Two competing views of America's economic future frame
the heated debate over the North American Free Trade
Agreement (NAFTA). One is optimistic and
open. The other is fearful, xenophobic, and closed. The
fears of many sincere people regarding the NAFTA reflect an
underlying insecurity about the nation's economic
future about the capacity of American workers to compete
in a rapidly changing world economy. In the face of change,
many Americans would like to believe that they can throw up
economic barriers and ignore the world beyond our borders.
The challenge for the Clinton Administration is to
restore America's confidence in itself and in our ability to
prosper in a profoundly competitive world. The NAFTA is a
test case for how America faces its economic future.
Trade expansion, as President Clinton has noted, is an
integral part of a comprehensive economic strategy for
restoring U.S. growth and competitiveness in global markets.
Notwithstanding the fear-mongering rhetoric of the NAFTA's
opponents, there are at least four compelling reasons for
Americans to rally behind the President's far-sighted policy
of trade expansion:
Fourth, the NAFTA is crucial to better hemispheric
relations. A vote for NAFTA is a vote of confidence in
Mexico's future. Passing the NAFTA will help Mexico
consolidate its historic progress toward economic and
political reforms; rejecting it will signal a U.S.
shift toward a "beggar-thy-neighbor" attitude toward
Mexico and, by extension, the rest of Latin America.
Surely, most Americans would prefer to live beside a
more prosperous, stable, and friendly Mexico rather
than an impoverished, volatile, and resentful Mexico
whose citizens flee north for opportunities they cannot
find at home. At the very least, we must repudiate the
ugly undercurrent of nativism and prejudice that has
accompanied the assault on the agreement.
When the NAFTA is placed in a factual perspective, the
reasonable conclusion is that it will neither be a panacea
nor a curse for the U.S. economy. First, the tremendous
difference in size between the U.S. and Mexican economies
the U.S. economy is about eighteen times larger will limit
the impact of NAFTA, positive or negative. Mexico simply is
not capable of flooding the U.S. with cheap goods.Moreover,
NAFTA will not substantially change the rules governing
Mexico's access to the United States, nor will it
substantially alter the existing rules of investment for
U.S. companies seeking to lower their costs with cheap
labor.
Second, U.S. investment flowing to Mexico is but a
small portion of overall U.S. investment both at home and
abroad. Compared to total nonresidential fixed investment in
the United States of $548.2 billion in 1992, the direct
investment by Americans in Mexico $53.3 billion was a mere
statistical blip.
Finally, the job losses and gains projected by both
proponents and opponents must be compared to the overall job
turnover rate in the United States. Most studies have
projected some job gains due to the NAFTA. The U.S.
International Trade Commission projects that jobs gained
will outnumber jobs lost by 35,000 to 170,000. The Institute
for International Economics has estimated that 150,000 lost
jobs will be offset by job gains of over 320,000. The most
pessimistic study has estimated cumulative job losses of
500,000 over 5 years. However, all the numbers of the
estimated employment impact pale in significance compared to
the approximately eight million to nine million Americans
who change jobs each and every year.
The debate over the NAFTA brings Americans to a
crossroads in the post Cold War era. One path President
Clinton's choice leads to the progressive opening
of world markets to trade and investment, on the view that
America can and must win in global competition to generate
good jobs and rising incomes at home. The other path
urged on Americans by an unlikely alliance of "America
First" conservatives, special interest groups, and Ross
Perot leads to single reliance on protection for U.S.
industries on the assumption that we cannot, for all our
strengths, compete against the cheap labor of developing
countries or even developed nations like Japan.
Progressives should follow President Clinton on the
first path the path of confidence about Americas' ability to
face and master change. Fears of cheap-labor nations are
grossly exaggerated. If low labor costs were all that
mattered, advanced countries' industries would have decamped
long ago for the Third World. Other factors that determine
plant locations the education of the work force, technology,
transportation and other infrastructure, a tradition of
entrepreneurship, political stability and, above all, worker
productivity give America a decisive advantage over Mexico
and most other countries.
What unites the anti-NAFTA forces is a "can't win"
attitude toward a world that still relies on U.S. economic
leadership. For the sake of preserving specific jobs in
specific industries, this new economic isolationism would
deny all Americans the manifold benefits of unrestricted
commerce; better and cheaper products, more rapid
technological advance, access to global capital, and wider
markets for our goods and services.
The battle over the NAFTA thus presents a key political
test for the Democratic Party. Support for free trade
constitutes one of the party's most venerable and
progressive principles. Democrats have long maintained that
open trading favors the interests of average working
families, while tariffs and trade protection favor narrow
business and financial interests.
Today, however, organized labor and other party
constituency groups are demanding that Democrats junk that
principle and instead seek to protect specific jobs rather
than the interests of American workers in general. Many
congressional Democrats understandably find it difficult to
resist such demands by loyal constituents. Yet with
Democrats now in control of both the White House and
Congress, the party's challenge is to demonstrate its
capacity to govern in the nation's interests rather than
legislate on behalf of narrow interests.
While rejecting protectionism, progressives also should
spurn conservative free-trade orthodoxy. The Republican
Party's "laissez-faire" trade policies of the last decade
lost credibility by appearing to ignore the often jarring
impact of global competition on American workers and
communities. Now is the time for a new synthesis on trade
policy, one that takes into account the plight of working
Americans buffeted by sudden shifts in global patterns of
investment and production as well as the opportunities
created by open global trade. Trade expansion must work
within a broader economic strategy that builds new sources
of security for U.S. workers to replace those dissolving
under the pressure of global competition.
We must forge a new compact with American workers that
offers new sources of opportunity and security for the era
of global competition. Such a compact should include
creation of a school-based youth apprenticeship system to
raise skills among non-college bound youth, establishment of
an Employment Insurance System to help workers whose
economic security is threatened purchase career education
and skills; substantial increases in the level of private
investment in worker skill-training; and support for profit
sharing, pay for performance, employee participation and
ownership, and other means to create more flexible and
democratic workplaces.
The success of the Clinton Administration will be
measured largely by its ability to make America more
competitive, both at home and abroad. At the same
time, opportunities must expand for all Americans,
especially those with lower skill and education levels. To
do so, our leaders must convince the American public that
the benefits of competing in the global economy far outweigh
the costs. The NAFTA, therefore, is a crucial test of
America's resolve to face the future and of the Clinton
Administration's ability to lead America beyond its fears to
a new era of growth and economic leadership.
