I'm reposting this ezine issue on good and bad reasons to oppose NAFTA and Fast tract. The Progressive Response is a publication of Foreign Policy In Focus, a joint project of the Interhemispheric Resource Center and the Institute for Policy Studies. Erik Leaver Interhemispheric Resouce Center THE PROGRESSIVE RESPONSE Vol. 1, No. 4 Tom Barry, editor ***Issues of Debate: Assessing the Impact of NAFTA*** Trade Balance Tactics Opponents of NAFTA, on both the left and the right, cite the current U.S. trade deficit with Mexico as a sign that NAFTA has negatively impacted the United States. It is certainly true that the U.S. now imports more goods from Mexico than it exports to Mexico. In 1996 the United States suffered a $16.2 billion trade deficit with Mexico, whereas in 1993 it experienced a $1.7 billion surplus. Although those concerned about unemployment, poverty, and low wage levels in the United States should examine the state of U.S. trade in their attempt to find the causes of economic instability and job losses at home, they should not adopt the dogma that a trade deficit with Mexico means more unemployment in the United States. When considering the U.S. trade deficit with Mexico, it should be recognized that, while Mexico in 1995 and 1996 did export more to the United States than it imported from this country, overall trade with Mexico has expanded substantially since 1993. Despite the economic crisis in Mexico, U.S. exports to Mexico have expanded by more than a third during the first three years of NAFTA. It is not that the United States is exporting less to Mexico than it did before, only that U.S. imports from Mexico have increased faster than U.S. exports to Mexico. It would be wrong to attribute the present status of U.S.-Mexico trade balance primarily to NAFTA for the following reasons: * Overall U.S.-Mexico trade was on the increase even before NAFTA. * In the 1982-1991 period the U.S. experienced a persistent trade deficit with Mexico. * U.S. export growth to Mexico is largely related to the state of the Mexican economy. * The 1994 economic crisis in Mexico--in which consumption dropped 15%--helps explain why U.S. exports to Mexico did not rise as rapidly as previously projected. * The steady GDP increase in the U.S. has created increased demand for goods and supplies, boosting the level of Mexican exports to the United States. Given that the balance of trade between Mexico and the U.S. is closely to the state of the economy in each country, it is likely that the current trade status will change. Consequently, arguments in favor or against NAFTA based primarily on the size of the deficit or surplus are unlikely to stand the test of time. Indeed, as the Mexican economy slowly recuperates, its trade surplus is falling dramatically. The latest figures from Mexico show that its total imports have increased by 27 percent while exports have also increased although more slowly--but still at a healthy rate of 15 percent. Those NAFTA opponents in the United States who point to the 1995-96 trade deficit with Mexico may be left on shaky ground in a year or two as that deficit turns into a surplus. Similarly, more caution is needed in basing one's opposition to NAFTA on reported or calculated job losses. For starters, it should be recognized that the United States has experienced both relatively low unemployment and economic growth since the NAFTA took effect. Opposing NAFTA on the basis of the state of traditional economic indicators--GDP growth, unemployment, trade balance, etc.--is a difficult argument to make, especially at this time of comparatively good economic health in the United States. There are two approaches to the job loss discussion that should be regarded with caution. The first is the facile adoption of a Commerce Department's multiplier that holds that $1 billion in increased exports creates 20,000 new U.S. jobs. By applying this multiplier to the trade deficit (which implies that all Mexican imports take U.S. jobs and that this deficit is due to NAFTA), the Economic Policy Institute concluded that the increase in the U.S. trade deficit since 1993 has cost the United States 251,000 jobs. As noted previously, this approach fails to recognize that, while the United States may be experiencing a deficit with Mexico, its exports continue to increase. Weintraub calls all the manipulations using export/job multipliers "primitive arithmetic," pointing out that 1) merchandise trade is only one part of the balance of payments and does not include the export of U.S. services, 2) imports do not automatically translate into job losses, 3) decreased Mexican exports would decrease Mexico's ability to purchase U.S. products, thereby adversely affecting U.S. jobs, 4) as a global trader, the U.S. should expect deficits with some countries and surpluses with others, and 5) a substantial part of North American trade is not in final products but in components of final products. It is true that during the NAFTA debate the U.S. trade surplus with Mexico was cited as a sign that the United States was creating jobs in the U.S. economy at the expense of Mexico, using the export/jobs multiplier as the proof. This was faulty argumentation as many NAFTA opponents rightly observed at the time. However, now that the trade balance has temporarily shifted, NAFTA opponents have opportunistically latched on to the multiplier argument as evidence that NAFTA is hurting the United States. This is specious argumentation and should be rejected. The ostensibly more persuasive argument that NAFTA is costing the United States jobs is based on figures from the Trade Adjustment Assistance (TAA) program, under which 128, 253 U.S. workers have received assistance because they have lost their jobs either because of production relocation or imports from Mexico. Public Citizen and the AFL-CIO argue that this figure is just the tip of the iceberg, since the criteria for TAA are too strict. It is certainly true that many workers have been affected adversely by production shifts and changing trading