Should US Workers Be Worried?

BEN WATTENBERG, a well-known Washington scholar, jokes that there is so much confusion about the North American Free Trade Agreement (NAFTA), no one knows whether it will ``destroy the world, or save it.''

``On a given day, one can hear that NAFTA will destroy 5 million jobs, or create 500,000,'' Mr. Wattenberg says. ``It is said to be [either] a monumental event or a trivial one.''

No other element of NAFTA has caused more confusion, even among experts, than the question of its impact on American jobs.

Economists who expect heavy United States job losses predict many American factories will move to Mexico. Other economists reject that, and forecast job gains. Here is what some of the better-known reports tell us:

Will NAFTA create jobs in the United States, as President Clinton predicts, or will there be ``a giant sucking sound'' as jobs rush south to Mexico, as claimed by Ross Perot?

Mr. Clinton often quotes a report by Gary Hufbauer and Jeffrey Schott of the Institute for International Economics. It shows that over the next five to six years, the US should enjoy a net gain of 171,000 jobs. The Hufbauer/Schott analysis jibes closely with a number of other studies, including one by DRI/McGraw-Hill.

On the other side, research by the Economic Strategy Institute estimates US net job losses between 32,000 and 220,000. Among the most pessimistic predictions is one by Pat Choate, an analyst often cited by Mr. Perot. He says the agreement puts 5.9 million US jobs ``at risk.''

Why are there such differences?

Economists use different models. The Joint Economic Committee of Congress, which looked at 16 studies, concluded that the most important difference involved capital flows. For example, Hufbauer/Schott assumes there will be no diversion of business investment from the US to Mexico. But a Stanford study assumes that $26 billion would be diverted to Mexico. If that happens, the US loses 91,974 jobs, Stanford says.

Most NAFTA studies ignore diversion. Such studies ``underestimate gross US job losses due to NAFTA,'' the economic committee says.

Economists who predict job gains point to lower tariffs and greater efficiencies in the US and Mexico. Example: In the first year, US sales of autos to Mexico are expected to rise from only 1,000 to 60,000.

Will many Americans, particularly lower-skilled workers, be forced to find new jobs?

Almost certainly. Economists estimate the number of workers displaced will range from 18,800 to 912,000. Unfortunately, many of these people will probably be unable to find jobs as good as the ones they lost.

If NAFTA forces some Americans out of their jobs, isn't that a strong argument against it?

Proponents of NAFTA point out that millions of Americans change jobs every year. NAFTA will prod the US economy toward better use of its manpower, and strengthen the job base. For example, they note that the agreement could rescue many manufacturing jobs which are now being exported to low-cost areas in Asia. NAFTA permits American firms to use Mexico for labor-intensive phases of manufacturing, while keeping highly paid, specialized work in the US.

Critics warn that the loss of manufacturing jobs is already severe, and that NAFTA will speed it up. While some skilled jobs may be saved in the US by NAFTA, many low-skilled workers in manufacturing and in some service sectors will be forced to take employment at reduced pay.

The bottom line:

Job losses or gains will involve less than 1 percent of the huge American work force. However, some industries and communities, including up to 1 million workers, could be seriously affected.

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