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February 28, 2008

Memo To Ohio: It’s Not NAFTA’s Fault

by Doug Mataconis

In today’s New York Times, Daniel Leonhardt examines the logic behind the Democratic candidates’ NAFTA-bashing as they campaign in Ohio:

The first problem with what the candidates have been saying is that Ohio’s troubles haven’t really been caused by trade agreements. When Nafta took effect on Jan. 1, 1994, Ohio had 990,000 manufacturing jobs. Two years later, it had 1.03 million. The number remained above one million for the rest of the 1990s, before plummeting in this decade to just 775,000 today.

It’s hard to look at this history and conclude Nafta is the villain. In fact, Nafta did little to reduce tariffs on Mexican manufacturers, notes Matthew Slaughter, a Dartmouth economist. Those tariffs were already low before the agreement was signed.

A more important cause of Ohio’s jobs exodus is the rise of China, India and the old Soviet bloc, which has brought hundreds of millions of workers into the global economy. New technology and better transportation have then made it easier for jobs to be done in those places and elsewhere. To put it in concrete terms, your credit card’s customer service center isn’t in Ireland because of a new trade deal.

All this global competition has brought some big benefits, too. Consider that cars, furniture, clothing, computers and televisions — which are all subject to global competition — have become more affordable, relative to everything else. Medical care, movie tickets and college tuition — all protected from such competition — have become more expensive.

In other words, more open trade is a net plus for all of us, including the people of Ohio.

There’s no doubt that Ohio has experienced economic dislocation, most recently thanks to the closing of several automobile plants, including a massive Ford plant near Cleveland’s Hopkins Airport, but that’s not because of free trade, it’s because Ford, GM, and Chrylser aren’t making cars that people want to buy.

Blaming free trade is both misplaced and unwise. Repealing NAFTA would be a huge mistake that would harm the economies of the three largest nations in North America. Of course, with Barack Obama’s campaign secretly telling Canada that his anti-NAFTA rhetoric is nothing to worry about, it’s fairly clear that what we’re hearing right now is really nothing more than demagoguery.

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  • Benjamin Kuipers

    I completely agree with you Doug, NAFTA should not be repealed, as to remove it now would be to empower and embolden the long-discredited forces of mercantilistic protectionism. I suggest that in addition we work to remove the regulatory and intra-NAFTA regulations, government controls and other measures which hamper the free flow of goods and services.

  • oilnwater

    nafta is all about regulation. that’s why it sucked and sucks to this day. “free” doesn’t come in a multi-thousand handbook (nafta)

  • http://www.belowthebeltway.com Doug Mataconis

    oilnwater,

    NAFTA eliminated trade barriers across an entire continent.

    How you can argue against that is beyond me.

  • TerryP

    Trade is one area, among others that the democrats have absolutely no clue. Or if they do have a clue they are so beholden to the unions that they go against what they know is true just to keep their vote.

  • http://www.no-treason.com Joshua Holmes

    This argument is pretty lousy. Tariffs were already pretty low, but the Soviet Bloc was gone before 1994, China had been opening up since Deng took over in 1978, and India had started liberalising before 1994 as well. So, all these workers pouring into the global economy were pouring into the global economy long before the decline started around 2000 or so. Either the liberalization of the Second & Third Worlds isn’t the cause, or NAFTA’s just as much a possible cause as the others.

    As for arguing against NAFTA, for starters, it created a new supergovernment bureaucracy, along with all the trimmings and perks that requires. It also lays out extensive schedules on what can’t be sold – and how they can or can’t be labelled – in all three countries. Moreover, as the article pointed out, tariffs were already fairly low, and NAFTA hasn’t really stopped nasty trade shit like the softwood lumber tariffs on Canada.

    So yeah, a “free trade” agreement that’s 550 pages long should give anyone pause.

  • http://poppychop.net/ Nitroadict

    I oppose NAFTA on the possible basis it might have (i say *might*) in contributing towards a possible, if not an eventual (due to current monetary policies), NAU of some sort.

    I view NAFTA with dubious pause & suspicion.

  • Ben

    I don’t see why a true free trade agreement would need to be longer than a couple of pages.

  • oilnwater

    well you could say something (pro-NAFTA) along the lines of:

    “NAFTA was simply created to facilitate a goods/services trade channel between 3 nations (US/MX/CAN). In the event of a discrepency on agreement of a tariff, or another similar parameter that is placed on a good or service, between the different national governments of these nations, the NAFTA framework will be able to resolve the issue. Yes the language needs to be extensive in order to cover the intricacies of each nation’s own specific corporate/business/trade law.”

    but i just say it’s BS. these three nations were trading pretty freaking well enough in history without this regulation. furthermore i would suspect it distorts trade by its own framework. how can you acheive *market equilibrium* on a good or service when a framework exists that only takes a static or slowly-updated rulebook? on top of that, specific goods are mentioned in NAFTA for which economic realities will change over the years faster than the NAFTA language will keep up with.

    and then also you have the supragovernmental issue that NAFTA created. that equals more spending to fund NAFTA administration, funding that you pony up in order to have your country’s and your neighboring countries’ trade business distorted. Go NAFTA! <3 w00t

  • oilnwater

    basically i see the agreement as trade distortion, not trade facilitation, although technically NAFTA *is* trade facilitation- only facilitation towards tariffs and trade laws that attempts to make uniform certain businesses of all three nations. this is not in one nation’s (OUR NATION!) best interests. and so i don’t find myself sympathetic to NAFTA’s guiding principle at…all.

  • TerryP

    Look NAFTA is not a free-trade agreement even though it is called that. It is a managed trade agreement. But all in all it is likely a positive step toward freer trade then what we had before. If you are waiting for an actual free trade agreement it will likely never come even if we had Ron Paul as President.

    What really gets me about the democrats is that they are all over Bush for hurting our credibility with the rest of the world and then these yahoos want to hurt our credibility probably even worse with arguably our two most important allies.

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