Trade Policy and the US Presidential Election

As the Democrat party race for the nomination has tightened, trade became a major issue in the debate. Hillary Clinton claims that the US needs to take a second look at NAFTA and negotiate a better deal. Barak Obama made similar statements while campaigning in Ohio, although an aide explained to a Canadian diplomat that the statements were just political posturing. The bulk of the academic studies come to the conclusion that NAFTA had little impact on employment in the US and that there was a net contribution to economic growth. In fact, the greatest growth in imports came from China and the value increase in oil imports as crude prices have soared. In the traditional manufacturing areas of the mid-west, jobs have been dwindling for decades as new technologies have moved in and high-labor content has moved off-shore. Many manufacturing processes have been automated. I remember touring a Caterpillar factory in the 1990's in which an entire line used to make transmission gears had been automated. What was surprising was not the absence of workers but the fact that the machine could consistently manufacture gears to tolerances that were 10x better than the best master lathesman could do. The sad fact is that most of these jobs would have gone in any case and the workers were caught in the middle. The frustration by the states which had lost many of these jobs without seeing new opportunities replace them focused on NAFTA. States like California which also lost manufacturing jobs were able to replace them with new jobs scarcely mention free trade arrangements. I do think there is one issue about NAFTA and job losses that does bear discussion. Mexico opened its borders under NAFTA, particularly to agricultural products. The result was that traditional subsistence level farms in southern Mexico failed and the peasants fled to large cities in Mexico and to the US. Some studies of immigration in the US suggest that over 8 percent of the Mexican population has moved to the US in the past 15 years. Many African countries that have experienced civil conflicts have not displaced such a large percentage of their populations. The US could have learned an important lesson from the EU with its expansions. The EU gave billions in development aid to the new entrants to build infrastructure and jobs to avoid large migrations of workers for jobs. This clearly worked with the expansion to Spain and Portugal and to a good extent with admission of the former East Bloc countries. The US should make part of its policy a determined policy to help out with economic development in Mexico and Central America to ensure that local citizens find good jobs at home where they will buy goods manufactured in the US.