Linda Chavez-Thompson's Claims About NAFTA And Jobs May Not Be True

Here is a letter to the editor I wrote to the San Antonio Express-News. So far it has not been published.

"Linda Chavez-Thompson claims that "the United States has lost more than 682,000 jobs to NAFTA" ("Flawed free-trade deals will cost American jobs," August 13). This is hard to prove and may be wrong.

In 2005, she said it was 900,000 jobs while UNITE HERE chief economist Mark Levinson said it was almost a million. Why does this figure change?

In 1993, Chavez-Thompson said "NAFTA poses a great threat to the public sector of the economy as it does to the private sector." The actual employment and wage record before and after NAFTA, which began in 1994, calls her prediction into question.

In the previous 17 years, the average annual unemployment rate was 6.97%, while the hourly wage increase of 96% was less than the CPI increase of 154%. So real wages fell. The average percent of the population employed was 60.34.

From 1994-2010, the average annual unemployment rate was 5.62%, while the hourly wage increase of 65% was more than the CPI increase of 51%. So real wages rose. The average percent of the population employed was 62.65.

Workers have done better since NAFTA than before. That, however, does not mean that it was the cause.

Dartmouth economist Douglas Irwin said in his book Free Trade Under Fire "it is virtually impossible to disentangle all of the reasons for jobs displacement."

But the annual U.S. unemployment rate was 6.1% in 1994, a mark not surpassed until 2009. It is possible that without NAFTA, the rate could have been even lower all those years.

In fact, in 2000, the rate was 4%. If NAFTA really cost us 680,000 jobs, then without it, unemployment would have been just 3.5% that year.

I know of no economist who has claimed that was possible. Full-employment is usually defined as an unemployment rate of 4-6%.

There are only 11 million manufacturing jobs now compared to the 17 million in 1994. But it was actually 17.26 million in 2000.

We have had two recessions since then which might have caused the decline. If NAFTA was the cause of manufacturing jobs losses, why did it take more than 6 years?

Douglas Irwin says that workers could get trade assistance under NAFTA simply by showing that imports contributed to their job loss even if it wasn't specifically due to NAFTA. This may be the source of the unrealistically high job loss estimates.

Irwin also mentions that it costs consumers $140,000 a year to preserve each domestic textile job since tariffs raise prices. So blocking free trade can be expensive.

A report signed in 2003 by the U.S. , Canada and Mexico concluded that NAFTA expanded employment.

What is good about trade? Again, let's summarize some of what Irwin says in his book.

It increases specialization in each nation which leads to greater efficiency and productivity which in turn leads to greater incomes. Consumers can buy a greater variety of goods, not just more goods. Nations that opened up to trade have generally taken advantage of these forces.

When nations close themselves to trade, as the U. S. did in 1807, the economy suffers (the embargo was lifted after about a year since everyone knew it was causing serious economic damage in terms of higher prices and lower incomes).

Job losses are by and large a macro issue. With unemployment still high, this is where we should all focus our attention. Blocking free trade will probably only hurt."