The Real NAFTA Story: Clinton and Obama Are Pandering

The big news on NAFTA leading up to the primaries tomorrow is the rendezvous between Obama advisor and economist (as opposed to a normal political advisor) Austan Goolsbee. A memo was released today of a meeting Goolsbee had with the Canadian consulate and … well just read about it here. (UPDATE: Gov. Ted Strickland of Ohio has said something similar to what Goolsbee allegedly said)

And I was going to write a much longer post, but Andrew Leonard at Salon beat me to the punch, as the Goolsbee is issue is simply well beyond what matters. Like Leonard, I think the Democratic primary issue is really what was said by Robert Reich:

It’s a shame the Democratic candidates for president feel they have to make trade – specifically NAFTA – the enemy of blue-collar workers and the putative cause of their difficulties. NAFTA is not to blame. Consider the numbers. When NAFTA took effect, Ohio had 990,000 manufacturing jobs. Two years later, in 1996, it had 1,300,000 manufacturing jobs. The number stayed above a million for the rest of the 1990s. Today, though, there are about 775,000 manufacturing jobs in Ohio. What happened? The economy expanded briskly through the 1990s. Then it crashed in late 2000, and the manufacturing jobs lost in that last recession never came back. They didn’t come back for two reasons: In some cases, employers automated the jobs out of existence, using robots and computers. In other cases, employers shipped the jobs abroad, mostly to China – not to Mexico.

NAFTA has become a symbol for the mounting insecurities felt by blue-collar Americans. While the overall benefits from free trade far exceed the costs, and the winners from trade (including all of us consumers who get cheaper goods and services because of it) far exceed the losers, there’s a big problem: The costs fall disproportionately on the losers — mostly blue-collar workers who get dumped because their jobs can be done more cheaply by someone abroad who’ll do it for a fraction of the American wage. The losers usually get new jobs eventually but the new jobs are typically in the local service economy and they pay far less than the ones lost.

This is more than a Democratic issue, really. Mitt Romney beat John McCain in Michigan by using very similar rhetoric about fighting to get jobs back to Michigan, when in reality they’re gone from the lower Midwest for good. (Ask people in Troy, NY how well the “get jobs back” thing is working out).

The Washington Post editorialized last week:

What could the Democrats mean? Labor and the environment are covered by “side agreements” to NAFTA, negotiated by President Bill Clinton, that call on all three countries to make and enforce good laws. The more recent U.S.-Peru Trade Promotion Agreement went further, requiring Peru to change its labor laws to meet International Labor Organization standards. Both Mr. Obama and Ms. Clinton, who supported the Peru deal, see it as a model for a NAFTA renegotiation with Mexico, according to their advisers. But if that’s all the candidates have in mind, they are wildly overpromising: The Peru pact’s labor and environmental standards are only incrementally stronger than the NAFTA side agreements. Meanwhile, the risks of renegotiation are huge. NAFTA is controversial in Mexico, too; farmers there are outraged by American agricultural imports. If the Mexican side asked that tariffs be reimposed on U.S. grain as part of a renegotiation, would President Obama or President Clinton sacrifice American farmers whose votes they were seeking only yesterday in Iowa? Or would he or she pull out of NAFTA? If the latter, the tariffs on both sides would revert to the levels of 14 years ago.

Whole U.S. industries have grown up to take advantage of NAFTA. Meanwhile, none of the U.S. jobs that left for Mexico would come back; they’d simply go to China, India or elsewhere.

The Democratic candidates understand that trade with the developing world has both costs and benefits, which are not evenly distributed across the United States. Two days before this week’s debate, Mr. Obama said, “I don’t think it’s realistic for us to repeal NAFTA,” because that “would actually result in more job loss . . . than job gains.” Ms. Clinton awkwardly pleaded that NAFTA has benefited some parts of the country — such as Texas. Yet the urge to win Ohio trumped, and both Democrats made a threat that, if taken seriously, can be described only as reckless. In other words, we have to hope that they were only pandering.

Moreover, the Economist comes to similar conclusions after examining their policy positions:

He is not against technology, of course. That would sound stupid. Nor is he against Americans trading with other Americans. Nor, even, does he oppose trade with foreigners. But he has found an artful way of signalling to those who do that he agrees with them: he denounces NAFTA (the North American Free-Trade Agreement).

To many ears, this sounds like shorthand for denouncing globalisation—though that is not what Mr Obama actually says. More important, because NAFTA was signed by Bill Clinton, Mr Obama can blame his wife for it.

He does so in a reassuring tone of voice but in hysterical terms. During a debate this week in Ohio, where Mr Obama was wooing working-class whites before the state’s primary on March 4th, he spoke of “entire cities that have been devastated as a consequence of trade agreements that were not adequately structured to make sure that US workers had a fair deal.” To workers in a cold warehouse, he claimed that NAFTA has destroyed 1m American jobs, “including nearly 50,000 jobs here in Ohio”. As president, he vowed, he will not “stand idly by while workers watch their jobs get shipped overseas.”

Mrs Clinton finds this hard to parry. During the debate, she said she had been “a critic of NAFTA from the very beginning” but didn’t say anything publicly out of loyalty to her husband’s administration. No one believes this, not least because she publicly praised the deal several times. Mrs Clinton now says NAFTA was bad for America, that she always thought so and that Mr Obama is lying when he suggests otherwise. “Shame on you, Barack Obama,” she added.

Mrs Clinton was right in the 1990s and is wrong now. Trade hurts some people, but helps many more. It raises overall income and allows Americans to buy a wider range of better goods more cheaply. And NAFTA has helped make Mexico less poor, which has contributed to its stability and democracy—something that should matter to Americans.

And lastly, back to Reich who clarifies Clinton’s opposition to the issue:

The answer is HRC didn’t want the Administration to move forward with NAFTA, but not because she was opposed to NAFTA as a policy. She opposed NAFTA because of its timing. She wanted her health-care plan to be voted on first. She feared that the fight over NAFTA would use up so much of the White House’s political capital that there wouldn’t be enough left when it came to pushing for health care. In retrospect, she was probably right.

I’m pretty sure ceding the straight talk on such a key issue to McCain could come back to hurt the Democrats. But we’ll see.