replaced millions of craftsmen and shop floor workers. Gains in productivity from the broad deployment of technology means that in the developed countries fewer people can produce much more stuff. Technological innovation is as disruptive to labor markets as it has been since the Industrial Revolution. If the "hollowing out" of U.S. manufacturing is a major concern, a more serious discussion should be held than we’ve had so far. For some on the political left, if FTAs didn't exist to blame job losses, an equivalent would need to be invented.
It could be more credibly argued that a major mostly unsung NAFTA benefit has been the integration of the members' economies and logistics systems. You've got capital, a diverse array of labor, technological prowess, and a big internal market. A “factory for the world” in direct competition with Asia and the EU, and with advantages over both, is clearly developing. U.S. labor will clearly have a roll and the competitive might deployed to make high value products and services will create more jobs throughout the NAFTA zone.
The time has come, not to scuttle existing agreements or weigh down new ones with burdensome conditions, but apply the lessons from NAFTA and other agreements to make the next set better while fine tuning existing ones.
The question of what kinds of jobs and how many of them will exist 10 years from now is one of the most important we face. Let’s focus some of our brainpower and physical energy on getting answers.
Yes, there’s a giant sucking sound. But it’s not NAFTA. It’s called change.
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| LVCR16-2LS bearing | 16 | 26 | 22 |
| LVCR12-2LS bearing | 12 | 22 | 20 |