The Democrats' NAFTA slander

Bronwen Maddox:

Hillary Clinton is playing a tricky game in questioning the advantages of free trade in her attempt to win over blue-collar workers before the votes next week that will determine whether there is still life in her bid for the presidential nomination.

In attacking the 1994 North American Free Trade Agreement (Nafta), one of her husband's proudest achievements, she does not have economics on her side; most studies show that the United States has done well out of the pact (even if the effects are small).

Even the politics is a gamble: she hopes that in the crucial votes on Tuesday, Ohio will listen to her, and southern Texas, fervently in favour of the trade pact, will not. Barack Obama has handled that footwork better, while still sounding cool on the benefits of free trade.

European officials, listening to this outpouring of scepticism about trade, are dearly hoping that both are doing no more than Democratic candidates have always done, in playing to the union vote, and would not be so protectionist in practice. But although the US has generally kept trade disputes separate from diplomacy, the threat of recession will do nothing to help.

It is remarkable that, 13 years after it came into force, Nafta is still so sensitive. The pact covers trade between Canada, the US and Mexico, but the American-Canadian part of it was never very contentious, as their cross-border trade was already extensive and their economies are similarly developed.

In contrast, American politicians projected every imaginable horror on the consequences of linking their economy with that of their poor neighbour to the south. Ross Perot is now best remembered for a single phrase — the “giant sucking sound” — his prophecy during the 1992 presidential campaign that Nafta would send American jobs southwards.

The truth is much less dramatic — which has led both the free-trade and anti-trade camps to wield it for their opposite purposes. Four detailed studies carried out on the tenth anniversary of the pact found that the boost it had given to trade between the US and Mexico was modest, although accelerating. Because Mexico was so much smaller than the US, the benefit was proportionately much greater for it.

...

Nafta “had little or no impact” on employment overall, the survey also concluded, although one analysis, pointing out the difficulties of making estimates, suggested that perhaps it had created a quarter of a million American jobs.

...

The fact is that US unemployment fell after NAFTA and household income rose. That giant sucking sound you don't hear is the wind coming out of the arguments of the opponents. Democrats have the problem of having to pander to the union bosses who want to blame their problems on others instead of their members benefits which make them uncompetitive.