Opinion Archive

What to Make of Anti-NAFTA Populism

March 12, 2008

Both Democratic front-runners recently fell all over themselves to attack NAFTA. They did so despite the fact that one is the wife of the President who achieved its passage and the other is on the record saying that the agreement has been good for the United States. This implies that they know better, but that the need to win over blue collar workers in Ohio ran roughshod over their own judgment. Adding to the idea that the anti-NAFTA rhetoric was mere opportunism was the fact that no anti-NAFTA pamphlets were circulated in Texas (which held elections on the same day as Ohio), where the trade agreement is relatively popular. The fact that it could just have been political posturing, however, does not make the statements any less dangerous to the prosperity and stability of the continent.

Be careful what you wish for

Conventional wisdom says that reopening negotiations on NAFTA would cause the agreement to fall apart as special interest groups in all three countries would pounce to get their pound of protectionist flesh. For a start, Mexican corn farmers and Canadian factory workers (victims of the strong “loonie”) would love to scrap the agreement even more than Ohian blue collar workers, so the danger of reopening the treaty is very real. Hence, most analysts assume that no sitting US President would open a Pandora’s box by scrapping the current framework of trade in North America. Nevertheless, it is worthwhile reminding ourselves what is at stake.

Nearly $1 trillion dollars in trade flows between Mexico, Canada and the US. Several million jobs in each country depend on it, equivalent to many times the population of Cleveland. Industries like the US automotive sector have based their entire manufacturing platform around NAFTA. Strategically, under Chapter 6 of the Agreement, all three countries’ governments are barred from interfering in the sale of energy products, such as oil, to the other two countries. The US is the only net importer of oil in North America, so its supplies depend, in part, on the trade agreement. Further, the mere possibility of the US pulling out of NAFTA would probably cause an economic crisis in Mexico. This would generate more unauthorized migration to the US and would create a strategic nightmare for the US if Mexico were to implode. Oh, and if the situation in 1994/1995 repeated itself, the US would be called upon to put up tens of billions of dollars for the financial rescue. All to try to protect jobs that will probably end up in China, anyway.

Et tu, Brute?

The curious thing is that Democrats have triumphed when they have taken a leadership position vis-à-vis the trade agreement. Like when Al Gore won the NAFTA debate against protectionist Ross Perot or when Bill Clinton proved his worth by pushing NAFTA through Congress. On the flip side, the anti-North America candidates in this race lost everything. John Edwards, the only candidate who flat-out called for NAFTA’s demise was roundly defeated. Virulently anti-immigrant Tom Tancredo consistently polled at the bottom of the Republican field and dropped out without one single delegate. In fact, in both parties the candidates with the most liberal stands on both trade and immigration are at the top of the list.

If NAFTA has been so good for the Democrats, why the betrayal? Except for the opportunity to show leadership, trade is a lose-lose situation for a politician. Its benefits are diffuse and its supporters are complacent, while those negatively affected are vocal and angry. Free trade is a tonic to the economy precisely because of the Schumpeterian “creative destruction” that forces human and capital resources to shift from where they are not competitive to areas where they can be. Confronting people with the reality that their work is no longer wanted, however, is difficult. The upshot is that political leaders have been shamefully silent on the benefits of NAFTA and the agreement is, today, at its least popular in all three countries.

The truth shall set you free

There’s a scene in the book/movie Primary Colors, a fictionalized account on the Clintons, where Jack Stanton, the Bill Clinton character, bravely stands in front of a group of blue collar workers and tells them that their jobs are not coming back; that they must retrain themselves to work in a globalized economy. Ironically, John McCain was the candidate that had a “Clinton” moment when he told factory workers in Michigan exactly that: “some of these jobs… are not coming back”. For the good of both the working-class (“beer-drinking”) Democrats that support Mrs. Clinton and the intellectual (“wine-sipping”) Democrats that support Mr. Obama, the Democratic front-runners need to start putting experience over expediency.

For the latest thought-provoking article by Agustin Barrios Gomez please go to our Opinion Column page

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