Should Democrats Stop Bashing NAFTA?

NAFTA NOT TO BLAME: (The Street.com - summary):

On the Democratic campaign trail, the North America Free Trade Agreement (NAFTA) has become a punching bag representing all of the ills of free trade, responsible for destroying middle class jobs. The populist rhetoric reached a fever pitch in Ohio this week, even though both Sen. Hillary Clinton (D., N.Y.) and Sen. Barack Obama (D., Ill.) have spoken favorably of NAFTA at times and recently supported the Peru Free Trade Agreement.

NAFTA is NOT to blame. The Congressional Research Service noted .. four studies had been released studying the economic effect of NAFTA:

. It had a very modest effect on trade growth between the U.S. and Mexico.

. It had nothing to do with widening trade deficit between the U.S. and Mexico.

. It slightly increased growth and productivity in the U.S.

. It had little or no effect on aggregate employment in the U.S.,

. It had a small effect on real wages.
Democratic demagoguery on NAFTA proves to be misplaced.

Leonardo Martinez-Diaz, a Brookings Institution expert on international finance, says: "NAFTA has become shorthand for the general effects of trade and globalization." The markets in both China and India dwarf the economies of Canada and Mexico. Companies like Wal-Mart and Target depend almost wholly on manufacturing in China..the Democrats use "clever rhetoric" on NAFTA. On the one hand, they express concern for the bitter sentiments of loss felt by American workers, and on the other hand signal to those who favor free trade that they have no plans to move away from free trade agreements. The Democrats' nuanced position presents a problem in the general election, because like their case on taxes, Republicans have a simpler, emotional appeal. On free trade, Sen. John McCain will lambast the Democrats for flip-flopping: "They voted for free trade before they opposed it..the bashing of free trade leads to protectionism and tariff wars." Protectionism has been strongly viewed as a negative economic force, as some have blamed the Smoot-Hawley Act of 1930 for causing the Great Depression. This will hurt the Democratic nominee, as a recent Gallup poll showed that the economy has supplanted Iraq as the top issue in the campaign.

The Democrats need to stop the negative attacks on NAFTA and focus on a brighter future. Brookings' Martinez-Diaz says: "Free trade always creates winners and losers. The Democrats must force those in favor of free trade to recognize something has to be done to help the losers." Timothy Canova, professor of international economic law at Chapman University School of Law, said via email that freer trade in agriculture, combined with U.S. farm subsidies, has contributed to more than 600,000 farm families losing their livelihoods in Mexico. "This, of course, contributes to the increase of illegal immigration from Mexico to the United States," Canova says. "Likewise, there are certainly factories in the U.S. that have been closed down as a result of freer trade with Mexico, and even more so with China."

Robert Reich Blog:

It’s a shame the Democratic candidates for president feel they have to make trade – specifically NAFTA – the enemy of blue-collar workers and the putative cause of their difficulties. NAFTA is not to blame. Consider the numbers. When NAFTA took effect, Ohio had 990,000 manufacturing jobs. Two years later, in 1996, it had 1,300,000 manufacturing jobs. The number stayed above a million for the rest of the 1990s. Today, though, there are about 775,000 manufacturing jobs in Ohio. What happened? The economy expanded briskly through the 1990s. Then it crashed in late 2000, and the manufacturing jobs lost in that last recession never came back. They didn’t come back for two reasons: In some cases, employers automated the jobs out of existence, using robots and computers. In other cases, employers shipped the jobs abroad, mostly to China – not to Mexico. NAFTA has become a symbol for the mounting insecurities felt by blue-collar Americans. While the overall benefits from free trade far exceed the costs, and the winners from trade (including all of us consumers who get cheaper goods and services because of it) far exceed the losers, there’s a big problem: The costs fall disproportionately on the losers -- mostly blue-collar workers who get dumped because their jobs can be done more cheaply by someone abroad who’ll do it for a fraction of the American wage. The losers usually get new jobs eventually but the new jobs are typically in the local service economy and they pay far less than the ones lost. Even though the winners from free trade could theoretically compensate the losers and still come out ahead, they don’t. America doesn’t have a system for helping job losers find new jobs that pay about the same as the ones they’ve lost – regardless of whether the loss was because of trade or automation. There’s no national retraining system. Unemployment insurance reaches fewer than 40 percent of people who lose their jobs – a smaller percentage than when the unemployment system was designed seventy years ago. We have no national health care system to cover job losers and their families. There's no wage insurance. Nothing. And unless or until America finds a way to help the losers, the backlash against trade is only going to grow.Get me? The Dems shouldn't be redebating NAFTA. They should be debating how to help Americans adapt to a new economy in which no job is safe.