Opposition to NAFTA - Nothing But Old Status Quo
CONGRESS goes back to work next week to face, among other things, the North American Free Trade Agreement (NAFTA). Over time, this will eliminate tariffs and other trade barriers between the United States, Canada, and Mexico, thereby creating the world's largest trading bloc. Few, if any, issues coming before Congress in this decade will have a greater long-term impact.
Judging by the early cries of alarm from NAFTA's opponents, the issues are poorly understood. The agreement, we are warned, will lead to a massive transfer of American industry to Mexico and a flood of cheap imports that will condemn American workers to unemployment and despair. This is nonsense.
The opposition to NAFTA betrays a narrow, shortsighted, and ultimately self-defeating view of the American national interest. This is an approach that desperately clings to the status quo because it is terrified of change and of the unknown.
Senators from South Carolina want the textile industry in their state protected from imports made by low-cost labor in Asia. Disregard for the moment that this would drive up the cost of living by forcing consumers generally to pay more for clothes. How do the senators think South Carolina got a textile industry in the first place? By offering cheaper labor than was available to the industry in New England, and in nonunionized plants, too.
It is hopeless to try to keep these kinds of shifts from taking place. They can be delayed by foolish government policies, but they cannot be prevented indefinitely. Wise policies try to take advantage of change, not get in its way. NAFTA is a wise policy that will facilitate advantageous adjustment to change.
The AFL-CIO is being extraordinarily close-minded about this. All it can see is an increase in imports. And Ross Perot adds to the confusion.
Of course, NAFTA will lead to an increase in imports. It will also lead to an increase in exports. Exporting more is one of the things we have to do to get our economy moving again. And we cannot export more (not, at least, if we expect to get paid) unless we import more. That is the point of NAFTA.
Further, to the extent that employment is increased in Mexico, more Mexicans can find jobs there and will have less incentive to migrate to the US. That reduces the competition for low-wage jobs here; it also reduces the considerable demands on federal, state, and local governments for social services, health care, and education.
Perhaps we have to go back to 1930 to find a trade debate comparable in importance to what is coming up on NAFTA. In that year, at the onset of the Great Depression, Congress panicked and did exactly the wrong thing. It passed the Smoot-Hawley Tariff Act, which almost doubled tariffs, provoked foreign retaliation, and made the depression worse instead of better. The mistaken idea was to protect American jobs.
PRESIDENT Franklin Roosevelt's reciprocal trade policy began the rectification of Smoot-Hawley, and nobody would suggest a return to those days. NAFTA presents a choice between growth and stagnation. Defeating NAFTA now would be the equivalent of passing Smoot-Hawley in 1930.
Trade patterns in North America (and worldwide) are changing and will continue to change, with or without NAFTA. The experience of history is that when there are fewer restrictions, there is more trade. When there is more trade, some people lose but more people win. The losses are temporary; the gains are permanent. One suspects that the blindness of the AFL-CIO on this issue is that the losses would come in industries where labor is organized, the gains in industries where it is not.
The opponents may be able to defeat NAFTA in Congress, but they cannot protect themselves against what they fear.