Daniel W. Drezner
NAFTA is not responsible for Ohio
Perhaps an unanticipated benefit of Clinton and Obama outbidding each other to see who could savage NAFTA more is that the mainstream media will actually point out that NAFTA is not responsible for the rust belt’s economic woes. David Leonhardt makes this point in his New York Times column today: The first problem with what ...
Perhaps an unanticipated benefit of Clinton and Obama outbidding each other to see who could savage NAFTA more is that the mainstream media will actually point out that NAFTA is not responsible for the rust belt’s economic woes. David Leonhardt makes this point in his New York Times column today:
The first problem with what the candidates have been saying is that Ohio?s troubles haven?t really been caused by trade agreements. When Nafta took effect on Jan. 1, 1994, Ohio had 990,000 manufacturing jobs. Two years later, it had 1.03 million. The number remained above one million for the rest of the 1990s, before plummeting in this decade to just 775,000 today. It?s hard to look at this history and conclude Nafta is the villain. In fact, Nafta did little to reduce tariffs on Mexican manufacturers, notes Matthew Slaughter, a Dartmouth economist. Those tariffs were already low before the agreement was signed. A more important cause of Ohio?s jobs exodus is the rise of China, India and the old Soviet bloc, which has brought hundreds of millions of workers into the global economy. New technology and better transportation have then made it easier for jobs to be done in those places and elsewhere. To put it in concrete terms, your credit card?s customer service center isn?t in Ireland because of a new trade deal. All this global competition has brought some big benefits, too. Consider that cars, furniture, clothing, computers and televisions ? which are all subject to global competition ? have become more affordable, relative to everything else. Medical care, movie tickets and college tuition ? all protected from such competition ? have become more expensive.
Leonhardt also raises an obvious point that has, curiously, not been aired all that often:
[W]hen you read [Clinton’s] plan, or Mr. Obama?s trade agenda, you discover none of it is particularly radical. Neither candidate calls for a repeal of Nafta, or anything close to it. Both instead want to tinker with the bureaucratic innards of the agreement. They want stronger ?labor and environmental standards? and better ?enforcement mechanisms.? It?s a bit of an odd situation. They call the country?s trade policy a disaster, and yet their plan to fix it starts with, um, cracking down on Mexican pollution.
Repeat after me: attaching labor and environmental standards to trade agreements will have no appreciable effect on trade flows. Anyone who tells you differently is selling you something. UPDATE: Simon Lester does make a valid point: “Demanding that labor and environmental provisions be included could scuttle some trade deals, and that would have an impact on trade flows.” Of course, that’s not really an argument in favor of inserting them. Denying market access to poor countries doesn’t make them richer, and poor countries tend not to care about labor and environmental standards.