Part one of a three-part series on free trade
By Kurt Sundberg of Simplex Systems Controls –
During the 2016 presidential election, trade was a hot topic. Candidate Donald Trump emerged as somewhat protectionist in his rhetoric– critical of free trade, NAFTA, and other trade agreements.
While Trump was the latest candidate to criticize free trade, he certainly wasn’t the first. In the early ’90s Ross Perot, a free-speaking independent running for President, was famously critical of free trade.
During a 1992 debate with Bill Clinton and George H. Bush, Perot assailed the North American Free Trade Agreement (NAFTA), an agreement that had been tentatively agreed to by Canada, the U.S., and Mexico.
Perot stated that ratifying NAFTA meant Americans would soon hear a “giant sucking sound” as all types of valuable factories would pack up and moved to Mexico.
“You implement that NAFTA, the Mexican trade agreement, where they pay people a dollar an hour, have no health care, no retirement, no pollution controls and you’re going to hear a giant sucking sound of jobs being pulled out of this country.” Ross Perot
Perot was widely criticized and ridiculed by both Democrats and Republicans for his contrarian viewpoint. No one knew it then, but Perot’s statements on NAFTA would turn out to be more right than wrong.
NAFTA and other free trade agreements that followed opened Mexico up to corporate capital but did little to ensure that labor or environmental standards would be met. Also, the agreement did not boost the skill base or purchasing power of Mexican consumers as it promised it would.
One thing NAFTA did do was facilitate a dangerous “race-to-the-bottom” offshoring of locations and jobs. Capital money flowed south along with valuable and irreplaceable American factories and jobs.
The Downside to Free Trade
The U.S. has always engaged in trade with other countries. For most of its existence, the raising and lowering of tariffs was the cornerstone of American trade policy.
As the economy grew, the need for expanded trade grew with it. America’s trade had an ideal balance, where imports were paid with exports (saving and making money in the process).
Unfortunately, this ideal scenario changed when NAFTA took effect. For example, the trade balance with Mexico went from a surplus of $1.7 billion in 1993 (the year before NAFTA entered into force) to a widening deficit that reached $81.5 billion in 2018.
The reality of ongoing (and widening) trade deficits with Mexico and other countries indicate that the international trading field is unfairly tilted against American industry. According to the U.S Chamber of Commerce, this is primarily due to the fact that while the U.S. market welcomes imports from around the world, many countries continue to impose excessive tariffs and other restrictions on U.S. exports.
Read the rest of Part One of a Three-Part Series on Free Trade
