A Win For Free Trade

The House of Representatives narrowly passed the Central American Free Trade Agreement (CAFTA) this morning. This agreement will expand free trade to Central American nations, which will help expand the American economy while providing more economic opportunities to Central American nations as well.

Since the passage of NAFTA in 1993, the US economy has added 18 million new jobs, seen an increase in manufacturing production of 41%, and experienced 38% GDP growth. The “giant sucking sound” of jobs that were supposed to be the result of NAFTA’s passage never materialized. NAFTA is one of the major contributing factors to the economic growth of the 1990s, and exports to Mexico and Canada increased from from $134.3 billion to $250.6 billion – creating new American jobs.

Furthermore, export related jobs pay significantly more than import related jobs. Export related jobs pay an average of 11% above the median national wage. Import-related jobs pay 15% below the national median wage. The number of high-paying jobs gained by free trade initiatives such as NAFTA far outweigh the number of low-paying jobs that have been lost during the same period. Furthermore, the biggest reason for the longstanding decline in the manufacturing sector has more to do with technology than trade – material science, electronics, and other technologies have meant that consumer goods last far longer than they did 10 or 20 years ago. Rather than having to buy a new washer and dryer every 5 years, consumers need only buy one every 10 or 20 years. Less demand obviously means that there is less need for heavy manufacturing. Traditional heavy manufacturing is giving way to much more technologically advanced materials like carbon-fiber and composite materials.

During the 1990s, the one good thing about the Clinton Administration was that it was one of the strongest supporters of free trade in recent history and was instrumental in passing NAFTA and creating the World Trade Organization. However, Will Franklin notes that the Democrats have abandoned their position on free trade. In 1993, 40% of House Democrats supported NAFTA. Today, only 7% of House Democrats voted for the bill.

Free trade benefits American workers. This agreement will help counterbalance the inflow of Chinese textile products made with foreign cotton and add to Latin American textile imports made with American cotton – helping American cotton farmers and reducing our dependence on Chinese goods. Labor conditions and political freedoms tend to be much better in Central America than they are in China as well.

For workers in Central America, CAFTA provides increased protections for local workers, and all DR-CAFTA countries have signed on to meeting International Labor Organization standards. Furthermore, countries that engage in dangerous or predatory labor practices can be fined or lose preferential access to the US market under the terms of CAFTA – giving those countries every economic incentive to reform their labor laws.

The Democratic Party’s shameful retreat from free trade is a sign of how far out of the mainstream they have become. They’ve abandoned one of their most successful policies in favor of a form of protectionism that has failed time and time again. In the past progressive groups railed against protectionism, correctly arguing that tariffs and restrictions on trade were tools of big business and special interests to stifle competition and protect domestic monopoly interests. Despite the Democrats waving the flag of progressivism around, they no longer uphold its key principles.

10 thoughts on “A Win For Free Trade

  1. The beneficiaries of CAFTA are likely to number in the mere thousands. It’s too soon to tell how many losers there will be, but one can be assured that they will vastly outnumber the winners. Globalization’s gas chamber effect on the working class didn’t occur immediately due to the 90’s tech bubble, but it’s in full throttle now, and CAFTA be expected to accelerate that trend.

    It’s also rather interesting that you suggest the Democratic Party’s opposition to CAFTA puts them “far out of the mainstream.” Do you have any poll data to back that up? I find it extremely hard to believe that CAFTA, or even NAFTA, enjoys majority support from the public. In the current political alignment, the only thing that threatens the GOP majority is their insistence on selling out everybody for the short-term interest of their corporate enablers. CAFTA, along with “amnesty” for illegal immigrants, are the latest examples of Bush testing the threshold for economic pain of his social conservative base.

  2. Great article on CAFTA. I’m having an argument with a lib on another site and could use your help. It would be very helpful and greatly appreciated if you could provide the sources of the data about jobs, etc. that resulted from NAFTA.

  3. Hey Jay! Still waiting on the public opinion poll data supporting your contention that opposition to CAFTA puts the Democrats “far out of the mainstream.”

  4. Hey Jay! Still waiting on the public opinion poll data supporting your contention that opposition to CAFTA puts the Democrats “far out of the mainstream.”

    I’ve not seen any polling data, nor would polling data be particularly helpful in this case. Most of the country has never *heard* of CAFTA, and the ones who have are likely to be partisans on one side or another. Trusting matters of esoteric public policy to polling data is not an accurate way of measuring support.