patterns between Mexico and the United States. This was true before NAFTA and continues to be true, and it is also true that globalization of production results in a downward pressure on wage scales. But this does not necessarily mean that the United States has suffered a net job loss because of NAFTA. Clearly, U.S. jobs are also being created as a result of more integrated North American economic relations, although there is no parallel way to measure jobs created. Put another way, the TAA figure clearly shows that some U.S. workers have lost jobs as a result of North American trade and investment patterns, but it's not valid to use this figure to justify statements that NAFTA has resulted in a net job loss for the U.S. work force when other U.S. workers have gained jobs because of those same changing patterns. It may certainly be true that the United States has experienced a net job loss because of U.S.-Mexico trade and investment patterns, but opponents should acknowledge that jobs are also being created. Other points that Weintraub makes to support his contention that NAFTA has been good for both Mexico and the United States include: * Increases and decreases in trade cannot be attributed solely to NAFTA, considering that even before NAFTA the trade preferences granted by the two countries were not significantly different. * Increased Mexican exports to the U.S have helped that country to pay off debts to the United States. * Without NAFTA, Mexico would have likely raised its import tariffs in an effort to stem the 1994 balance-of-payments crisis, which would have lowered U.S. exports and slowed the growth in overall trade. * It is true that increased maquiladora production in Mexico has resulted in localized hardships for U.S. workers who have lost their jobs, but it should be remembered that 50 percent of the value of maquiladora production comes from U.S.-supplied inputs and that if the opportunity to establish production-sharing facilities (maquilas) in Mexico did not exist many companies would likely shift all their production facilities overseas. In any fight against free-trade globalization, it will also be necessary to respond to Weintraub's assessment of NAFTA as being good for the consumer. He concludes his progress report with this observation: "One should not lose sight of an elementary point that is often forgotten. An import duty is a tax on the consumer. If one believes in lower taxes, NAFTA moves modestly in this direction. If one believes in the importance of a competitive market, NAFTA encourages this. If one believes in consumer sovereignty, NAFTA stimulates this." There is a dangerous tendency among progressives in the United States to side with U.S. producers rather than U.S. consumers and to assume an ultranationalist posture. Unless one supports total national self-reliance, there are self-evident benefits of trade (both intranational and international). Too often progressives have lent support to industries, particularly agroindustries like those that produce sugar, tomatoes, and avocados, in the name of fair trade and U.S. workers. Such industries operate behind costly protectionist tariffs and quotas, denying U.S. consumers lower prices and foreign economies a source of foreign exchange. Progressives should be cautious about protecting noncompetitive industries, especially when restricting imports shifts the burden to consumers. A Progressive Agenda In making the case against the corporate agenda of free trade, progressives need to steer clear of the mercantilist perspective that Weintraub outlines and adopt a more internationalist approach. This does not mean that U.S. workers and consumers should accept a downward harmonization of wages and standards, but it does mean that any campaign for upward harmonization must accept that U.S. businesses, workers, and consumers--are not the primary victims of the current trends in economic globalization. Because of its position in the global economy and its associated political influence in international affairs, the United States more often benefits than loses in the new configuration of economic relations. This is not to say that there are not many negative consequences of NAFTA and other free trade accords but only to acknowledge the privileged position of the United States when compared, for example, with a country like Mexico. If the corporate agenda of economic globalization, which NAFTA is certainly a part of, is to be successfully opposed, it will require enlightened cooperation across borders. Ultranationalist positions that demand that the U.S. government protect all sectors of the economy against foreign competition undermine such alliances. This has become particularly clear in the NAFTA evaluations that focus on documenting the "giant sucking sound" while failing to look at the entire picture of U.S.-Mexico relations. We must think globally. During the first three years of NAFTA, the United States has enjoyed comparatively good economic health. Arguments that NAFTA is hurting the United States at a time when Mexico has endured one of the most severe economic crises in its entire history will not have much resonance in Mexico and are not a good basis for establishing cross-border citizen alliance. NAFTA opponents in the United States must take care not to paint the United States as the main victim of regional economic integration. It is simply not true. Pointing to the U.S. trade deficits with Mexico and Canada and imputing job losses to these deficits portrays a false picture of the winners and losers of free trade. The facts of the economic relations of the United States with Mexico must be kept clearly in mind when considering the impact of NAFTA: * Mexico's merchandise exports to the U.S. constitute about 25% of its GDP, whereas U.S. merchandise exports to Mexico are less than 1% of the U.S. GDP. * Mexico's GDP is less than 5% of the U.S. GDP. In Mexico, as in the United States, any evaluation of NAFTA should extend beyond standard economic indicators to an examination of the economic