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| NAFTA: GOOD DEAL?
JULY 11, 1997TRANSCRIPT |
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In a newly released report, the Clinton adminstration says after three years, the North American Free Trade Agreement (NAFTA) has had a "positive" impact on the U.S. economy, albeit "modest." But trade experts disagree vehemently whether or not this is actually true. Margaret Warner leads a discussion.
A RealAudio version of a background report on NAFTA's impact on Mexico is available.
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May 6, 1997
The governor of Tlaxcala, Mexico talks about how NAFTA is affecting his area.
February 26, 1997
Charles Krouse examines the effects of NAFTA on Chile's economy.
December 13, 1996:
Shields & Gigot discuss the President's stance on NAFTA.
February 21, 1996:
Trade experts discuss the effects of NAFTA.
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NAFTA
MARGARET WARNER: Today the Clinton administration issued its assessment of NAFTA's first three years, saying the trade agreement had a "modified effect" on the U.S. economy. Among the good news cited by the administration on jobs NAFTA has created 311,000 new export-related jobs, 122,000 in trade with Mexico, the rest in trade with Canada. On wages, NAFTA-related jobs pay 13 to 16 percent more than the national average. And on exports, U.S. exports to Mexico rose by 37 percent.
Here to debate NAFTA's impact are Mickey Kantor, Former U.S. Trade Representative, and Commerce Secretary, who helped negotiate NAFTA--he's now an attorney in Washington; and Thea Lee, Assistant Director for International Economics at the AFL-CIO.
Ms. Lee, the most contentious issue when this country debated NAFTA four years ago was jobs. Labor said hundreds of thousands of jobs would be lost. Free traders said the opposite would occur. Many, many new jobs would be created. Who was right?
THEA LEE, AFL-CIO: Well, we think we were right, and if you use the same methodology that the Clinton administration and the Bush administration used during the NAFTA debate, which was to look at the swing in the trade balance and attach a job multiplier to it, our trade deficit with Canada and Mexico is quadrupled since we signed NAFTA in 1993.
MARGARET WARNER: What do you mean, a job multiplier? Tell us about jobs, if you will.
THEA LEE: Sure. Well, I mean, our trade deficit has grown by $30 billion with Canada and Mexico combined. They had told us that we would have a trade surplus instead, but those imports that are coming in from Canada and Mexico at a much faster rate than the exports have grown are displacing American jobs. And it's happening in two ways: One is that U.S. companies are actually closing down their factories and moving to Mexico and some to Canada. And the other is that imports come in and displace American production.
MARGARET WARNER: So you're saying net job loss.
THEA LEE: About 420,000, using the same method that the Clinton administration and the Bush administration used during the NAFTA debate.
MARGARET WARNER: Net job loss?
MICKEY KANTOR, Former U.S. Trade Representative: No economist, no economist will tell you that imports cost you jobs automatically. Every export creates jobs. And let's talk about what's happened with NAFTA; three things that are very important. Positive impact on our economy; 311,000 jobs and increased exports to Mexico by 37 percent, in spite of the peso crisis, exactly the same way we increased our exports around the world, which has been an enormous increase to the United States worldwide over the last three years, the second global economy.
We've taken leadership of the global economy. We've opened markets for U.S. workers, and third, most importantly, we have changed what has recently been one-way trade to two-way trade. What we've said is we want everybody to play by the same rules. That's exactly what NAFTA does, a combination of phasing into playing by the same rules, opening Mexico's market, create new markets for U.S. goods, keeps U.S. companies in the United States. It was one of Thea's allies, and as Ross Perot said, our aerospace industry would move, would move to Mexico if NAFTA was passed. The last time I looked, Boeing's still in Seattle.
MARGARET WARNER: Ross Perot also said there'd be a giant sucking sound of jobs going South. Do you think that was accurate, or is that overblown?
THEA LEE: Ross Perot was never representative of the critics of NAFTA. He didn't represent the labor movement. He didn't represent the environmental movement. Job sucking sound, yes. Jobs have moved out, and a lot of the same U.S. companies that promised they would be creating jobs for exports here in the United States have, instead, closed down their factories and moved to Mexico: Allied Signal, GM, a lot of --streamlined companies just moved down. They're moving their jobs--
MICKEY KANTOR: The big three in the last three years have invested $39 billion, 39 billion in the U.S. economy, only 3 billion in Mexico. I think that's about 13 to 1, if I'm not mistaken, if my math is correct. The fact is we are sending five times as many automobiles to Mexico today as we were before NAFTA started. We're sending more--may I just finish--auto parts. Before the peso crisis hit in ‘94, you know this and I know this, we had a $1.8 billion trade surplus for the first 11 months of 1994. And December 21, 1994, the peso crisis hit. We had a trade deficit in December, four hundred and--I think--about ninety-eight million dollars. And then, of course, it went South.
That's really what happened here. But, in spite of that, two-way trade in NAFTA is at 44 percent increase in the first three years, which is more than two-way trades increase with every other country in the world. It has been a winner. Has it done everything that everyone wanted? Of course not. Not with the peso crisis. Does it need improvement? Yes, it does. Do we need to continue to work to make the rules fair and support American workers? Absolutely.
MARGARET WARNER: All right. Let me--since we can't get an agreement on jobs, let's turn to the other big issue, which was wages. Now, again, labor said it would depress wages, a downward pressure on U.S. wages because Mexican wages were less. Free traders said it would create a lot of new high-paying jobs. Was either side right? Were both sides right?
