International trade

Sanjay Paul
October 1996

(A version of this article appeared as Clinton has Right to Brag About Agreements in Business Forum, Green Bay Press-Gazette, October 19, 1996.)

On Sunday, hours after Packer fans rejoiced in yet another thrashing of the hapless Chicago Bears, Bill Clinton and Bob Dole squared off in their first of two debates. For ninety minutes, they sparred cautiously - with Clinton trying to maintain a certain Presidential aloofness, while Dole strove to exhibit his sense of humor.

While they touched upon a variety of issues during the debate, neither candidate had much to say about a vitally important economic subject: international trade.

Ever since Pat Buchanan fulminated mightily against free trade during his botched run for the Presidency, the subject has become conspicuous by its absence from the political agenda.

At first glance this seems surprising. After all, among President Clinton's most striking accomplishments are the passage of two trade agreements - NAFTA and the Uruguay Round of GATT. Why, then, does he not trumpet them as he does some of his other accomplishments?

Clinton's silence may only be partly explained by his allegiance to labor unions. The other reason is that it is so devilishly difficult to explain, in a sound-bite or two, why free trade is good for the American economy.

Back in 1993, when the trade agreements came up for ratification, organized labor fought in vain to prevent their eventual endorsement by Clinton. Even the barrage of criticism unleashed by Perot at the time failed to sway Clinton. (Readers may recall the CNN debate between Perot and Al Gore - a memorable affair in which Perot managed to offend a number of folks with some ill-advised remarks about the aspirations of the Mexican people.)

The primary argument levied against the trade agreements was that they would lead to a massive loss in U.S. jobs. Foes of NAFTA argued that making trade less restrictive between the U.S. and Mexico would only encourage U.S. businesses to shut down their domestic operations and move to greener pastures south of the border. The allure of low wages, they said darkly, would result in a "giant sucking sound."

Similar arguments were made with regard to GATT (now the World Trade Organization). Protectionists argued vociferously that the completion of the Uruguay Round spelled doom for the high-wage American economy. As less-developed countries lured away mercenary U.S. corporations with the promise of lower wages and lax environmental standards, American industry would go into decline - with the concomitant loss of millions of jobs. The automobile industry, in particular, was slated for imminent destruction.

It was a bleak picture the critics painted. After the trade agreements went into effect in 1994, they waited for the cataclysm to unfold.

They have been waiting ever since - and there appears to be no end in sight. In the last two years, far from shedding jobs, U.S. businesses have been adding new jobs - on average, a couple of hundred thousand every month. Despite dire predictions to the contrary, the automobile industry has dramatically increased its production of cars and trucks. Family incomes have risen, and for the first time in years, the yawning chasm between the rich and poor seems to be becoming narrower. Inflationary pressures have all but disappeared, interest rates have remained low, and the stock market has soared.

While it is unlikely that the passage of the two trade agreements is responsible for the recent performance of the U.S. economy, it is quite evident that NAFTA and the Uruguay Round have not, as their critics feared, decimated the economy. Indeed, by almost any measure, the economy has become stronger in the last two years. The wait for the protectionists continues.

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