• Hocking America
Hocking America
Back in 1992, presidential candidate Ross Perot famously warned that free trade with Mexico would produce a “giant sucking sound” pulling American jobs south of the border. He was right about the sound, wrong about the direction.
Now, on the 10th anniversary of the North American Free Trade Agreement, the sucking sound is coming from the Pacific Rim rather than the Rio Grande. In the first 10 months of this year, Mexicans sold $34 billion more in goods and services to Americans than they bought from us. Canada, our other NAFTA partner, enjoyed a trade a $45 billion trade surplus with the United States.
Compare that to the $191 billion sucked out of here by our trade deficit with the Pacific Rim, mainly China and Japan. Western Europe enjoyed a $82 billion surplus with us.
Clearly, America can’t blame NAFTA for the skinning we’re taking in international trade. Despite the overblown rhetoric prompted by the anniversary, NAFTA has been a sideshow to the main economic event of a monumental trade deficit.
Trade with Mexico more than doubled since the treaty was signed. But it has failed to raise Mexican living standards or reduce illegal immigration to the United States.
Some American jobs – including 200 at Hussmann Corp. in Bridgeton – did head for Mexico. But Mexican farmers complain bitterly about American food imports. Economists argue over whether NAFTA created more American jobs than it cost.
To a large extent, the jobs lost to Mexico would have disappeared anyway. Industries that need lots of low-skill labor will move overseas, where that labor is cheap. Of late, Mexicans have been losing jobs to Asia just like Americans. An estimated 500 Mexican maquiladora plants, which make U.S.-bound exports, have closed in recent years. Mexicans earning $1.75 an hour can’t compete with Chinese working for 25 cents.
This trend hurts some U.S. workers, but is a bonanza for consumers. Wal-Mart can start a shopper stampede with $29 DVD players made by Asians working for pennies.
The real threat to America’s future lies in our massive trade deficit. This year, America probably will buy goods worth half a trillion dollars more than it sells abroad.
That half trillion is basically borrowed money. Foreigners use it to buy Treasury bonds, which are a claim on future American taxes. They use it to buy U.S. corporate debt and American companies, which are claims on American profits and labor. Combined with our massive federal budget deficit, this amounts to a slow hocking of the nation to overseas creditors. It could mean a leaner future when the foreigners come to collect.
We won’t solve this problem by blaming NAFTA – as most Democratic presidential candidates do – and rebuilding tariff walls. Foreign retaliation would hurt our own exporters – from Boeing workers in North County to farmers in Jerseyville, Ill. Consumers wouldn’t like the higher prices. U.S. industry could get flabby without foreign competitors.
The recent and long-overdue tumble in the dollar will erase part of the trade deficit. A return of fiscal responsibility in Washington would help, as will a continued push against foreign trade barriers.
But a real solution awaits rising prosperity abroad. For the past decade, the growing American economy has dragged the rest of the world along while Europe lagged and Japan stagnated. America added 18 million jobs in the past decade, despite overseas competition. Unemployment here fell.
Now, as American growth gains speed again, we can hope that our prosperity spreads to our neighbors so that they can buy our products.
America owes its economic leadership to its system of loosely fettered capitalism, combined with a remarkable capacity for innovation. We invent the products the world will need tomorrow and make things very efficiently. That’s what we have always done, and it’s the key to our future.
But our economy depends increasingly on an educated work force and has less use for unskilled labor. That’s why it’s critical that the nation invest in education and job training for young people and for those left behind when low-skill jobs float off to China.
St. Louis Post-Dispatch
