Wednesday, February 27, 2008

A Protectionist Lie

One of the great, unchallenged, political assertions out there right now is that NAFTA costs American jobs. Hill-Bama busied themselves with this protectionist canard during their debate last night. It happens to be nonsense.

We’re witnessing an unprecedented attack on free trade. It’s been growing for some time, and may wind up being the biggest protectionist assault since the days of Herbert Hoover. Believe me, if this canard ever flies, the stock market is going to head south in a hurry.

Take a look at the facts in the following table. I raise this point because a number of policymakers -- Senator Barack Obama in particular -- are out on the campaign trail saying NAFTA cost America 1 million jobs. One million jobs, Senator? There’s just no evidence to support that statement.

Since NAFTA’s passage, we’ve created 27.5 million new jobs. Average hourly earnings – that’s non-supervisory earnings – are up 62 percent. Meanwhile, the index of industrial production for manufacturing is up 72 percent. Those are huge numbers.

Here’s the critical part:

Since NAFTA, the United States has lost 3 million manufacturing jobs (even while production is up 72 percent). But get this. Here’s the really interesting part: During the fifteen years before NAFTA was passed, we lost 2.6 million manufacturing jobs.

Tariffs and trade barriers are bad news. They are anti-growth. They are tax hikes on trade flows subsidized by families and small businesses. Why shouldn’t people be able to freely choose the best goods at the best prices? Why should policymakers be allowed to interfere with this basic economic freedom? The end result is always a reduction in choices and prosperity.

Scapegoating free trade may make catchy headlines for pandering populist policymakers. It may even make hay for Obama in the Ohio primary next week. But let’s be clear: NAFTA is not responsible for the loss of manufacturing jobs. Not by a long shot. Our dynamic, fast-paced high tech/Internet economy is responsible for gradually phasing certain jobs out.

It’s called Schumpeterian gales of creative destruction. It’s called productivity, automation, robotics, etc. It’s called progress.