THEA LEE: What NAFTA does is shift the balance of bargaining power between workers and capital within North America, and what it does, it increased the mobility and the flexibility of multi-national corporations; makes it easier for them to take--close down the US factories and move to Mexico. It increases their bargaining power, and that they'll put downward pressure on wages.
We hear it from our workers every day of the week. When they sit down at the bargaining table, they hear that threat of moving production to Mexico. So even the workers who have kept their job in the United States have had their wages cut and their benefits cut back by NAFTA. In fact, the median wage, the real median wage in the United States has fallen 4 percent since 1993, when NAFTA went into effect.
MARGARET WARNER: Is there something to that?
MICKEY KANTOR: Well, I don't understand. We know that median wage is going up. Hourly wage has gone up for the first time in over twenty years, but unemployment is at about the lowest rate it's been in twenty years; the misery index at the lowest it's been in twenty-eight years in this country. We're in very good shape, but NAFTA was the engine of destruction. It certainly has been very ineffective.
The fact is fair trade agreements, which create a level playing field, which really serve our workers and serve our businesses, make America stronger, are good for the country. We need to take leadership. This is about are we going to take leadership or not; are we going to build our ties to a country where we share a 2,000-mile border with 94 million people, who are growing industrially--let me finish--and who have a growing middle class; and the answer is, of course, yes. It's good for the country.
MARGARET WARNER: But let me ask you this. I've got you two here, you're trade and economic experts. You don't even agree on what's been the impact on wages or jobs. What is a person at home to think, a person who's not an economist and not a trade expert? I mean, you would think those are very objective criteria.
MICKEY KANTOR: Well, let me make just one common sense answer, Thea. I'm sorry. I'll apologize. Just one--if Mexico had higher barriers to our goods and services before NAFTA and we had the lowest barriers almost in the world, other than Hong Kong, and they had free access to our economy, we have little access to theirs, and all NAFTA does is make the rules fair and lowers their barriers, why isn't that in our interest?
THEA LEE: That's a good question, and I'd like to answer it. And the point is that NAFTA is not and has never been just about reducing tariff barriers. It's also about changing the rules of trade and investment for the nation. I agree with you. NAFTA is about rules; and it's about whether they're fair rules or not. And our view of NAFTA is that it's not a fair set of rules; that it protects the rights of investors and patent holders to a much greater degree than it protects the rights of workers and the environment. And in that sense we can do a lot better than NAFTA, and we should not be extending this agreement until we can get those rules right. It is that shift of power. It is the lopsidedness of NAFTA that is important and that workers object to.
MICKEY KANTOR: Let me just say, that's a very interesting point. Without NAFTA, the rules would be even more unfair. We'd have no environmental agreement. If I just might, with the Border Environmental Commission, which approved sixteen projects, seven of which have been funded, which is beginning for the first time to clean up that border, which is a mess and everyone agrees, we have for the first time a trade agreement, a labor agreement, which begins to force countries to enforce their labor laws.
Mexico has increased their enforcement officers by 250 percent since NAFTA went into effect. Has it solved the common cold and cancer? No, of course not. But has it made a positive impact on North America, on jobs in all three countries, and really helped our economies? Of course it has. That's an easy answer.
MARGARET WARNER: But she doesn't agree. She doesn't agree.
MICKEY KANTOR: But the fact is she's wrong.
THEA LEE: The alternative to NAFTA is not no trade. We've never wanted to stop trading with Mexico or Canada, and we value our colleagues in Mexico, our labor colleagues, our environmental colleagues, the citizens of Mexico. We think that that's very important. But the point is that the alternative to NAFTA would have been a different kind of trade agreement; that we could have gone more slowly. We could have put in stronger and more enforceful protections for labor and the environment, and that would have been a better world.
MARGARET WARNER: All right. Let me ask you both something else. If you look at whoever's figures I take--and you look in relation to the whole side of the U.S. economy, it is minuscule.
THEA LEE: That's right.
MARGARET WARNER: But the White House figures--the same thing. Why is this debate still so passionate?
THEA LEE: Because NAFTA is a symbol. It's a symbol of how we do trade policy, and it also is a model for future trade agreements. And everybody always used to say that.
MARGARET WARNER: Which is what the administration is talking about?
THEA LEE: We're going to build on NAFTA, and so we need to get the rules right in NAFTA; we need to get them exactly right before we go on. But it's true. I mean, it doesn't make sense, if you think about NAFTA as lowering a couple of tariff barriers that were already pretty low to begin with, why did labor care, why did business care, if that's all it was about, but it wasn't.
It was about how we do business, and whether we're on the high road, or the low road, whether we encourage U.S. companies that are having a hard time competing in the global economy, to respond to globalization by shutting down, by abandoning their American production facilities and going to where they can get low wages and lax enforcement of environmental regulations.
MARGARET WARNER: Why do you think it's still so passionate?
MICKEY KANTOR: Well, one reason they moved before was because it was no NAFTA and we didn't address those rules, which we did quotas, trade balancing requirements, high tariffs. They averaged 10 percent; they were very high in Mexico, but it's all the rules which keeping U.S. investment in and products and services out of Mexico. The Clinton administration had a very simple policy. We welcome the goods and services of others into our economy. We want the same access to their economy as well. We reached 200 trade agreements during the time on the first term of this administration.
The President insisted each one was called a single undertaking like NAFTA and that we would have the same access to others' economy eventually as they had to ours. That's good for workers; it's good for our economy. It's exactly what Thea is talking about. NAFTA was the first major step in that direction.
MARGARET WARNER: All right. We have to leave it there, both of you. Thank you.
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