NAFTA: The lie of the century
Governor Kasich and many others in the political class are cheering the announcement that China company Fuyao Glass Industry Group will bring 800 jobs to Dayton, Ohio. Apparently twenty years after President Clinton and a Republican congress rammed the North American Free Trade Agreement (NAFTA) down the throats of the citizen class “free trade” deals are finally paying dividends. Unfortunately the Fuyao announcement is nothing more than political spin in advance of the November election.
In 1997, three years after NAFTA kicked in, I published “An economic and political analysis of NAFTA and Fast Track Negotiation Authority” and sent a copy to every member of the Ohio congressional delegation. John Kasich, a congressman at the time, was one of three who responded. The other two were Sherrod Brown and Steve Latourette. In any case, in his response Governor Kasich asked me to be patient as it was only a matter of time before the benefits of NAFTA materialized. Well not only was NAFTA an abject failure, twenty years later we can confirm what I wrote in my report; the political class sold NAFTA on false pretenses, and here’s how they did it.
First, they promised that for every $1 billion in exports, 15,000 to 20,000 jobs are created. For starters, those are bogus numbers as upper level management and stock holders captured most of the gains, which isn’t all bad, but it’s still disingenuous to suggest the wealth created by exports benefited tens of thousands of U.S. workers. The middle class also benefits from lower prices, but millions in the citizen class became under-employed or lost their jobs altogether, and took a huge cut in discretionary spending. Many unwisely chose to go into debt to make up for that loss, and of course we now know how that turned out.
The second big lie used to sell the larger NAFTA lie is “a rising tide lifts all boats.” The political class argued that moving production south to Mexico would solve their economic woes as well as ours. It did for a while until Bill Clinton, the corporatists and their surrogates in Congress pushed through Most Favored Trading status for China. Again, breaking his campaign promise to withhold that trade deal with China unless Beijing cleaned up its act on human rights, Clinton teamed with a willing Republican Congress to incentivize corporations to move to China, an even lower cost producer than Mexico. Any real or imagined advantages to Mexico from NAFTA moved to China as the peso and stock market crashed, investors fled and exports dropped; precisely the conditions NAFTA was supposed to fix.
In a letter to President Zedillo, President Clinton and Prime Minister Chretien, public interest groups from Canada, the U.S., Mexico and Chile sent a clear message that the citizens did not want NAFTA expansion to Chile. They write, “Under NAFTA, Mexico suffered its most severe economic crisis in 60 years. Since NAFTA, Mexican unemployment grew by two million and 28,000 Mexican businesses failed. Real wages in Mexico (dropped) by a third since NAFTA. Astronomical interest rates have deprived Mexicans of their homes, farms and businesses. Under NAFTA nearly 1 million Mexican farmers have been displaced by northern grain imports. Many Mexican small and medium retailers and manufacturers have been wiped out under NAFTA rules.”
The abject failure of NAFTA is bad enough, but the real outrage is that no one in the political class that pushed for NAFTA will now take responsibility for its disastrous results. And even worse, the Obama Administration is gearing up for more so called “free trade” deals, and pushing for Fast Track Authority to outflank Congress. The “quantitative easing tank” is out of gas, but the next best trick to transfer wealth from the citizens to the political class is a fresh round of free trade deals powered by Congress abdicating to President Obama its constitutional responsibility to debate and authorize trade agreements.
- Citizens Trade Campaign, 1025 Vermont Avenue NW, Suite 300, Washington, D.C. 20005, IPR: Rosanna Picillo, (202) 879-4298.
- Mitchel, John, An Economic and Political Analysis of NAFTA and Fast Track Negotiation Authority, Wright State University, 1997.