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Summary
I'm a solid capitalist, one who was once a staunch advocate of free trade. However...
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In 1992, when discussions of the North America Free Trade Agreement were running hot and heavy, I sensed something was amiss. Debate on this mammoth undertaking became particularly animated and surely polarized during the Presidential debates that year. Frankly, Ross Perot made a lot of sense in his criticism of what in the not distant future would become a fait accompli.
NAFTA advocates excused away Perot's negative views as an attempt to hurt his perceived arch enemy, then-incumbent President George Bush The First. But much of what Perot was talking about made much more sense, at least to me, than what was coming from either Messrs. Bush or Gore.
For one thing, and an exceptionally crucial one, it was obvious few people in Congress had read this voluminous document. What sealed the deal, though, as far as I was concerned, was listening to Al Gore in particular talk about how America and its workers would be protected from potential abuse -- after the fact -- because the United States would assure it when negotiating NAFTA's so-called "side agreements." These involved hugely critical areas to the United States -- to Canada also -- ones covering pollution, working conditions, etc.
And another selling point of the day from which I derived great discomfort was the idea that an especially good reason for championing NAFTA, although one having little directly to do with trade, was the very beneficial impact it would have in stemming the flow of illegal immigrants from Mexico. After all, wages and the standard of living south of the US border would rise so fast that Mexicans simply no longer would want to flood into the United States. Of course, illegal immigration from Mexico is much worse now than it was then.
At any rate, I wound up opposing the passage of NAFTA. Moreover, that was the point in time at which I decided that if NAFTA had come to represent the embodiment of free trade, I no longer could be a free-trader.
"Free trade" means the same to me today as it always has meant. To succeed, "free trade" and "fair trade" must be synonymous. What I have come sadly to accept is that the plethora of politicians of marginal quality in this country, exacerbated greatly by the brothel-like climate in Washington created by zillions of dollars dispensed by lobbyists, make "free trade" that also is "fair trade" something that simply is not achievable.
Now along comes the Central America Free Trade Agreement or "CAFTA," and to be honest, I was summarily opposed to it. Its selling points had much too familiar a ring.
And to add genuine injury to insult, the inherent merits of this trade agreement were not enough to get it passed. It took all the pork in a hugely wasteful transportation bill, a piece of legislation George Bush threatened to veto in earlier times (explaining why it was still kicking around) to get CAFTA through Congress. And the transportation bill suffered no Presidential veto; it had become the Administration's CAFTA "carrot."
CAFTA passed the US Senate late the night of 6/30, by a vote of 55-45. Interestingly, 12 of the Senate's 55 Republicans voted against it. In the House, passage was in the wee hours of 7/28, by a vote of 217 to 215. So it is clear that without the grease from the transportation bill, CAFTA surely would not have made it, and it almost did not make it even with the bribe.
Before illustrating where CAFTA might be taking the country and what is left of its high-paying jobs, let's have a quick look at where NAFTA has taken us.
The North America Free Trade Agreement took effect on January 1, 1994. For all of 1993, the United States ran a trade deficit of $10.8 billion with Canada (much of it from automobiles, owing to Detroit's large Canadian presence). Believe it or not, in 1993, the US still had a trade surplus with Mexico, in an amount that year of $1.7 billion. Examine the following table. Do you suppose what has taken place between 1/1/94 through 6/30/05 had anything to do with NAFTA?
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US TRADE DEFICITS (-)
OR SURPLUSES (+) WITH
MEXICO AND CANADA
(Billions of Dollars)
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Year Mexico Canada
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2005* -48.952 -65.242
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2004 -45.067 -66.480
2003 -40.648 -51.671
2002 -37.146 -48.165
2001 -30.041 -52.844
===========================
1995 -15.808 -17.144
1994 +1.350 -13.967
1993 +1.663 -10.772
1992 +5.387 -8.036
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*Through June (annualized).
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As to what has happened to US goods-producing jobs during this period, the following table tells that sorry tale. While you cannot blame NAFTA for all this, you certainly are on safe ground to place some of the blame there, even a lot of it.
From 1994 through 2004, inclusive, there was a shrinkage of roughly a third of a million goods-producing jobs in the US. Manufacturing jobs shrunk by 2.445 million or 14.6% over the same period. And that was a period during which real GDP grew by more than $3.3 trillion or almost 44%.
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JOB AND GDP COMPARISONS FOR SELECTED YEARS*
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Total Goods- Manufact-
Real GDP Producing Jobs uring Jobs
Year (Trils.) <------- Millions ------>
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2004 $10.842 21.884 14.329
2000 $9.817 24.649 17.263
1995 $8.032 23.156 17.241
1993 $7.533 22.219 16.774
1979# $5.173 24.997 19.426
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*Four-quarter averages for GDP, annual av-
erages for jobs data. #Year in which goods-
producing and manufacturing jobs peaked.
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Unfortunately, America's starting point with CAFTA isn't even as good as it was with NAFTA. At least in the very earliest stages of NAFTA, the US had a favorable trade balance with Mexico. In 2004, however, the United States ran a trade deficit with all six countries comprising the Central America Free Trade Agreement. (Through June 2005, the US registered a very small trade surplus with the Dominican Republic.)
So longer run, are CAFTA and NAFTA destined to trend on parallel courses? I hope not. However, I believe the answer is that they probably will.
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2004 TRADE RESULTS BETWEEN THE UNITED
STATES AND THE SIX "CAFTA" COUNTRIES
(Ranked by Size of U.S. Deficit )
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U.S. U.S.
Imports Exports
Country From To Balance
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Costa Rica 3.333 3.306 -0.027
Dominican Rep. 4.527 4.358 -0.169
El Salvador 2.052 1.868 -0.184
Nicaragua 0.999 0.592 -0.398
Honduras 3.640 3.078 -0.562
Guatemala 3.154 2.551 -0.603
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Total 17.696 15.753 -1.943
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MEMO: 2005 totals of all above countries
(through June, annualized):
18.078 16.438 -1.640
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