Monday, April 21, 2008
NAFTA and manufacturing jobs
Notwithstanding the bleating you have heard from the left about NAFTA destroying "good manufacturing jobs," it simply is not true. Virtually all of the increase in our trade deficit with the NAFTA countries is from oil and gas.
It is amazing how some presidential candidates are blaming the North American Free Trade Agreement for U.S. job losses. They seem to believe that a substantial part of the three million manufacturing jobs lost since 2000 resulted from Nafta, and that outsourcing of manufacturing production to Mexico and Canada resulted in a huge trade deficit.
Too bad they don't know that the growth in the deficit isn't due to manufactured goods, but to oil and gas imports.
There is no question that the imbalance of trade within Nafta has soared since 2000. That deficit has almost doubled to nearly $140 billion in 2007, from $77 billion in 2000. But the deficit in manufactured goods did not displace U.S. factory production.
What the antitrade advocates have been hiding from the candidates (or maybe don't know themselves) is that almost all of the increase in our Nafta deficit since 2000 has been in increased U.S. imports of energy from Canada and Mexico. In fact, $58 billion of the $62 billion increase in our Nafta deficit has been in energy imports. That's 95% of the total increase.
We need that oil and gas, and we would rather get it from our friendly neighbors. Surely no one seeks to argue that America would be better off saying no to Mexican and Canadian oil and gas, advocating that we instead import that energy from less secure sources farther from our borders.
Except for energy, though, our trade deficit within Nafta has hardly grown at all – only $3.5 billion from 2000-2007. Our agricultural and manufactured goods sales to Nafta countries have just about kept pace with our imports. That's a lot more than one can say about the rest of our foreign trade.
While the nonenergy deficit within Nafta has grown less than $4 billion since the job loss started, with the rest of the world it grew over $150 billion. Put another way, the increase in our nonenergy deficit within Nafta has accounted for only 2% of the increase in our global nonenergy deficit since 2000.
Of course, you will not hear this from the left, especially during a hard-fought campaign in Pennsylvania, a notoriously protectionist state.
15 Comments:
By 
, at
Mon Apr 21, 08:48:00 AM:
Hardly surprising. What is surprising is that Obama and Hillary don't seem to know this, or they don't think we have access to the hard data. The echo chamber they live in thinks we are all bitter and don't know how to use the internet. How in the world do they think we are we going to "renegotiate" NAFTA so that it works out better for us?
By 
Gordon Smith, at
Mon Apr 21, 09:21:00 AM:
While the trade deficit may be largely due to oil and gas, it's clear that we've lost too many jobs to Mexico and Canada.
I live in North Carolina. We used to make clothes and furniture around here. Now we don't. All those factories have moved out of the country.
You can attack folks for whatever reason, Hawk, but please don't pretend that NAFTA didn't speed the end of these jobs. Folks out here wouldn't appreciate being told that wanting to have jobs is somehow "protectionist".
By , at
Mon Apr 21, 09:47:00 AM:
Hey, leave the democrat candidates alone on their positions on NAFTA. Both of them are simply following the specific orders of their organized labor pimps!
By , at
Mon Apr 21, 09:58:00 AM:
Though it doesn't say anything about the quality of the jobs, this state by state break down of unemployment strikes me as interesting.
http://www.bls.gov/web/laumstrk.htm
By Dawnfire82, at
Mon Apr 21, 10:04:00 AM:
What about between 1994 and 2000?
Gordon: Free trade allows for industrial specialization which is good for everybody who is willing to specialize. That's not even a political opinion, it's a verifiable fact. My father was a former union officer/Democrat, which colored my upbringing, and going into college I didn't believe that free trade was such a great thing either. But like I said, it is provable. Mathematically.
However, fighting the trend will hurt you. If your country is specializing toward mass-labor manufacturing, but you prefer to work in high finance, chances are you will suffer. Likewise for a country that is specializing toward finance, service, and high capital manufacturing but you prefer to work in labor manufacturing. Plus, the prevalence of illegal labor here gives the US a special kind of problem.
It's not that jobs don't exist. Plenty of people come of age and find work every year. It's that the same kinds of jobs don't exist. The (painful) answer for individuals is to learn a new trade and adapt but for the collective whole, free trade is the way to go.
By Gordon Smith, at
Mon Apr 21, 10:23:00 AM:
So, Dawnfire, you suggest telling the tens of thousands of laid-off factory workers to become white-collar techies? I'll get right on that.
