Short-term painMost economists love NAFTA, love free trade. Michael Hicks, a Marshall University economist, will be the first to tell you that.Hicks takes a “no pain, no gain” approach to the issue.“In the long run, I don’t know anybody — no serious thinker — who doesn’t think free trade will allow wages to rise, bring nations out of poverty and allow the environment to be better,” Hicks said. “The problem is the long run may be so far away, a lot of people might not be willing to bear the short-run displacement.”Hicks looks differently at state job figures for the past decade. Between 1994 and 2000, overall manufacturing employment remained stable, at about 82,500. It didn’t fall until the economy started to falter in late 2000, and now stands at about 72,500.“This was not NAFTA, because it would have been felt by then, like it was with the textile industry in Tennessee,” he said. Instead, he blamed the job loss largely on increasing worldwide productivity, “a simple story that means we need fewer and fewer workers to make more manufactured goods.”Hicks said he sympathizes with one argument promoted by free-trade opponents: U.S. companies could flee the country in order to set up in nations with more lax environmental laws.“Then again, a generation ago, nobody in India gave one whit about the environment. But that’s no longer the case,” he said. “It’s taken a generation for incomes to rise enough for the people to care about it.”Why should American workers, faced with the threat of foreign competition, care about the quality of life in other countries?“A very clear self-interest response would be: Because they’re going to be consumers of our goods very soon, if we can make them more wealthy.”Since NAFTA’s inception, the U.S. trade balance has plunged like never before. The balance, based on imports vs. exports, now shows a deficit of more than $400 billion. The deficit was $69 billion in 1993. A trade deficit means the United States is buying more than it’s selling.“The North American Free Trade Agreement was supposed to result in big benefits to the U.S. economy. According to those in favor of free trade, there were no downsides to NAFTA,” Sen. Robert C. Byrd, D-W.Va., said last year. “The U.S. could only gain from expanded trade with Canada and Mexico.“Exactly the opposite has happened. NAFTA encouraged large U.S. investors to move production, capital and jobs south of the border to exploit cheap labor and lax environmental standards.“These new factories then exported their products back to the U.S.,” said Byrd, who voted against NAFTA in 1993. “By 1999, the United States was running a trade deficit with Mexico of $23 billion, and that trade deficit continues to grow.”As of August, the deficit with Mexico stood at nearly $28 billion, up from a positive balance of $1.7 billion in 1993. The Canadian figures are not as drastic: an $11 billion deficit in 1993 vs. $35.5 billion in August.Hicks described the trade deficit as “small, and not too important.”“During the last two decades, the U.S. has had remarkable growth, and we had a trade deficit all along,” he said. “The dollar value of the deficit is scary, but the percentage total of goods and services we’re producing is about the same.”Economists are quick to point out that, unlike a budget deficit, the trade deficit is only a gauge, and does not have to be paid back.
“When is ‘eventually?’”Robert Scott has been immersed in NAFTA for several years. As an international economist with the nonprofit, nonpartisan Economic Policy Institute in Washington, D.C., Scott detailed “NAFTA at Seven” in 2000, and is ready to release “NAFTA at 10” later this month as the agreement reaches its first decade of existence.In his first nationwide study, Scott found that NAFTA was responsible for 2,624 lost jobs in West Virginia by 2000. Overall, trade-related job loss accounted for 14,458 lost jobs in West Virginia during the same time period.Scott’s numbers are highly contested by other economists.“I tend to disagree with most of the economics profession,” he said. “For them, free trade is akin to a religious belief, and not based on careful analysis of what’s happening... Economists like to say there will eventually be benefits, but when is ‘eventually?’”Scott’s 2000 report details how NAFTA has been successful for some in the United States, Canada and Mexico — “investors and financiers ... who search for cheaper labor and production costs.”Scott also traces a pattern of non-college-educated workers dropped from the manufacturing sector and into lower-paying service jobs.Also, “within manufacturing, the threat of employers to move production to Mexico proved a powerful weapon for undercutting workers’ bargaining power,” the introduction to Scott’s study states.Scott said NAFTA proponents’ promise that the agreement would help Mexican workers is not coming true. A slight increase in wages along the border area, where many U.S. companies have set up shop, is reversing because of growing competition with China, he said.While export statistics, for the nation or individual states, are widely available, import numbers are scarce.A U.S. Department of Commerce report from 2001 details exports from each state, promotes free trade and lauds NAFTA.The last paragraph of the four-page report is titled “Imports Also Important to West Virginia.” The paragraph is the same for each of the state reports, with only the state’s name changed.“Although many often equate imports with ‘lost’ jobs, the reality is usually much more complex,” the report states. It goes on to say that imports provide companies with vital materials that are scarce locally and provide a wider choice for consumers in the marketplace.“There’s no data on imports,” Scott said. “The administration likes to talk only about exports and act like imports don’t exist... It’s like trying to balance a checkbook by counting only deposits and not withdrawals.“If you do that, you’re going to bounce a lot of checks.”To contact staff writer Robert J. Byers, use e-mail or call 348-1236.Coming Monday in The Charleston Gazette: The effects of NAFTA on West Virginia’s garment industry.