Democrats Make a Bad Trade

By Steve Chapman
Sunday, December 2, 2007

Democrats yearn for the bounteous days of Bill Clinton's presidency, when the economy was flourishing, there were good jobs at good wages, and poverty was on the wane. So it's a puzzle that on one of his signature achievements -- the North American Free Trade Agreement -- the party's presidential candidates are sprinting away from his record as fast as they can. It's as though Republicans were calling for defense cuts while invoking Ronald Reagan.

Even Hillary Clinton can't bring herself to defend the deal her husband pushed through. Asked during a recent debate if she thought it was a mistake, she did everything but deny she'd ever met the man.

"All I can remember from that is a bunch of charts," she chortled, in possibly the least believable statement of the 2008 campaign. "That, sort of, is a vague memory." In the end, though, Clinton declared that "NAFTA was a mistake to the extent that it did not deliver on what we had hoped it would."

She has plenty of company. Barack Obama is on record as saying he "would not have supported the North American Free Trade Agreement as it was drafted." John Edwards has flogged the treaty like a rented mule, calling it "a complete and total disaster." And Dennis Kucinich thinks all copies of NAFTA should be humanely shredded and used as compost on shade-grown fair trade coffee, or something like that.

What did NAFTA ever do to deserve this abuse? Critics claim it destroyed a million jobs -- forgetting that its implementation coincided with the longest peacetime expansion in American history. During that period, the unemployment rate fell to its lowest level since the Vietnan War. If that was a disaster, I'm Hannah Montana.

Ordinary workers, contrary to myth, benefited from NAFTA. In the decade before it took effect, according to the Bureau of Labor Statistics, average hourly earnings (adjusted for inflation) fell by 5 percent. In the decade after, they rose by 10 percent.

Even supposing the deal did eliminate a million jobs, that actually doesn't amount to much. Every year, millions of jobs vanish and millions materialize, as old companies cut back or close and new ones sprout. What counts is net growth, and since 1994, the total number of jobs in this country has risen by 26 million.

Candidates blame NAFTA for pushing American companies to close plants here and move production south. But from 1994 through 2001, reports the Cato Institute, U.S. manufacturers invested $200 billion a year at home -- and only $2.2 billion a year in Mexico. After NAFTA passed, U.S. manufacturing output soared, and it's now at the highest level ever. American farmers have seen their exports boom.

From listening to the Democrats, you'd never guess that our exporters got more out of the deal than Mexico's did. NAFTA actually made it easier for U.S. companies to stay here and sell products in Mexico. How? By phasing out tariffs on goods shipped there -- which, on average, were 2.5 times higher than ours. We gave nickels to get dimes.

Edwards and Co. hold fast to the superstition that tariffs and other trade barriers are essential to our prosperity. Reality is that admitting imports makes Americans more prosperous by reducing prices of consumer and capital goods. It also strengthens American companies by forcing them to be more efficient and innovative.

So why do so many people, including approximately 100 percent of those who turn up at Democratic debates, hold this and other trade agreements in such contempt? One obvious reason is they want to appeal to labor unions, which generally prefer protectionism.

But Gary Hufbauer, an economist at the Peterson Institute for International Economics, suspects one reason lies in a different issue: illegal immigration. Some NAFTA supporters thought it might generate enough growth in Mexico to keep Mexican workers at home. When the tide of illegal immigrants grew, it bred resentment here.

That reaction partly helps to explain the Democratic retreat. By denouncing NAFTA, the presidential candidates can appeal to Americans alarmed about our porous borders without offending Hispanic voters.

But they should remember two crucial things: Bill Clinton presided over an era of enviable prosperity, and he did more to expand free trade than any president since Franklin D. Roosevelt. If they want to get back to the land of Oz, Democrats would be advised to follow the same Yellow Brick Road.