    Bill Clinton is a mainstream Democrat, and is also one of the staunchest supporters of free trade. Clinton’s free trade policies were one of the few things he did right. A free trade position was a mainstream position among Democrats – sadly the Democratic Party has veered to the far left in recent years.

    Free trade is indeed responsible for the state of the US economy – it’s why our rate of unemployment is at a very low 5.0% and our rate of economic growth is at a very health level of 3%+.

  5. On the day Clinton signed NAFTA, the Democratic Party forfeited its majority status for at least a generation. Much as pointy-headed economist hacks like to sing the praises of these free trade deals, they’re toxic in the eyes of voters, and rightly so. When the party of the working-class aligns itself with the corporate interests who reap nearly all the rewards from these trade agreements, they lose all credibility on meat-and-potatoes issues and have to rely on their positions on cultural issues to win elections. The Bill Clinton/DLC strategy won two Presidential elections in 1992 and 1996, but has otherwise decimated the Democratic Party. Regardless of the potential consequences of this agreement, which nobody can fully predict, it would be political suicide for the Democrats to support this.

    Suggesting that “free trade” is the engine for low unemployment and high economic growth is nonsensical. Our economy was booming in the “roaring 20’s” when the world was in full throttle isolationist mode. Growth rates and unemployment rates in the 1950’s were more impressive than today, and foreign trade was but a blip on the economic radar screen then. When the usually ideological Kool-Aid drinker Gil Gutknecht votes against CAFTA on the grounds that “the benefits of these trade agreements are highly overstated,” it’s quite telling.

    And do you really believe most of the country has never heard of CAFTA? You’re always suggesting that these American “values voters” who wanna ban schools from teaching evolution are not given enough credit for their expansive intellect…..yet you don’t think that the majority of Americans would know what CAFTA is? I’m sorry but anybody would couldn’t identify CAFTA as being a trade agreement with Central America should be ridiculed on The Tonight Show’s Jaywalking feature rather than defended for their morality plays in the voting booth.

  6. The point was that short-term economic growth rates are hardly indicative of a policy that’s “working.” If low unemployment and high growth were really benchmarks for effective policy, then the Harding-Coolidge-Hoover era would have to be accepted as a winning formula despite its destructive long-term consequences. History has proven that the “roaring 20’s” bubble ended up being a disaster, just as lawless free trade policy will prove to be a long-term disaster for civilized economies of the world.

  7. Your argument is ridiculous. Actually, strike that, it’s worse than rediculous, it’s recockulous.

    The argument that the Harding-Coolidge-Hoover era was a period of “lawless free trade” is totally and utterly wrong. In fact, the “Gilded Age” you keep railing against was one of the strongest periods of economic isolationism in American history. The Harding Administration passed the Tariff Acts in 1922 that instituted punitive tariffs on nearly every good to “save American jobs”. Fordney-McCumber Act of 1922 made things even worse by ensuring that our agricultural surpluses at the time rotted rather than being sold overseas. The Smoot-Hawley Tariff in 1930 was one of the singular biggest causes of the Great Depression.

    Ironic that you seem to support policies that are right out of the protectionist handbook of the Gilded Age…

  8. When critically analyzing another’s argument on a blog, there’s one very important thing one has to do…..read the argument in full before commenting on it. I was not equating the Harding-Coolidge-Hoover era with lawless free trade or successful economic policy in general. I was simply dispelling your original notion that American economy of the moment has low unemployment and modestly high growth rates necessarily because of ongoing trade policy. Had you read my argument, you would have understood that I was pointing to the deeply protectionist 1920’s as another era with high economic growth and low unemployment, thus discrediting your notion that a snapshot of economic success cannot be achieved without free trade. Eventually, however, we paid the consequences for that economic policy, just as we will with the opposite extreme you are suggesting in which America and the existing civilized world will become almost entirely dependent on imported goods.

    The problem with your ilk is that you refuse to believe a middle ground can be forged between 1920’s-style isolationism and the race-to-the-bottom globalization encouraged in NAFTA and CAFTA.

  9. And by the way, I Googled “Gilded Age” and didn’t find any historical references identifying the 1920’s as part of that era. Most identified the era as ending with Teddy Roosevelt’s Populist era or, at the very latest, World War I. Nice try though.

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