By , at
Mon Apr 21, 11:57:00 AM:
Time has come to REPEAL NAFTA and stop this NORTH AMERICAN UNION, SQUAWK SQUAWK
By Escort81, at
Mon Apr 21, 12:22:00 PM:
Some job losses can be specifically traced to Nafta and others attributed to it a bit more tenuously. Those are the costs of the agreement, and they are painful, particularly if the job that's lost happens to be yours. The benefits of the agreement are very significant, but are perhaps not quite as personally intense or tangible as the costs, which makes it a nice subject for a primary in a union-oriented state like PA. In Philly, the unions range from the ridiculous (at the PA Convention Center, job specialization raises costs and drives away exhibitors) to the dangerous (roofers unions are a real-life version of the Sopranos).
Gordon: is it the perception in NC that most of the furniture and clothing manufacturing jobs left the state after Nafta was signed, or had the fall off started before the agreement? As an aside, my father spent his career as an executive in various segments of the textile business, and remarked (while I was growing up in the 1960s and 1970s) that textile manufacturing jobs were leaving unionized PA for non-union southern states. So maybe these plants move to where the lower cost labor is, for better or worse.
By SR, at
Mon Apr 21, 12:48:00 PM:
Gordon,
Glad you are going to get on it. Here's how: make sure your local school's teach math and science instead of politically inspired BS.
Now what to do about the older people whose jobs were lost to cheaper labor, or cheapest machines. Sorry to say, but promising that they will come back is very unfair because they won't. Shall we put them on welfare? OK then, retraining is the answer, but many of the jobless must not be opting for retraining (yes, programs have been growing since the Clintons) because politicians like Obama keep promising that their old jobs can be recreated and/OR to increase unemployment benefits.
By Dawnfire82, at
Mon Apr 21, 01:05:00 PM:
"So, Dawnfire, you suggest telling the tens of thousands of laid-off factory workers to become white-collar techies? I'll get right on that."
So making sarcastic comments and holding out for delivery from on high (which will likely never come) is preferable to adapting to the changing reality?
My sympathy is draining away.
By , at
Mon Apr 21, 02:07:00 PM:
With all due respect to those who have been impacted by NAFTA, there will always be positives and negatives associated with a competitive business situation. While manufacturing losses are notably distinct, manufacturing efficiency, quality and competitiveness have all gone up. Whether it be textile jobs in PA and NC or plastics jobs in OH, or automotive jobs in MI, there will always be competition. A free market will work toward the best fit manufacturer at the best fit price point. The hard truth is that it's not always fun, but it is more fair than the alternative (state control).
My blue collar cred is as good as anyone's: I count two family members as Union leaders, and I am the first person in my family to finish college. I still hold a Union card, but now run a successful manufacturing facility. I have lost business to the Chinese,who move their product over the highway that goes right by my plant. If I am not competitive, I will lose. I could whine about tarriffs, but the truth is that I could more easily develop new skills in my people, get lean, and work to my strengths and walk away from my weaknesses. The Good News is that we are 20% over budget in both sales and profitability, and I have people begging me to let them work here.
The jobs that have left the U.S. could come back if the competitive model changes, so keep your eyes open for the opportunity (it's called "boomeranging"). However, if these jobs don't come back, is it that big of a loss? Do you really want to go back to Norma Rae?
I've been laid off 4 times, and had to move my family 5 times in the past 8 years to get the opportunities I wanted. Again, here's more Good News: I live a life I could only have dreamed of in my youth, and I have friends literally from coast to coast whom I can trust to be a reference or a confidant when needed. Yes, I've lost "roots", and yes, my children suffer a little from being uprooted. But is being poor and disgruntled really better?
We are all better looking forward to how we can adapt to the new situation, rather than looking back at some highly idealized view of how good things used to be.
By , at
Mon Apr 21, 02:18:00 PM:
Plastics Guy: Looks like you followed the advice given to Dustin Hoffman in The Graduate.
By randian, at
Mon Apr 21, 04:26:00 PM:
This comment has been removed by the author.
By Gordon Smith, at
Mon Apr 21, 11:19:00 PM:
Escort,
It is, yes. While some jobs were already on their way out before NAFTA, that trade deal accelerated the trend beyond any means to react, recover, or retrain. One town I work in had five plants close in two years at the beginning of this decade. They moved to cheaper labor. We work hard here in Asheville to buy local food and goods, but there's only so much one can do before your local money is heading south of the border.
We need to build our own things as a nation. Basic manufacturing capability is a cornerstone of an independent nation.
By randian, at
Tue Apr 22, 12:55:00 AM:
Why should I buy an inferior or more expensive product, or in other words impoverish myself, from a local producer? If they want my business, let them compete. Otherwise they should go out of business and do something more productive with their time and money.