models on which the regional free trade accord is premised. In Mexico, the country's leaders have dropped all pretense of directing economic development and have instead hitched Mexico's economic welfare to the vagaries of the global marketplace and in particular to U.S. capital and trade. In the United States, the country's economic welfare is also increasingly a function of the U.S. place in the global economy, and U.S. political leaders wrongly assume that aiding the overseas expansion of corporate America is the most effective way to improve the welfare of the entire nation. The ideological commitment to the benefits of the open regional marketplace is much the same for the two nations. But as the world's economic powerhouse, the United States stands in a much better position than Mexico to shape this economic integration to the benefit of its leading economic actors, namely the transnational corporations that control most regional trade. It is true that certain sectors of U.S. business have been affected adversely and certain workers have seen their jobs transferred to Mexico. But this does not mean that NAFTA has had an overall negative impact on trade, investment, consumer prices, and job creation. Expanding NAFTA and giving President Clinton fast-track authority for additional free trade agreements should be opposed but without resorting to mercantilist measurements of success or failure. More than a trade treaty, NAFTA is, as Weintraub observes, a "framework of economic relations" between the United States, Canada, and Mexico. As such, it is a model for other frameworks of regional and international economic relations. NAFTA should be opposed by policymakers and citizens because it is a framework for economic globalization that privileges the interests of large corporations and does not adequately consider the impact of these economic relations on the environment and labor. It and similar free trade accords should be opposed because they accelerate the forces of corporate-driven globalization, thus making it ever more difficult for countries (both those of the North and the South) to establish the basic ground rules for sustainable development in this new era of globalization. Before moving forward with further liberalization of trade and investment, U.S. policymakers and citizens should make certain that they--and not the transnational corporations--are the ones who formulate the framework of economic development. The imperatives of profit-taking and market expansion need to be conditioned by policies and regulations that ensure the common good. Otherwise, these agreements will facilitate the downward harmonization of labor, environmental, and consumer standards. The framework of economic relations that prioritizes the common good should not and cannot be one that is anti-market or anti-business. But it must be constructed to ensure environmentally sustainable and equitable development. Specifically, this means: * Creation of a context for economic relations that includes a safety net for those who are marginalized by the international market, including assistance and retraining for those who lose their jobs because of relocation. * Integration of labor and environmental standards into the heart of trade agreements. * Generation of funds through taxes on cross-border commercial and financial transactions that can serve to provide adjustment assistance to communities adversely affected by alterations in production and trading patterns. * Recognition that trade agreements should not necessarily be completely reciprocal, meaning that they recognize that less developed nations will likely need longer tariff phase-out periods and more regulations regarding foreign investment and capital flows. * Enforcement of guarantees that relocating companies adequately compensate host communities for services, training, financing, and facilities they have provided and that such companies supply fair notice and severance benefits to workers. * Strong support and advocacy for international standards and treaties on human rights, labor rights, and natural resources that will serve as a counterweight to corporate pressures for downward harmonization. Weintraub is right that many of the arguments used as rallying calls against regional economic integration are rubbish and narrowly nationalistic. But he is wrong in his belief that NAFTA-style globalization is, despite local hardships, good for the overall global economy and society. Sources for More Information: Center for Strategic and International Studies (CSIS) Email: (202) 775-9199 Website: http://www.csis.org Sidney Weintraub NAFTA at Three: A Progress Report Center for Strategic and International Studies, 1997 Economic Policy Institute Email: [EMAIL PROTECTED] Website: http://epinet.org See: (Trade Deficit, Job Losses Soar since NAFTA) epinet.org/tf970219.html Global Trade Watch Public Citizen Email: [EMAIL PROTECTED] Website: http://www.citizen.org/pctrade ------------------------------------------------------------------------------ To subscribe to the Progressive Response, send an email to: [EMAIL PROTECTED] with the words "join newusfp" in the body of the message. Alternatively, if you do not wish to receive The Progressive Response, please send an email message to [EMAIL PROTECTED] with the words "leave newusfp" in the body of the message. Visit the Foreign Policy In Focus website, http://www.zianet.com/infocus, for a complete listing of "In Focus" briefs and text versions of the briefs. To order policy briefs, our book "Global Focus: A New Foreign Policy Agenda 1997-98", or for more information contact the Interhemispheric Resource Center or the Institute for Policy Studies. IRC (Orders/Information) Voice: (505) 842-8288 Fax: (505) 246-1601 Email: [EMAIL PROTECTED] Contact: Erik Leaver IPS (Information) Voice: (202) 234-9382 Fax: (202) 387-7915 Email: [EMAIL PROTECTED] Contact: Martha Honey
[PEN-L:12228] Re: FAST TRACK ALERT; Heads Up: Son of NAFTA
Interhemispheric Resouce Center Wed, 10 Sep 1997 07:44:05 -0700 (PDT)
