Wednesday, December 14, 2016

Free Trade Has Worked. Just Look at Texas.

The state has become the leading exporter in the U.S. since the passage of NAFTA in 1993.

By Alexis Garcia & Alex Manning of Reason magazine.
"It's funny because out of all the rhetoric coming out of this year's campaign this is the one issue thats going to have the most effect," states Erica Grieder, former senior editor at Texas Monthly. "We're going to have a lot of economic growth in Texas in the coming years because of trade. So if there's a hostility in Texas to trade that's not going to work out too well for us."

Free trade came under attack this election cycle with all major party candidates making statements that blamed bad trade policies for the loss of manufacturing jobs and and the decline of the middle class. The top target of scrutiny has been the North American Free Trade Agreement (NAFTA), a bipartisan deal that removed all trading barriers between the United States, Canada, and Mexico.

While President-elect Donald Trump has referred to NAFTA as the "worst trade deal" ever signed, economists have come to the general consensus that NAFTA has had an overall positive effect on the economy since its passage in 1993.

Regional trade has increased from roughly $290 billion in 1993 to more than $1.1 trillion in 2016. And while foreign direct investment stock in Mexico has increased from $15 billion to over a $100 billion in that same period, U.S. exports with partnering NAFTA countries have tripled since the legislation took effect and Canada and Mexico now account for one-third of U.S. exports according to the Congressional Research Service.

"There's this kind of demagogue-ish concept that life is a zero-sum game. That the economy is primitive. That you take jobs from one country and move them to another country and there's only a finite number of jobs to go around," states Grieder. "Texas is proof that's not the case."

Since the passage of NAFTA, Texas has led the country in exports for over a decade and the state's gross domestic product (GDP) has gone from $444 billion in 1993 to nearly $1.6 trillion today. The state's employment rate has fared better than the national average—a 2016 Business Roundtable study showed that international trade was responsible for over 3.1 million jobs in the Lone Star state.

But even though the state is benefiting, the constant attack on free trade during the 2016 election cycle has turned even traditional supporters against international trade deals like NAFTA. The University of Texas at Austin's Texas Politics Project found that 51 percent of Texas Republicans think international trade deals have harmed the United States in a June 2016 poll.

The findings out of Texas are similar to overall national numbers—just 48 percent of Americans think international trade deals have been good for the country according to the most recent Pew Research polls.

"You have areas that do feel dislocated by globalization," says Grieder. "It's not really NAFTA, it's more the growth of China as a role player in the world economy, automation, technological change. But it's kind of easy to point to NAFTA."

Grieder explains that it is important that community industries that may be threatened by trade deals have the ability to apply for trade adjustment assistance. But she cites examples where cities have adapted. "Look at Pittsburgh—how much it has evolved and changed and now it's more stronger than it used to be. Indiana has done very well. It is possible for things to get better even if things change and that's the thing people need to look for.""

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