Is NAFTA Still Nifty?
Democratic candidates Barack Obama and Hillary Clinton agree on this: the US should threaten to withdraw from the North American Free Trade Agreement (NAFTA) unless the other two parties (Canada and Mexico) agree to re-negotiate several important terms.
For Senator Clinton this is an awkward stance to take, since her husband President Bill Clinton negotiated NAFTA and won Senate approval, primarily on the strength of Republican votes. If NAFTA needed to be "fixed" as she now says, why not say so then?
Big labor opposed NAFTA in 1993 because of fear that American jobs would be lost to Mexico, where wages and benefits are much lower and environmental standards much less troublesome. Many jobs have been lost, and big labor today is still against NAFTA. The problem is especially severe in Ohio, where the candidates will be squaring off Tuesday in a presidential primary.
NAFTA, a key component in globalization of trade, is good for America in many ways. Millions of American jobs have been created due to NAFTA. For example, Canada is Wisconsin's largest foreign market. Moreover, Canada (not an OPEC member) is the largest source of imported oil to the United States. The oil-sands of Western Canada are reliably estimated to contain about 175 billion barrels of recoverable oil. (1) Only Saudi Arabia, a much more risky source, has more. Under NAFTA, Canada cannot reduce exports to the US unless d0mestic consumption is rationed by the same factor.
If the US invokes its right to withdraw from NAFTA after a six-month period, Canada would be free to ship all its oil to China, where the precious liquid could command a higher price. For this reason, no American president is likely to actually pull-out the trade agreement. But if a threat to withdraw from NAFTA is not credible, why do Clinton and Obama believe that Canada or Mexico would amend the treaty to make it more favorable to American interests? Why would re-negotiation benefit the United States, rather than Canada or Mexico?
The trouble with free trade is that, even if it results in a net increase in jobs, some jobs are inevitably lost. Those who obtain new jobs as a result of reduction of trade barriers are often unaware of the cause of their employment-----they would attribute their prosperity to a good work record or top-notch skills, rather than to NAFTA. Their votes do not reward the backers of free trade; they more likely vote on the basis of national security concerns, taxes, crime, or moral issues. The beneficiaries of free-trade are widely dispersed, often over many states. Free trade does not pay-off at the ballot-box
On the other hand, those who lose jobs due to foreign competition are intensely aware of the source of their problem, and will vote against free-traders. The latter are also more likely to be concentrated in declining industrial areas, such as many of the older cities in Ohio, so the political effect of their animus toward free-trade agreements will be palpable.
This dichotomy between the winners and losers in the free-trade economy explains what we have seen in Ohio. The only good news is that whoever wins the presidency will promptly forget whatever promises he or she made to the unemployed voters in Ohio, and NAFTA will survive unharmed.
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(1) "US Warned on NAFTA", Associated Press, March 2, 2008
For Senator Clinton this is an awkward stance to take, since her husband President Bill Clinton negotiated NAFTA and won Senate approval, primarily on the strength of Republican votes. If NAFTA needed to be "fixed" as she now says, why not say so then?
Big labor opposed NAFTA in 1993 because of fear that American jobs would be lost to Mexico, where wages and benefits are much lower and environmental standards much less troublesome. Many jobs have been lost, and big labor today is still against NAFTA. The problem is especially severe in Ohio, where the candidates will be squaring off Tuesday in a presidential primary.
NAFTA, a key component in globalization of trade, is good for America in many ways. Millions of American jobs have been created due to NAFTA. For example, Canada is Wisconsin's largest foreign market. Moreover, Canada (not an OPEC member) is the largest source of imported oil to the United States. The oil-sands of Western Canada are reliably estimated to contain about 175 billion barrels of recoverable oil. (1) Only Saudi Arabia, a much more risky source, has more. Under NAFTA, Canada cannot reduce exports to the US unless d0mestic consumption is rationed by the same factor.
If the US invokes its right to withdraw from NAFTA after a six-month period, Canada would be free to ship all its oil to China, where the precious liquid could command a higher price. For this reason, no American president is likely to actually pull-out the trade agreement. But if a threat to withdraw from NAFTA is not credible, why do Clinton and Obama believe that Canada or Mexico would amend the treaty to make it more favorable to American interests? Why would re-negotiation benefit the United States, rather than Canada or Mexico?
The trouble with free trade is that, even if it results in a net increase in jobs, some jobs are inevitably lost. Those who obtain new jobs as a result of reduction of trade barriers are often unaware of the cause of their employment-----they would attribute their prosperity to a good work record or top-notch skills, rather than to NAFTA. Their votes do not reward the backers of free trade; they more likely vote on the basis of national security concerns, taxes, crime, or moral issues. The beneficiaries of free-trade are widely dispersed, often over many states. Free trade does not pay-off at the ballot-box
On the other hand, those who lose jobs due to foreign competition are intensely aware of the source of their problem, and will vote against free-traders. The latter are also more likely to be concentrated in declining industrial areas, such as many of the older cities in Ohio, so the political effect of their animus toward free-trade agreements will be palpable.
This dichotomy between the winners and losers in the free-trade economy explains what we have seen in Ohio. The only good news is that whoever wins the presidency will promptly forget whatever promises he or she made to the unemployed voters in Ohio, and NAFTA will survive unharmed.
--------------------------------------------------------------------------------------------
(1) "US Warned on NAFTA", Associated Press, March 2, 2008
Labels: Clinton trade, NAFTA, Obama, Oil
posted by Gerald S Glazer at 11:20 AM
1 Comments:
Excellent analysis, but on balance as you suggest NAFTA is good for the USA in general. This of course means that both Democratic candidates are naive, ignorant, or lying.
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