NAFTA Mythology
Rich Lowry savages Barack Obama's NAFTA-bashing today, pointing out that the ivy-league populist has the facts completely wrong.
For Barack Obama, hope can triumph over anything, except for open trade with a neighboring country with an economy 1/20th the size of ours. Then, all is despair.
Obama’s culprit is Mexico, our third-largest trading partner. It is trade deals like NAFTA — the 1993 accord eliminating tariffs among the U.S., Mexico, and Canada — that “ship jobs overseas and force parents to compete with teenagers for minimum wage at Wal-Mart,” Obama intones. Feel inspired yet?
The big picture doesn’t justify this Dickensian evocation of gloom. Since 1993, the U.S. economy has grown by 54 percent. The jobless rate has dropped from 6.9 percent in 1993 to 4.9 percent today. Manufacturing output has increased by 63 percent. Canada and Mexico are our first- and second-largest export markets, and U.S. merchandise exports to them have increased at a slightly faster clip than exports to the rest of the world.
NAFTA has clearly been a (small) benefit to the economy of both the U.S. and Mexico. Critics focus on the large U.S. trade deficit that opened up with Mexico shortly after the adoption of NAFTA, but that had more to do with the decline of the peso and a steep Mexican recession that dampened demand for our exports. Since 2001, our manufactured-goods deficit with NAFTA countries has been stable, making the agreement an implausible villain in the hollowing out of America.
Obama’s complaint, ultimately, is with the long-term liberalization of the Mexican economy. Beginning in the mid-1980s, Mexico joined the General Agreement on Tariffs and Trade, lowered its tariff rates, reduced restrictions on foreign investment and deregulated state industries. As a result, both U.S. exports to and imports from Mexico grew rapidly prior to NAFTA.
Because of this dynamic, the Congressional Budget Office estimates almost all of the increased trade between the U.S. and Mexico would have happened without NAFTA. The effect of the agreement itself — rather than the broad trend of liberalization — was marginal. “Relative to the size of the economy,” the CBO writes, “the increases in exports never exceeded 0.12 percent of U.S. GDP, and the increases in imports never exceeded 0.11 percent of U.S. GDP.”
Kind of a silly issue that really isn't what Obama says it is. Expect this one to come back to haunt him in the general election.
By feeblemind, Tuesday, 26 February , 2008 @ 10:36 am
If I understand the article, then bashing NAFTA is a shrewd move on the part of Obama. There is a significant percentage of dem and repub voters that don’t like NAFTA and will be attracted to the rhetoric. These voters want NAFTA repealed. If the CBO comments are true, NAFTA could be repealed with a negligible effect on the economy. So it appears that this is an instance where he can preach a populist message without doing real harm. BTW, I had always been under the impression that NAFTA was a huge plus for all the trading partners. The CBO is saying just the opposite…or am I missing something?
By clifto, Tuesday, 26 February , 2008 @ 12:21 pm
Facts seldom haunt Democrats. Democrat voters wouldn’t know a fact if they could tax one.
By martian, Tuesday, 26 February , 2008 @ 12:57 pm
There you go again - mucking up good speech subjects and talking points with facts! Don’t you know you should never allow facts to get in the way of a good campaign?