The Myth About NAFTA. Since its inception in 1994, the North American Free Trade Agreement (NAFTA)

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1 Puget Sound ejournal of Economics David Severn 5/22/01 History 153 Paper #3 The Myth About NAFTA Since its inception in 1994, the North American Free Trade Agreement (NAFTA) has stimulated a heated debate regarding the agreement s actual effects on the labor force of the United States. By eliminating tariffs placed on imported goods from Mexico, NAFTA has encouraged some labor-intensive American manufacturing firms to move south of the border to take advantage of Mexico s lower wages. 1 This movement has cost individuals jobs and has caused the belief that NAFTA has been detrimental to America s labor force to spread. Steelworkers President George Becker presented this sentiment when he stated that NAFTA has been an unmitigated disaster for working people in the United States. 2 According to Becker and others influenced by this belief, Ross Perot s warning in 1992 was right on the mark; NAFTA did create giant sucking sound as American jobs headed for Mexico. 3 Although NAFTA has caused some individuals to lose jobs, the conclusion that NAFTA has been detrimental to the American labor force as a whole disregards pertinent information, and lacks a global perspective, and so is a misrepresentation of reality. The distaste for NAFTA held by some Americans is visible throughout much of the country. This anti-nafta sentiment can be seen by viewing contributions made across the country by mass media. Even before NAFTA came into existence, parts of the media began stating opposition to the agreement. A 1993 article published in the 1 Joel Millman, Trade is Free and the Factory is Closed, Wall Street Journal, (August 1, 2000): A20. 2 Patrick Johnson, Those who didn t want NAFTA should have voted for Ross Perot, Pittsburgh Post- Gazette, (September 1, 1998): 1. 3 Chris Koepfer, NAFTA is five. Will it see ten? Modern Machine Shop, (April 1999): 11.

2 Houston Chronicle titled NAFTA bad for the United States, proclaimed that NAFTA would lead to the loss of American jobs. 4 This pre-nafta article set the stage for the disenchantment that was to come. In 1999, an article appearing in the USA Today titled, NAFTA putting blue collar workers at risk, took the notion of losing jobs a step further. It claimed that NAFTA was eliminating a whole way of life. With NAFTA, the idea that you can support a family on a manufacturing salary is becoming a thing of the past. 5 These example of material appearing in popular culture, both on the local and national level, reveal that there is a faction of America that believes NAFTA has undermined the American labor force. Although this faction s aversion to NAFTA is evident in the mass media, its existence becomes particularly clear when viewing those individuals that the agreement has hurt most, the workers that lost their jobs when firms moved to Mexico. In 1996, when Mattel moved its Fisher Price plant from New York to Mexico, Larry and Donna Hill became victims of NAFTA. Mattel s move forced the Hills to sell their dream home and move into a 25-year-old trailer. This real life effect of NAFTA damaged the Hill s way of life and left them with a feeling of bitterness about what had happened to them. 6 Cone Mills employees in North Carolina faced a similar loss when the company announced plans to open a manufacturing facility in Mexico that would cause 250 current employees to lose their jobs. 7 This large-scale lay-off left former employees to search for new employment opportunities. In both the Hill s and the Cone Mills employees cases, NAFTA took away something valuable, people s jobs. 4 Stanley Gould, NAFTA bad for U.S, Houston Chronicle, (August 17, 1993): 13b. 5 NAFTA: Putting Blue Collar Workers at Risk, USA Today, (November 1999): 8. 6 Jerry Zermski, As jobs trickle across border, free trade takes toll on area, Buffalo News, (April 3, 1998): 5. 7 Cone Mills Announces Restructuring of Plant, April 20,

3 According to the Department of Labor Statistics, the Hills and the employees at Cone Mills are just a few of the estimated 210,000 American workers that lost their jobs from 1994 to 1999 due to NAFTA related firings. 8 Although this number appears large, NAFTA victims actually account for less than.00075% of the United States population. 9 This small percentage of Americans who have been hurt by NAFTA brings into question the persistent appearance of NAFTA in the headlines. While the vast majority of the more than 284 million Americans are unaware of the benefits of NAFTA (lower prices on consumer goods and more jobs in export industries), these 210,000 workers who lost their jobs when their company moved to Mexico are well aware that they are casualties of free trade. 10 In addition to this consciousness, NAFTA related firings frequently occur in large numbers as whole plants are shut down (like the Cone Mills plant in North Carolina) and oftentimes result in the creation of special interest groups (SIGs). These special interest groups are highly cohesive and have much to gain by protesting NAFTA. 11 This disparity between uniformed consumers and the informed SIGs has created the anti-nafta reaction found in the media. Despite the individual losses, NAFTA s actual effects are far less dramatic than the Hills, special interest groups and factions of the media have portrayed them to be. To more clearly understand this argument, an examination of NAFTA s effect on North Carolina is helpful. According to the Geensboro News Record, from 1994 to 1999, 20,000 North Carolinians lost their jobs as their employers relocated south of the border. 8 Suzi Parker, NAFTA s small-town impact, Christian Science Monitor. (September 9, 1999): 1. 9 U.S. Census Bureau, April 26, Irwin Stelzer, Time to judge the economic consequences of Bill Clinton, The Times, (January 12, 2001): Robert J. Carbaugh, International Economics 7 th Edition (New York: South-Western College Publishing, 2000),

