Why NAFTA Is A Job Creator, Not A Job Killer

Investors Business Daily ^ | Dec. 8, 2016 12:04 PM ET | GARY SHAPIRO

[expat_panama]

President-elect Donald Trump's stance on trade deals assumes unbalanced international trade agreements are domestic job killers. In the election, that won him favor in broad swathes of the country where globalization seems irrelevant, and foreigners and Washington alike are viewed with suspicion.

So, what will happen to established trade agreements, such as the North American Free Trade Agreement (NAFTA), when Trump takes office Jan. 20?

When NAFTA was finalized more than two decades ago, Ross Perot infamously predicted it would create "a giant sucking sound" of jobs leaving for Mexico. Since then, NAFTA has been blamed for our county's trade deficit with our North American trading partners. Trump said so himself during the general election, and promised to rip up or...

Trump's passion for job creation is admirable and understandably popular. And he is correct on one point: NAFTA can be made better. But the fact is, the U.S. is always working to improve and strengthen existing trade agreements. Let's focus on the benefits of our existing agreements and addressing gaps in those agreements, rather than on disrupting the rules of engagement currently in place...

...For example, NAFTA's intellectual property (IP) provisions don't account for the rise of the internet and the digital economy. Adding language to NAFTA that recognizes the IP realities of the 21st century would modernize the agreement. Provisions should address cross-border data flows, prohibit forced data localization and reflect balanced copyright policy.

Updating NAFTA to align policies that support innovation and further harmonize standards would reduce conflicting and costly energy-efficiency requirements, as well as other unnecessary technical trade barriers.

Now is a good time to pivot from political rhetoric to reality. Supporting a valuable trade agreement with our neighbors, while modernizing it to one that strengthens our nation's economy and security, is a win-win for all.

[expat_panama]

fwiw, current official policy at greatagain.gov is now just what the author says, that we don’t want to leave NAFTA but rather update it. Mexico’s president has already publicly signed on.

[gogeo]

President-elect Donald Trump's stance on trade deals assumes unbalanced international trade agreements are domestic job killers.

They are.

What's his point?

[boycott]

Not a jobs killer for Mexico.

[boycott]

Not a jobs killer for Mexico.

[lewislynn]

Not a jobs killer for Mexico.

Nor, apparently, for Panama.

[HarleyD]

When NAFTA was finalized more than two decades ago, Ross Perot infamously predicted it would create "a giant sucking sound" of jobs leaving for Mexico.

And then what happened???

[JonPreston]

But the oil share of our goods deficit with Canada and Mexico has declined under NAFTA – from 77 percent in 1993 to 53 percent in 2013. And the non-oil deficit with Canada and Mexico has multiplied more than 13-fold since NAFTA. After removing oil, gas and petroleum products, we still have a NAFTA goods trade deficit of more than $82 billion.

[Freedom of Speech Wins]

In theory NAFTA probably theorized ethical companies, in practice though it is a different story. Bad ethics on the part of companies and NAFTA equals disaster.

[nathanbedford]

As we emerge from the campaign and move closer to actually dealing with trade issues, we begin to see there is more than one side to the story.

Trade is almost never a pure win-win situation. Inevitably, the deal itself favors one segment of our economy at the risk to other segments of the economy. It should not be surprising that consumers benefited from cheaper goods and foodstuffs while some manufacturing concerns were adversely affected. Some agricultural producers were harmed while others prospered in a newly created market. Drivers enjoyed cheaper gasoline prices while automobile manufacturers suffered. Some automobile suppliers prospered while others were harmed.

The point? Sweeping generalizations about trade deals are demagogic and the only way to intelligently deal with the matter is to get deep into the weeds and make everything transparent because ultimately the economics become political issues. In a representative democracy, we expect that the people shall have a voice in the matter the disposition of which should not be left to elitist minority to negotiate a fait accompli for the rest of us, whether by way of an omnibus healthcare bill or a take it or leave it trade package.

Economics becomes politics when we regard the macro scale of trade. On the one hand there is the obvious need to protect the status of the country as a leading manufacturer in the world and generator of technology, or to watch the country slip into degraded status. In other words, it is a political question whether we engage in mercantilism.

On the other hand there is an obvious danger in a top-down managed economy examples of which we have seen over and over ultimately fail. We need only consider our own history in the Great Depression and all of the top-down nostrums imposed on the economy by elitists who only prolonged the misery. We look at the Soviet Union, we look at Japan and we see in the latter case a nation that in the 1970s we thought was destined to master the world become the victim of its own sclerosis. We look at China today and we see the upside numbers of extraordinary growth but we do not necessarily see the internal corruption and decay which might well lead to a very hard landing.

The question of the degree to which we will manage the economy from the top down in the name of trade is one which should be honestly debated, and it was not in the last election. To overstate the matter, we heard only one side of the story, loss of manufacturing jobs, but we did not equally hear the upside to global trade.

If we are to manage trade according to the results of the last election, we should ask ourselves who should manage it, whether the executive or legislative, or both, and upon what principles? For whose benefit? And how will the people be informed of the consequences? We should make an informed decision as a nation about how much we are willing to risk loss of liberty and corruption through the crony capitalism associated with a top-down managed economy and how much we are willing to risk national decay if we take no action.

[Robert DeLong]

There is always someone who is willing to point out the positives, while totally ignoring the negatives.

So let's move to the bottom line to give a more accurate assessment.

I would say that any business that continues to lose money year after year will eventually be out of business.

