NAFTA Nay-Sayers Need a Timeout

By Donald Lambro
Monday, March 17, 2008

WASHINGTON -- The economy's emergence as the main issue in this year's presidential election means that the voters will be pounded by a lot of persistent myths about trade and jobs.

The worst myth asserts that trade agreements, particularly the North American Free Trade Agreement (signed, sealed and delivered by Bill Clinton), are to blame for the decline in manufacturing jobs in America. I wrote about this recently, but the issue is worth revisiting because it is growing in political intensity and will be one of the key ideological battlegrounds in the Pennsylvania Democratic primary next month. Barack Obama and Hillary Clinton have said they want a "timeout" on trade and that they both plan to revisit NAFTA in an attempt to change or in some way undo the agreement with Canada and Mexico.

President Bush addressed their threats to renegotiate NAFTA last week in an address before the U.S. Hispanic Chamber of Commerce, saying if such a rejiggering happened, it would result in "a timeout from growth, a timeout from jobs and a timeout from good results."

I wish I could say the national news media is quick to correct mistruths, untruths and half-truths being spread about trade. But campaign reporters remain woefully uninformed about economic issues and show little interest in examining whether the Democratic candidates' negative statements regarding free trade hold up to serious scrutiny. This was notably true during the Ohio primary when Hillary and Obama waged slash-and-burn campaign attacks on NAFTA and trade.

What's difficult in debating this issue is that sometimes two seemingly contradictory results can, to one degree or another, be true at the same time. Ohio lost about 200,000 manufacturing jobs between 2000 and 2003, and some of its companies have moved facilities elsewhere in the country or abroad. And we have had to compete with major foreign exporters such as China and the economic pressures that can result from such new players in the global arena. But at the same time Ohio has also benefited from NAFTA, and trade in general.

"A critical fact overlooked by politicians who blame lost jobs on NAFTA is that during those three years Ohio manufacturers actually sold more goods to Canada and Mexico ... than it took in," John Engler, president of the National Association of Manufacturers, wrote in a recent op-ed article. "If Ohio exported more to these countries than it imported ... how can these politicians argue this agreement cost us jobs," Engler argued. One out of every five manufacturing jobs in Ohio "depends on making products that are sold overseas," and its "exports to NAFTA countries increased more than 31 percent in the past five years."

The reasons Ohio has lost manufacturing jobs are more complicated than the simply blaming NAFTA. The state was hit hard early this decade when the economy was slowing down, state taxes were raised -- making Ohio less competitive -- and technology made manufacturing more productive, requiring fewer workers.

Politicians, being what they are, never talk about the natural churning of the U.S. workforce. In the last few years, almost a million Americans left or lost their jobs each week. However, a little more than that were hired each week, too. Employment has declined in the last two months as a result of the slowdown, but before that we had nearly five years of net job growth.

The fact is that, even during our current economic rough patch, trade remains one of the bright spots in a $14-trillion-a-year economy. A typical example: Last week, Caterpillar boosted its sales forecast by 20 percent, largely because of growing foreign demand for its construction and farm machinery.

Another example: Whirlpool, whose 9,000 workers manufacture top-of-the-line, energy-efficient appliances at four plants in Ohio. Over 20 percent of the Clyde factory's sales come from overseas -- business that will grow as we negotiate and sign trade agreements with other countries to drop their tariffs on American-made products.

Hillary and Obama are fond of roundly condemning job outsourcing, but they never mention the rise of "insourcing" from foreign companies that find it pays to build their manufacturing plants here. BMW, the German automotive giant, has announced that it will expand production at its South Carolina plant by more than 50 percent, while it cuts jobs in Germany. Also taking advantage of the lower dollar, Toyota will be buying more of their parts locally and that, too, will help boost employment. Meanwhile, the United States remains the largest exporter in the world, selling $1.6 trillion in goods and services abroad last year -- the fourth straight year of double-digit export growth, says Commerce Secretary Carlos Gutierrez.

NAFTA has been a driving force in that export growth. Closing the United States off from the global marketplace, or calling for a "timeout," is a job-killer. The jobs of the future are going to come more and more from selling our stuff to a growing world economy.