What Does NAFTA Do?
Kevin D. Williamson’s fulsome praise of NAFTA (“What NAFTA Does,” November 13) notwithstanding, the primary goal of NAFTA is to provide American manufacturers with unfettered access to low-cost Mexican labor. The “continental supply chain” engendered by NAFTA allows parts and subassemblies to be shipped to Mexico duty-free, where they can be assembled into finished products by workers making $2.50 per hour. This is the “Free Trade” part of the agreement; if tariffs were imposed on incoming or outgoing goods, the low-wage advantage would be negated and the manufacturers would set up shop elsewhere.
A handful of overproducing American farmers have benefited from NAFTA because, as the theory of comparative advantage would predict, Mexican farmers have been persuaded (i.e., forced) to give up their farmlands and become factory workers, thereby depriving Mexico of the ability to feed itself and making it necessary to import food. The value of the agricultural products the U.S. exports to Mexico pales in comparison with that of the manufactured products, which are essentially American, exported by Mexico to the U.S.
It would be great if the American manufacturing jobs lost to low-wage Mexico could be replaced by high-paying “service” jobs here in the U.S., but that is not a realistic possibility.
I doubt that Donald Trump or anyone on his economic team thinks that America’s trade deficit with Mexico is comparable to the national debt or some other deficit that can be eliminated only with cold, hard cash. The trade deficit is just a convenient metric for quantifying the difference in value between goods exported and goods imported, and eliminating our trade deficit with Mexico would mean that the value of goods exported by the U.S. would be equal to or greater than the value of goods imported from Mexico.
I don’t know whether NAFTA is the “worst deal ever made,” but it is fair to say that, in exchange for millions of jobs that would pay $20 per hour in the U.S., we have gotten marginally less costly cars, a relatively small market for some farm produce that the U.S. does not need, and an unlimited supply of reasonably priced all-season avocados.
Kevin D. Williamson responds: I thank you for the letter. A few thoughts: 1) “Overproduction” is an ancient progressive superstition; American farmers do not “overproduce,” but rather produce with extraordinary efficiency to meet demand for American farm products around the world. 2) There is no meaningful sense in which manufactured goods are “essentially American,” but, if there were, the implied trade-off between farm exports and manufactured imports would still be a fiction, inasmuch as no such trade-off actually exists: Farm exports respond to demand, just as manufactured imports do. 3) The claim that replacing manufacturing jobs (which have been lost mainly to automation, not to Mexican competition) with high-paying service jobs “is not a realistic possibility” is simply contradicted by the facts: Wages have risen as manufacturing’s share of employment has declined and the services sector has expanded. As it turns out, those health-care and financial-services jobs pay on average better than it paid to turn a wrench in a GM factory in 1955. That fact is obvious to anybody who is willing to look around and see that our standard of living is radically higher today than it was even 20 years ago. If you want an eye-opening experience, open your eyes.