Caring for Those Harmed by Free Trade
The North American pact is good for the US as a whole, but let's not ignore the exceptions
NEGOTIATORS for the United States, Mexico, and Canada have now reached a North American Free Trade Agreement (NAFTA). The negotiations may have ended but the debate is just beginning. Many Americans had developed strong and divergent views on NAFTA even before the agreement was reached, and in coming weeks we'll be hearing from all corners of the land.
Some will say a free-trade agreement can only cost us jobs; others that it will create jobs. How can we sort this out? What should our policy be? We should rely on the lessons of history.
Thirty years ago, President John Kennedy helped launch a new round of global trade talks, which opened world markets to a level that was unprecedented.
Kennedy favored free trade, which he knew would benefit the US as a whole. But he also understood that the country needs to do something to help workers caught in the move to more open competition. His answer was the Trade Adjustment Assistance program. Kennedy knew that the round of trade negotiations eventually named after him would mean higher paying jobs for future generations of Americans, but he was determined that those who were harmed would not be forgotten.
Somewhere along the way, however, too many people seem to have forgotten this important principle. In each of the last 10 years, the Reagan and Bush administrations have tried to eliminate the Trade Adjustment Assistance program. And in each year, Congress refused to do so. It's a good thing, too, since NAFTA will cause some pain. If the negotiators did their job right, this free-trade agreement will create more jobs than it costs us, but there will be a cost.
Free trade makes a lot of sense for the US. A good free-trade agreement with Mexico will mean more American exports and more American jobs. Since Mexico began opening its market in 1986, we have seen a $5 billion trade deficit turn into a surplus expected to reach $9 billion this year. Mexico is a poor country, but a good customer. The average Mexican buys more American goods than his much richer Western European counterpart. Mexico buys everything from computers to corn from US suppliers, and there are many more products we could be selling.
We still need to examine NAFTA's fine print to ensure that it is, in fact, a good bargain. And, assuming we determine that the agreement is in our national interest, we must not leave those who will be dislocated in its wake. The fact that the many will benefit is no consolation for the families of workers who lose their jobs.
WE must also remember that the same free trade which brings economic development can also bring industrial pollution if care isn't taken, particularly along the US-Mexico border. We must not gain free trade at the cost of environmental degradation.
NAFTA is being debated at a time when the world is undergoing enormous change. Although the US is the world's unchallenged military superpower, we are not the preeminent economic power we once were. Our competition with the rest of the world is more likely to be economic than military in the years ahead.
We face low-wage competition from all quarters of the globe, not just Mexico. During the 1980s, the US lost 2.6 million manufacturing jobs to lower-cost operations, especially in Pacific Rim countries. From Tunisia to Thailand, low-wage countries are eager to lure new production. That pressure will continue regardless of what happens to NAFTA. In fact, if Congress turns down the agreement there's nothing to stop Mexico from stepping up the pressure by eliminating its remaining barriers to foreign investm ent while keeping in place its barriers to foreign goods.
In my view, we have three basic options for confronting the new realities of economic competition. The first is what might be termed a "curse the darkness" approach: shut ourselves off, isolate our firms and workers from the growing competition of Europe, Asia, and Latin America. But raising that white flag would run counter to our tradition of confronting challenges. Worse yet, it would condemn Americans to a lower quality of life over time.
Building a new fortress would also deny us access to new markets and products, and that surely is not the way to go.
The second option is what I call the "head in the sand" approach: full speed ahead in a callous and neglectful attitude toward the effects of trade. Allow our workers and our firms to be buffeted by unfettered global competition and let "the market" sort out the winners and the losers. That sort of laissez-faire thinking is popular in some quarters. But it ignores both the realities of the world and our obligations to our people.
There is a third path and it is well-tested. It is the approach Kennedy took three decades ago. It recognizes that an effective economic policy absolutely must be underpinned by a good social policy.
If NAFTA supporters want to see this agreement passed by Congress, the treaty had better be accompanied by a meaningful program of adjustment and retraining that helps American workers compete for the high-paying jobs of the 21st century.
It must also feature a strong program to deal with existing pollution problems along our border with Mexico and to head off new problems that can accompany added industrial development.
That approach surely is not "protectionist." Fifteen months ago, before the NAFTA negotiations began, the Bush administration agreed in
writing to address the key issues of worker adjustment and environmental protection by the time Congress was asked to vote on NAFTA. Some of those concerns have been dealt with in the agreement, but nothing has been done on others - for example, steps to help our displaced workers. The administration must make good on its May 1991 commitments to Congress if NAFTA is to succeed.
In today's era of increased global competition, let's show we have the wisdom to craft a comprehensive economic strategy - one that works to the benefit of the vast majority of Americans while caring for the needs of those left behind.