NAFTA and Jobs

nafta-jobs_16One of the promises made by Donald Trump was that he was going to force the cancellation of NAFTA. Trump then soften his promise a bit by stating that he was going to renegotiate NAFTA. NAFTA, according to Trump, was a job killer. Trump argues that jobs would return to the country as soon as NAFTA is out of the way. However, Donald Trump has never let facts stand in his way.

The fact is that killing NAFTA would kill more US jobs then it would bring back.

Since Donald Trump supporters love to pick-and-choose which sources to use to support their arguments, including seriously dubious ones like Breitbart, I have decided to use as many sources as possible to show you how killing NAFTA would destroy US jobs.

First, let us go to Trump’s own alma mater, the Wharton School of Business. Mauro Guillen, a Wharton management professor, argued that “a lot of jobs were created in the U.S. that wouldn’t be there without the Mexico trade.” (NAFTA, 20 Years Later: Do the Benefits Outweigh the Costs?; Knowledge @ Wharton website; February 19, 2014)

There are, however, many studies, most of them funded by worker unions, that argue that the US has lost anywhere between 700,000 and 1 million jobs since NAFTA was implemented. The problem with the reports, as pointed out by various economists, is that they do not factor the Chinese factor. The reports argue that NAFTA caused the jobs losses, especially in the automotive sectors, because NAFTA allowed the automobile manufactures to seek cheaper labor in Mexico. On the surface, it seems like NAFTA is to blame. But is it really to blame?

NAFTA has had nothing to do with the emergence of the Chinese competition. In many ways, the growth of Chinese products killed many industries in Mexico, most notably artisan products like leather and jewelry goods.

But the New York Times (NAFTA May Have Saved Many Autoworkers’ Jobs; Porter Eduardo; March 29, 2016) argues that NAFTA saved automotive jobs that would have been lost to China. According to the article, the cheaper Mexican labor allowed the US auto manufacturers the opportunity to complete in the global marketplace by having cheap labor close to the design and high-tech processes. The shorter the supply chain between design and the delivery of the vehicle the more efficient the process becomes. This allowed the technology design and development to remain in the US while allowing complex parts like transmission and engines to continue to be made in the US. Less complex and more labor-intensive manufacturing in Mexico kept the cars competitive.

Had NAFTA not existed, it is very possible that automotive manufacturing would have shifted to China, taking along with it the high-tech jobs that still design and make parts in the country.

“NAFTA is also blamed for lots of things that are actually because of competition from China,” according to Luis Rubio of the Center of Research for Development. (ibid.)

Even Bernie Sanders jumped on the anti-NAFTA bandwagon during his campaign for the Democrat ticket earlier this year. Sanders posted pictures dilapidated buildings in Detroit as an example of the destructive nature of NAFTA.

This prompted NPR to publish a fact check article. In the March 6, 2016 article titled; “Fact-Check: Bernie Sanders, Abandoned Buildings and NAFTA” by Danielle Kurtzleben, the publication published a poignant chart showing that Detroit’s population was in decline since its height in 1950. Hundreds of thousands of “white Detroiters fled the suburbs” after the 1967 race riots. This exodus has been dubbed the “white flight”.

The dilapidated buildings make for excellent visuals but the blame is misplaced on NAFTA. Like the China factor, the race uncertainties and labor strife were forcing jobs to other places, but the blame was nonetheless placed on NAFTA.

The doom-and-gloom of job losses erroneously blamed on NAFTA ignores the significant point that NAFTA has also created new jobs in the US that would not exist were it not for NAFTA.

About 5 million jobs have been supported by NAFTA. This per a December 9, 2016 article in The Atlantic by Alexia Fernandez Campbell. The article; “Nearly 5 Million U.S. Jobs Depend on Trade With Mexico” references research from the Mexico Institute at the Wilson Center in Washington DC. Per the article, if Donald Trump abolished NAFTA, it would result in many of these jobs disappearing.

Even though Donald Trump may succeed in bringing back some jobs, he will never replace the jobs losses from ending NAFTA. Automation and continued pressure from Chinese labor would ensure that.

The other often ignored issue about NAFTA is that NAFTA has resulted in an economically stronger Mexico that enhances the US rather than forcing the US to deal with a rogue nation on its doorstep. NAFTA allowed Mexico to move away from an agricultural and oil economy to a robust manufacturing economy. Oil reserves in Mexico are on an all-time low and the agricultural sector has been decimated by industrialization and automation. Without NAFTA, it is likely Mexico would be Venezuela today, but much closer to the US border.

Although NAFTA is universally blamed for jobs losses in the US, the fact is that other factors, such as China are often ignored leading to the erroneous conclusion that NAFTA is to blame. Trump is likely starting realize this as his team of economists point this out to him. Although he promised to “renegotiate” NAFTA the result would be disastrous for US jobs.

2 thoughts on “NAFTA and Jobs

  1. sorry, but you have no clue on this issue Martin. Where is Farah, Levi’s, Wrangler, all the pre-wash businesses like Economy Laundry, the one owned by Ahmann, etc, etc, etc..? Those businesses don’ t exist anymore due to Nafta. Jerryk is right. All we have now is logistics and trunk stops and guess who owns them. Cardwell, Sanders, and Foster even supplies the fuel.

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