A Day Without NAFTA - Part 2
by John Murphy
In the wake of this week’s North American Summit in New Orleans, CongressDaily reports on "a new analysis by the liberal-leaning Economic Policy Institute that said Pennsylvania has lost 222,000 manufacturing jobs since NAFTA was implemented." Not only does this study fail to show how NAFTA brought this about, it completely misses how exceptionally reliant Pennsylvania is on the Canadian and Mexican markets.
According to the Bureau of Labor Statistics, a total of 661,300 Pennsylvanians are employed in manufacturing. Canadians and Mexicans bought about $11 billion of made-in-Pennsylvania manufactured goods last year. This works out to export revenue of $17,000 for each and every Pennsylvania manufacturing worker.
Compare this to the salary of the average manufacturing worker in Pennsylvania - about $33,000. How could Pennsylvania manufacturers make their payroll without their huge and growing sales to Canada and Mexico? The short answer is: they couldn’t.
In fact, Pennsylvania depends on exports to Canada and Mexico - markets open to Pennsylvania products thanks to NAFTA - to a greater degree than other states. According to the U.S. Department of Commerce, 40% of all Pennsylvania exports go to Canada and Mexico, well above the 35% average across the United States. Pennsylvania’s exports to Canada and Mexico have grown 136% since 1994, when NAFTA came into force.
The labor union-funded EPI has elsewhere claimed that NAFTA caused the loss of a million U.S. jobs. But since the agreement came into force, U.S. employment has risen from 111 million to 139 million last December.
Did NAFTA create these new jobs? Of course not. But it has fostered growth in export-oriented jobs over jobs that aren’t tied to exports. Jobs tied to exports generally pay 15-20% higher wages than those that aren’t, so the shift in the mix of U.S. jobs away toward more export-oriented industries represents a net gain for working Americans.
Too often, arguments over trade miss the simple fact that "free trade" agreements like NAFTA are all about fair trade. Many people don’t know that the U.S. market is already wide open to imports; our average duty on imports is about 2%. But countries such as Colombia and Korea impose an average tariff on U.S. manufactured goods of 14 and 11%, respectively - similar to Mexico before NAFTA.
That’s just not fair. That’s like starting a basketball game down ten points from the tip off. Luckily, the pending trade agreements with these two countries would put U.S. trade relations with these countries on a fairer, mutually beneficial footing.
To underscore NAFTA’s benefits is not to dismiss the troubles Pennsylvania manufacturers face; they are serious, and they have serious causes that federal and state officials must address. But saying no to trade deals past or present is the wrong prescription for Pennsylvania’s manufacturing workers.
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