When the country as a whole experiences a trade deficit year after year, and in the process also loses jobs and factories, then it can reasonably be concluded that the trade deal they are involved is not good for the country as a whole.

[Roman_War_Criminal]

The NWO gestapo will stop at nothing trying to make their point “for the good of all”.

[WhoisAlanGreenspan?]

"...upon what principles? For whose benefit? And how will the people be informed of the consequences?"

Part of successfully throwing the bums out was a replay of Ross Perot's campaign against NAFTA. "Is it good for our country?" Secret side letters that favor one or more industry prove deals like this can't be allowed to see the light of day.

[trebb]

The same guy was probably telling folks that the Market would tank if trump won....I’ve read a lot of these financial “wizards’” articles and they seem to be upset that some of the imbalances are heading out the door - must be a way to leverage them at the expense of the Middle Class Taxpayers....

[expat_panama]

Trade is almost never a pure win-win situation. Inevitably, the deal itself favors one segment...

Pse clarify if you're really saying that virtually all of commerce is exploitation of one party upon another?  That's what "win-lose" is.  The only clear example of win-lose in real life would have to be say, a government mandated forced sale from one vendor, like social security or obamacare.  Other than that, we need to understand that nobody is forced to enter the market place to trade value.

[spintreebob]

Has someone Catalogued in detail what has increased and what has decreased jobs...and if those jobs are high or low paying?

When an American Company invests in Mexico how many jobs under static analysis? How many jobs under dynamic analysis?

When Cemex and Bimbo and other Mexican companies invested in the USA, how many jobs under static analysis? How many jobs under dyanmic analysis?

Re: Dynamic Analysis. It the investment caused the total company to grow then the amount of growth needs to be considered. If the investment (or non-investment) caused the total company to shrink than the shrinkage needs to be considered.

The Rubin factor: Months after Bill signed NAFTA, Treasury Secretary Rubin destroyed the Mexican peso and Mexican Maquiladora investments and drove the Maquiladoras from Mexico to Asia due solely to exchange rates manipulated by Rubin.

That destruction of Maquiladoras in Mexico created the massive increase in immigrants from Mexico to the US in the later Clinton and in the Bush years.

That one unilateral act of Rubin had bigger impact than all of NAFTA.

The consequences of that unilateral act of Rubin caused the Chicago style Democrat-PRI party to lose to PAN’s libertarian leaning globalist Fox for president of Mexico. The first time PRI lost since the election.

Fox’s libertarian leaning 6 years led to him being followed by the Social Conservative president Calderon (think a religious law and order Guliani-Santorum). With hundreds of thousands of Mexicans dying in Calderon’s war on drugs, PAN lost the next election back to the Chicago-Corrution style Democrat-PRI.

Each of these political events had far more impact than NAFTA.

[Mr. Jeeves]

All I know is that Canada hates the loss of tariff revenue from NAFTA so much that they make it very difficult for small (read: non-politically connected) American manufacturers to export there. I've heard cases of the Canadian government levying giant fines and back tariffs on US companies if even one tiny part of their product was found to be sourced outside the USA - something almost impossible to avoid in today's economy.

I know for a fact the US government does not treat Canadian imports with partial foreign sourcing the same way.

NAFTA, like most of these agreements, is thousands of pages of special favors for companies big enough to own and operate their own politicians. It's very hard for smaller players to gain any benefits from it.

[ronnie raygun]

One sided policies that benefit the international community and hurt the American worker, review and gut

[Gen.Blather]

“Other than that, we need to understand that nobody is forced to enter the market place to trade value. “

Let’s say it is the days before NAFTA and you own a leather goods manufacturing business in the New York garment district. Yours is one of the few remaining manufacturers, which got its start when immigrants came over and worked for next to nothing in sweat shops. Because of your operating costs you are at the high end of the market with jackets over $500. Your top end coats go for $900. You pay your labor NY rates.

You have been protected up to this point because there are tariffs on imported leather goods. NAFTA comes along and allows Mexican manufacturers to import their knock-offs of your products. Your cost averages $250-350. Their costs average $80-110. They undercut your prices by 50% and make a whopping big profit. If you match their prices you are out of business.

The consumer benefits. The American manufacturer must close his business or relocate it to a cheaper labor market. The employees, all skilled craftsmen, now are skilled in crafts that nobody in NY can use.

As nathanbeford pointed out, this is a complicated issue with many different interests that are affected. The consumer won. The American workers lost. The tax base in NY got smaller. So, NY lost. America loses as cash gets removed from our economy and goes instead to the Mexican economy. Mexico won across the board, jobs, cash inflow, improved living standard, new tax base...

Now, did Mexico give up anything? Perhaps they agreed to remove the import tariffs from American electronics or cars. Since the Mexican market is much poorer than the American market it is unlikely that the marginal increase in car sales, most of which will be low end models, and electronics, which we import anyway, will make up for the losses suffered on the US side of the deal.

So, trade issue is complicated and filled to the brim with crony capitalism. If the American coat manufacturer lobbies hard enough (pays bribes) he may get a better deal and stay in business here. But, most likely, for him, the end is in sight.

Now, I love getting fruit and vegetables year ‘round. But a friend has a pecan grove and his harvest costs are below the sales price of imported pecans. His investment in a retirement job bombed and he was hurt financially. As Nathanbeford points out, it’s not win/win for everybody. Somebody loses.

[zzwhale]

globalist BS.......