In my International Trade Regulation class the other day, we had a discussion of the current Presidential candidates and their positions on trade (this included both Republican and Democratic candidates). It can be plainly seen that John McCain is completely for FTAs. He has a 100% voting record for FTAs in the senate. The other two (Democratic) candidate's views are a little more murky. Obama seems farther to the left (opposes free trade) while Hillary seems to be riding the fence (what a surprise!). They will often vote for one agreement and then not vote for the next one, often citing lack of labor or environmental standards. Yet, one student brought up an extremely good point--both Obama and Clinton did not start faulting NAFTA for job losses until the Ohio presidential primary got closer. This opposition was not present in primaries in New Hampshire, South Carolina, Iowa, California, etc. This fact makes a strong case that their opposition is strictly based on political motives in pandering to presidential voters. Particularly Hillary, who's husband oversaw the signing and establishment of NAFTA seems to have no consistent stance toward trade--good for the country here but bad there. Now, obviously, there have been job losses since the inception of NAFTA. Many manufacturing jobs have been lost, but many jobs in services have been created. Neither of which can be completely credited to NAFTA. In all actuality, globalization (which neither America nor any other country can control) is mostly to blame. Globalization is caused by multiple factors including liberalization of market access, rapidly developing foreign financial markets, changes in currency, media, etc. Because of these factors and many more, the U.S. has no choice but to stay economically competitive with FTAs--this IS a situation where one can argue that since everyone else is doing it we should too.
As a result, one should be careful not to put to much faith into the rhetoric of Presidential candidates in their positions to amend or even worse, do away with NAFTA or other similar agreements. I would hope that voters in not only Ohio and Pennsylvania can see through this rhetoric, but also other Americans as well. We as Americans must realize that our domestic economy is changing whether we like it or not. Manufacturing jobs are going to continue to leave this country while other service oriented jobs will continue to grow. We have to learn to sacrifice and change--we cannot stop the integration of our economy with the global economy. While labor unions will not admit it, they may be the root cause of the loss of manufacturing jobs. These organizations push for higher wages (sometimes $15-20 dollars an hour), less working hours, better working conditions, etc. While these requests are commendable, corporations get tired of having to give in to these requests and end up going to less developed nations to manufacture products. Take China for example: Companies can go there and pay workers 1/10 of what they pay workers in America, get workers to work 12-15 hour days, and have less desirable working conditions. Strictly from a business point of view, what company would not take those jobs overseas. Now, I am NOT advocating companies leaving or have lower wages and bad working conditions in America. However, Americans need to understand that we have the highest wages and the best working conditions of any country on earth, and that when unions push for more and more, companies will finally get tired of the pressure and leave.
In conclusion, one should not be quick to blame FTAs for the loss of jobs or other economic woes that the U.S. is facing. There are many problems that will involve intelligent solutions rather than undoing past accomplishments (such as NAFTA).
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A. Thomas
2 comments:
What you are describing is the so-called race to the bottom. But, for companies making business decisions, the analysis is almost always more complicated than simply finding the lowest labor rates and loosest environmental standards. For companies, the focus is on total landed cost: what it will cost to get the good produced and delivered. So, that will include logistical expenses, customs duties, taxes, administrative costs, etc. In some cases, for example, Mexico remains a better deal than China because of geographic proximity that reduces delivery times, NAFTA duty reductions, and the administrative ability to manage operations from the U.S. side through a shelter/maquiladora (IMMEX) arrangement.
Also, larger companies are more concerned about social justice and welfare issues than your post implies. The cynical view is that companies want to preserve the value of their brand by avoiding public relations problems. The altruistic view is that management simply wants workers treated humanely. Either way, a lot of big companies put considerable effort into ensuring good working conditions in their foreign plants and by their suppliers.
So, there is more to this than just duty rates and trade agreements. Keep in mind that Mexico is losing business to China and China has no preferential agreements with the U.S. Thus, it strikes me that NAFTA and other trade agreements are generally beneficial in that they allow the U.S. to engage those countries in a discussion of labor standards, environmental protection, transparency, etc. as a quid pro quo for the trade deal. That makes them better than relatively unmanaged trade as we see with China.
Best regards, and say hello to Prof. Bowman.
nafta more profits forbusinesses since the savings on nafta produced items(cheap labor, inferior material)ARE NOT passed on to the end product buyers. the law society may want to read and understand what brought about the fall fo the roman empire. It was service oriented not production oriented
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