Trade agreements are like oysters, Jägermeister and Jackson Pollock paintings—you either love them or hate them.
In the current political milieu, anti-trade proponents have the upper hand, relegating vocal champions of free trade to a tiny minority. Damning free trade agreements, especially NAFTA and TPP, is the contemporary equivalent of “Remember the Alamo!” and “Remember the Maine!”—rallying cries to mobilize the masses into a frenzy. Witness Donald Trump who has blasted NAFTA as “the worst trade agreement in history” (an empirically false accusation) and claims that because of our free trade agreements “we’re losing our jobs like a bunch of babies.” (Although I for one have never met any toddlers who were unemployed members of the AFL-CIO’s pipefitters and iron workers’ union.)
Recognizably, in our post-Great Recession climate of anxiety, uncertainty, fear and anger, the human psyche easily falls prey to simplistic messages and the search for a scapegoat. That scapegoat is free trade agreements of which NAFTA is the poster child. Unfortunately, the post-NAFTA U.S. economy coincided with rapid globalization, technological change, and China’s entry into the World Trade Organization. These changes, not NAFTA per se, produced almost all the negative impacts that its critics claim. Since its inception trade expanded from $290 billion to more than $1.1 billion in 2016. The export-related jobs created annually pay 15% to 20% more, according to Peterson Institute economists Gary Hufbauer and Cathleen Cimino-Isaacs. Most importantly, the majority of NAFTA economic assessment studies point to modest but positive impacts on U.S. GDP of less than 0.5% with marginal job losses overall. Clearly, certain sectors are impacted more than others; but the biggest winners of all are American consumers.
It is most regrettable that the free trade debate continues to focus on employment as the major issue—jobs created and lost. That has never been the purpose of trade accords. These agreements are about efficiency, productivity and satisfying consumer demand with a wide range of accessible, affordable and high quality goods on a consistent basis. This is one of the major points made by Steve Blank and me in Making NAFTA Work published nearly two decades ago. Our thesis was that NAFTA was merely the trilateral recognition of a new emerging architecture in North America of cross-border integration of production, supply chains, management systems, and financial operations of companies.
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