Topic Category: Politics

While it appears that Pat Buchanan is no longer a serious threat for the Republican nomination, his attacks on free trade will continue to have an undeniably negative impact throughout the remainder of the presidential campaign.

In the court of U.S. public opinion, it's important to separate the rhetoric from the reality. The facts can get lost in the fiction of shrill campaign politics. And the facts on NAFTA differ greatly from the picture painted by Mr. Buchanan in his protectionist tirades.

NAFTA Is Promoting and Preserving U.S. Trade Gains

In NAFTA’s first year, trade in North America grew by 17% to $350 billion. U.S.-Mexico exports grew even faster, by 20.7% to $100 billion.

In 1995, despite Mexico’s economic crisis, NAFTA worked to preserve and promote U.S. export growth. While Mexico’s economic downturn undeniably dampened demand for U.S. goods, Mexico remained the third-largest consumer of U.S. products in 1995, purchasing more goods from the United States than all U.S. export markets except Canada and Japan.

These numbers may not mean much to Mr. Buchanan, but they have a real impact on the average American wallet. Contrary to his arguments, the growth of U.S. export industries directly benefits U.S. workers and businesses. A February 1996 study by the non-partisan Institute for International Economics found that since the late 1980s, both small and large firms that manufacture exports have experienced almost 20% faster employment growth than non-exporting plants.

Furthermore, firms that export provide higher paying jobs than firms that sell only to the U.S. market. In fact, workers in the export sector earn up to 15% more than those in the non-export sector. The report concludes that “deeper export and import reliance would raise average American living standards.”

If the United States Shuts Itself Off Behind Trade Walls, U.S. Businesses and Workers will Suffer

While Mr. Buchanan wants to eliminate NAFTA, North American businesses want to expand it. In a survey released February 1996 by the Bank of Montreal/Harris Bank, 80% of the business leaders surveyed in all three countries — Canada, the United States and Mexico — agreed that NAFTA should be extended to countries in Central and South America. By a four-to-one ratio, a majority of the business executives surveyed expressed confidence in NAFTA, citing the positive impact to their businesses of expanding markets, elimination of trade barriers and increasing competitiveness.

U.S.-Mexican Production Partnerships Benefit the U.S. Economy and Workers

NAFTA is attracting production and job opportunities into North America from beyond our borders. NAFTA’s rules of origin and Mexico’s improving manufacturing competitiveness are encouraging companies outside the NAFTA region to establish or relocate production partnerships and other business operations in North America.

Because of the strong supply links between the two countries, this is good news for workers, suppliers and other businesses in both the United States and Mexico.

A 1995 study by the U.S. International Trade Commission showed that Mexican-based production-sharing facilities are much more likely to utilize U.S.-made parts than are similar facilities located in Asia. According to the report, U.S.-made components account for more than half of the value of U.S. imports from Mexico under duty-free production-sharing provisions, while they typically account for less than one-quarter of the value of such imports from Asian countries. And the greater number of components used in the production of Mexican products, the more U.S. jobs are required to support this supply.

In 1995, Mexico’s imports of U.S. intermediate goods for use in production partnerships actually increased by more than 9%, According to SECOFI, Mexico's Ministry of Trade and Commerce. And while Mexico’s total imports from non-NAFTA countries dropped 23% for the first 11 months of 1995, Mexico’s total imports from the United States remained above their pre-NAFTA levels.

Protectionism Doesn’t Work

Point by point, the reality of the evidence refutes the rhetoric of Pat Buchanan’s “Fortress America” protectionist trade policy.

In its February 1996 report to the President, the Council of Economic Advisors found that “open economies...grew by an average of 2.5 percentage points more per year (over a 20-year period) than did closed economies.” Turning our backs on our trading partners, sealing off our borders and raising tariff barriers would, indeed, hurt the very constituency that Buchanan claims to champion. U.S. workers as well as businesses would suffer.

NAFTA has shown itself to be effective in promoting North American economic and business growth, through difficult times as well as good. This is a partnership we can, and should, be more than happy to live with.

This article appeared in The Exporter, April 1996.
Topic: Politics
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