4 But, in spite of these lost jobs, unemployment rates over the same period of time in North Carolina declined to a low level of 3 percent. 12 Although these two pieces of evidence appear to be contradictory in nature, a simple economic explanation makes the ambiguity clear. Because NAFTA lowers tariffs on both imports and exports, no only do Americans buy more imported goods from Mexico, but Mexicans also buy more exported goods from the United States. In North Carolina s case, exports to Mexico rose from a pre- NAFTA level of $442.7 million in 1992, to $1.6 billion in This increase in exports has positively affected companies like Hoechst Celanese. Commenting on the company s recent increase in exports to Mexico, Jack Timberlake, plant manager for Hoechst Celanese in Mount Holly, North Carolina, said that, Our plant is at full operation and hiring employees to meet strong demand due in a large measure to NAFTA. 13 This evidence shows that the dramatic increase in exports to Mexico, which created new jobs in North Carolina, can be held partly responsible state s incredibly low unemployment rate. 14 Although Cone Mill s former employees believe that NAFTA has seriously hurt the North Carolina labor force, the state s low unemployment rate reveals that in spite of NAFTA (or perhaps more correctly, because of NAFTA) jobs are still available in the Tar Heel State. Nationwide statistics reveal a similar trend in employment. Since NAFTA s inception, US unemployment has fallen from 6.9% in 1993, to 4% in 2000, its lowest level in more than three decades. 15 This decline in unemployment level shows that despite the loss of 210,000 jobs, the United States economy supports more laborers with 12 Eric Dyer, NAFTA sides can say, I told you so, Greensboro News Record, (January 24, 1999): Z5. 13 NAFTA s Impact on Employment, April 20, Dyer, NAFTA sides can say, I told you so, Z5. 15 Federal Reserve Bank: An Economic Time-Series Database, April 24,

5 NAFTA, than prior to NAFTA. Although the booming domestic economy during this period accounts for some of this increased employment, the heightened commerce between the United States, Mexico and Canada certainly didn t hurt. With NAFTA, commerce between the United States and Mexico doubled in its first five years, and trade with Canada during the same period grew from $259 billion to $387 billion. 16 These increased levels of trade support an estimated 2.6 million jobs; over 600,000 more jobs than exports to Canada and Mexico supported before NAFTA. 17 Aside from lowering unemployment, the increase in export related jobs has also helped to raise the living standards of American workers. According to the February 1999 Economic Report of the President, because wages in export industries are roughly 15 percent higher than in non-export industries, the influx of export related jobs helped real wages in the United States finally increase after years of stagnation. 18 In addition to neglecting this positive information about employment and wages in the United States, NATA s opponents also misstate the actual changes in the United States labor force. Contrary to Steelworkers President George Becker s claim that NAFTA has resulted in the downfall of blue collar America, evidence shows that NAFTA has actually helped to revitalize the United States manufacturing sector. 19 In the five years previous to NAFTA, United States manufacturing employment fell by nearly 1.3 million workers, whereas in the five years since NAFTA, American manufacturing jobs have actually increased by 400, Although the data does not specifically 16 Koepfer, NAFTA is five. Will it see ten? James Jones, and Tom Turner, Benefits and costs of NAFTA: mixed reviews, The Christian Science Monitor, (November 4, 1999): NAFTA: A Record of Success, U.S. Newswire, (April 14, 1999): Johnson, Those who didn t want NAFTA should have voted for Ross Perot, Jones and Turner, Benefits and costs of NAFTA: mixed reviews, 10. 5

