February 28, 2008

Democrats often pillory Republicans for their economic errors. From the 1930s on, they reminded Americans of Herbert Hoover's Great Depression. In 1960, they blamed Dwight Eisenhower for slow growth. In the 1980s, they decried the "trickle-down" policies of Ronald Reagan. And today, they excoriate the damage caused by the North American Free Trade Agreement passed under ... Bill Clinton.
Even Hillary Clinton treats the accord with a warmth she normally reserves for Kenneth Starr. She never misses a chance to denounce what she calls "the shortcomings of NAFTA," or to insist she was always against it. But she has to deal with Barack Obama, who often gives the impression that his opponent's name is Hillary Nafta Clinton.
o Tuesday's debate in Cleveland devoted a lot of time to the question: Are you now or have you ever been a supporter of NAFTA? Both candidates denied any complicity, past or present, and both vowed to scrap the treaty if the Mexican government doesn't agree to changes.
Obama makes a special theme of blaming this and other trade agreements for setting off a race to the bottom that destroys American jobs. "In Youngstown, Ohio," he said in a Texas debate, "I've talked to workers who have seen their plants shipped overseas as a consequence of bad trade deals like NAFTA, literally seeing equipment unbolted from the floors of factories and shipped to China." Why NAFTA would induce a company to move production to China is a puzzle, but you get the idea.
His campaign claims a million jobs have vanished because of the deal. That sounds devastating, but over the last 14 years, the American economy has added a net total of 25 million jobs -- some of them, incidentally, attributable to expanded trade with Mexico. When NAFTA took effect in 1994, the unemployment rate was 6.7 percent. Today it's 4.9 percent.
But maybe all the jobs we lost were good ones and all the new ones are minimum-wage positions sweeping out abandoned factories? Actually, no. According to data compiled by Harvard economist Robert Z. Lawrence, the average blue-collar worker's wages and benefits, adjusted for inflation, have risen by 11 percent under NAFTA. Instead of driving pay scales down, it appears to have pulled them up.
Manufacturing employment has declined, but not because we're producing less: Manufacturing output has not only expanded, but has expanded far faster than it did in the decade before NAFTA. The problem is that as productivity rises, we can make more stuff with fewer people. That's not a bad thing. In fact, it's essentially the definition of economic progress.
We're not the only country facing that phenomenon. China makes everything these days, right? But between 1995 and 2002, it lost 15 million manufacturing jobs.
Even if the candidates don't want to acknowledge the gains of the last 14 years, it's hard to see how they can blame NAFTA for economic troubles in Ohio or elsewhere. The whole idea was to eliminate import duties in both the United States and Mexico (as well as Canada). What everyone forgets is that we got the best of that bargain, since our tariffs were very low to begin with.
"Mexico had very good access to the U.S. market" already, says Charlene Barshefsky, who was U.S. Trade Representative in the Clinton administration. "What NAFTA did was level the playing field."
Critics complain that while exports to Mexico have risen, imports from Mexico have risen even faster. But that's not because we embraced free trade. It's because our economy has been more robust than theirs. Prosperous consumers buy more goods, from both home and abroad, than struggling consumers. Absent NAFTA, the trade imbalance with Mexico would not be smaller. It would be bigger.
None of this is a revelation to economists. The candidates' broadsides require them to ignore not just a wealth of evidence but the overwhelming consensus of experts. Gary Clyde Hufbauer, an economist at the Peterson Institute for International Economics in Washington, estimates that 90 percent of the people in his profession regard the accord as a good thing.
Jagdish Bhagwati, a Columbia University trade economist, supports Obama and thinks his positions on trade are generally better than Clinton's. "But on NAFTA," Bhagwati told me, "he is dead wrong."
Clinton is also in error, but on the question of which candidate has more consistently and vehemently denounced the accord, Obama has opened up a clear lead. Now there's a race to the bottom.



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