Is NAFTA Driving out
American Jobs?

Presidential elections seldom turn on a candidate's trade policy position, but this campaign is shaping up to be all about trade. In a February 2008 debate in Ohio, the two Democratic candidates were asked whether as president they would be willing to withdraw the United States from the North American Free Trade Agreement.

Both Barack Obama and Hillary Rodham Clinton responded that they would use the threat of withdrawal to pressure Canada and Mexico to renegotiate the trade deal. But the candidates' substantive opposition to NAFTA has been lost in a rhetorical flurry to distance themselves as far as possible from the agreement.

Clinton, despite having identified NAFTA as one of the successes of her husband's presidency, now questions the agreement's benefits and has called for a "time out" on future trade agreements. Obama has also adopted an anti-NAFTA stance promising to "fix" the agreement. Exactly what is wrong with NAFTA, anyway?

In a word, opponents of NAFTA are primarily concerned with jobs – or job losses to be more precise. Ross Perot once promised NAFTA's implementation would bring "the giant sucking sound" of good manufacturing jobs leaving the United States in pursuit of lower wages in Mexico. Opposition to NAFTA plays well in states such as Ohio that have lost a significant number of such jobs in recent years, but states such as Texas and California have seen significant benefits. So is NAFTA's notoriety among Democrats well deserved?

Understanding that statistics are "lies, lies and damn lies," it is impossible to rely exclusively on empirical evidence. The numbers merely help us place the debate in context. The studies I have seen show that NAFTA's impact on U.S. jobs has been relatively small. One study reviewed 10 years of data and concluded NAFTA-related job losses in the United States amounted to an average of 37,000 per year; during the same period, the U.S. economy was creating more than 200,000 jobs per month.

NAFTA does come at some cost, and opponents argue those costs are disproportionately borne by certain industries and individuals. Although it has proven difficult to measure the specific effects of NAFTA on particular industries, there is general consensus that textiles and apparel, as well the automotive industry, have been most affected in terms of job losses. Some of the economic difficulties faced by these industries were precipitated by broader economic changes – like the Mexican devaluation of the peso, for example. It is difficult to fairly apportion blame.

Opponents of NAFTA, including Ralph Nader's organization Public Citizen, also maintain NAFTA-related job losses disproportionately affect Latinos. It is true that Latinos are well represented in some of the industries most affected by NAFTA, such as textiles and apparel. But both Texas and California, two states with high Latino populations, have seen significant gains from NAFTA in terms of exports and employment. Moreover, NAFTA contains two employment adjustment assistance programs meant to provide retraining to workers and to assist communities in adjusting.

I do not mean to suggest that we replace well-paying jobs with a social welfare program. We need to retrain workers for 21st century jobs that pay at least as well as the jobs they lost. And we need to do all in our power to create those jobs right here in the United States.

Undoubtedly, NAFTA has had both positive and negative effects on the U.S. economy (and on Mexico's, for that matter). But the mainstream studies indicate NAFTA's impact has been relatively minor because trade with Mexico represents less than 3 percent of U.S. Gross Domestic Product. While some workers have suffered under NAFTA, the long-feared "giant sucking sound" of massive job losses has yet to materialize.

So what's wrong with NAFTA? If we are expecting benefits without any burdens, then NAFTA – and the plethora of regional and bilateral agreements we have negotiated since – will prove a disappointment. There are costs to trade. It is all too easy to set up NAFTA and free trade as the straw man upon which we heap all of our fears and anxieties, but trade has proved beneficial to the United States time and again.

If the Democratic presidential candidates truly believe NAFTA's costs outweigh its benefits, they would do well to provide substance and context to their arguments. The chest-thumping I-dislike-NAFTA-more approach does not serve the American people well.

Originally published in a slightly different form in the Sacramento Bee on March 2, 2008.