6 correlate this increase in manufacturing jobs to NAFTA, it reveals that, if nothing else, NAFTA has not caused the demise of blue collar America. Ins spite of this information, individuals and SIGs continue to blame NAFTA for the loss of jobs without accounting for technological change and increasing globalization. Debbie Olson, a former worker in the textile industry and NAFTA victim, believes that if it wasn t for (NAFTA), I would still have my job. 21 But what Olson and others fail to realize is that many labor-intensive jobs were leaving the United States long before NAFTA. According to the Department of Labor statistics, since 1968 employment in the apparel industry has fallen from 1.4 million to 770, Dick Windham, chief spokesman for Burlington Industries in North Carolina, put these statistics into perspective when he stated, (Burlington) would naturally have loved to see the entire textile industry stay in the United States as in the 1960s, but the reality is it had moved overseas long ago. 23 This decline in labor-intensive jobs can be attributed to technological advances in the rest of the world and foreigner s increased ability to access American markets. As the rest of the world catches up to American efficiency standards, it makes more economic sense for companies to specialize in those goods in which they have a comparative advantage. While this may hurt individual workers in the short run, it is the only way for American companies to stay in business and employ workers in the long run. Despite the existence of negative publicity and individuals personally hurt by NAFTA, an examination of evidence reveals that NAFTA has not damaged the American 21 Karen Brandon, and Stephen Franklin. Free Trade Growing Pains, Chicago Tribune, (November 29, 1988): 1A. 22 Suzi, NAFTA s small-town impact, Dyer, NAFTA sides can say, I told you so, Z5. 6

7 labor force. Since the beginning of NAFTA, decreases in unemployment rate and rises in real wages actually suggest that NAFTA has been beneficial to American workers. Aside from being good news for the United States workforce, this information casts doubt upon the public representation of international trade issues. IN order to avoid perpetuating further myths and misperceptions, it is important for Americans to assess matters of international trade with open eyes, as well as open ears. If citizens allow themselves to be influenced by the rhetoric surrounding NAFTA, as opposed to the actual information, the gains from free trade will not be recognized and public opinion could potentially persuade the United States to fall back on the protectionist policies of the protectionist policies of its past. 7

8 Bibliography Bagsarian, Tom. The violence of broken dreams, Iron Age New Steel, (June 2000): Brandon, Karen and Franklin, Stephen. Free Trade Growing Pains, Chicago Tribune, (November 29, 1988): 1A. Casey, Maureen. Free trade is costly to workers lives, Times Union, (November 29, 1999): A7. Carbaugh, Robert J. International Economics 7 th Edition (New York: South-Western College Publishing, 2000), Cone Mills Announces Restructuring of Plant, April 20, Dyer, Eric. NAFTA sides can say, I told you so, Greensboro News Record, (January 24, 1999): Z5. Edward, Alden. NAFTA Benefiting US, Financial Times, (August 30, 2000): 4. Federal Reserve Bank: An Economic Time-Series Database, April 24, Gould, Stanley. NAFTA bad for U.S, Houston Chronicle, (August 17, 1993): 13b. Johnson, Patrick. Those who didn t want NAFTA should have voted for Ross Perot, Pittsburgh Post-Gazette, (September 1, 1998): 1. Jones, James and Turner, Tom. Benefits and costs of NAFTA: mixed reviews, The Christian Science Monitor, (November 4, 1999): 10. Koepfer, Chris. NAFTA is five. Will it see ten? Modern Machine Shop, (April 1999): 11. Millman, Joel. Trade is Free and the Factory is Closed, Wall Street Journal, (August 1, 2000): A20. NAFTA s Impact on Employment, April 20, NAFTA: Putting Blue Collar Workers at Risk, USA Today, (November 1999): 8. NAFTA: A Record of Success, U.S. Newswire, (April 14, 1999): 1. 8

9 Nichols, John. New Trade Scheme Worse than NAFTA, Madison Capital Times, (April 19, 2001): 12A. Parker, Suzi. NAFTA s small-town impact, Christian Science Monitor. (September 9, 1999): 1. Pinnel, Gary. Small textile center shrinks, but survives with hard work, Central Penn Business Journal, (Journal 5, 2001): 5. Rodriguez, Rebecca. Stretching the Benefits of NAFTA, Fort Worth Star Telegram, March 1, 2001): 1-2. Sessions, Jim. Cross-border blues, Forum for Applied Research and Public Policy, (Spring 1999): Stelzer, Irwin. Time to judge the economic consequences of Bill Clinton, The Times, (January 12, 2001): 33. U.S. Census Bureau, April 26, Zermski, Jerry. As jobs trickle across border, free trade takes toll on area, Buffalo News, (April 3, 1998): 5. 9

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