What Lighthizer Misses On NAFTA

See Lighthizer’s Economics Deficit. WSJ editorial. Excerpts:

"Total trilateral merchandise trade has grown to more than $1 trillion annually from less than $300 billion in 1993.

Enter Mr. Lighthizer’s trade-deficit preoccupation, which holds that unless Mexico buys the same dollar amount of wheat and corn from the U.S. that the U.S. buys in widgets from Mexico, Americans are losing out. This bizarre economics is dangerous to American prosperity.

One of Nafta’s many benefits to American global competitiveness is that it allows U.S. manufacturers to access low-priced intermediate goods from the neighbors, add value in the U.S., and then export the final product around the world. Consumers at home and abroad find these U.S. products attractive because they are well-made and competitively priced thanks to continental supply chains. Workers and wages have benefitted too. The growth of high-paying U.S. jobs in technology, innovation, design and marketing depend on this free-trade web of supply chains.

U.S. car and truck makers benefit in particular from intracontinental trade. Production facilities in all three Nafta countries ship unfinished products across borders, often multiple times, before completion. It is not an exaggeration to say that free-trade access to labor and capital across North America is largely responsible for the survival of the U.S. auto industry. John Bozzella, CEO of the Association of Global Automakers, told Reuters last week that U.S. auto production has increased by more than one million vehicles annually since Nafta and there has been a boom in exports. Whether the industry can survive Mr. Lighthizer is another matter."

"Mr. Lighthizer says he wants to restore jobs that have been lost since 1994 when Nafta was launched. But most of those jobs were lost to technology and higher labor productivity. New employment opportunities depend on new export markets and enhanced competitiveness. Step one is to let go of the obsession with Nafta trade deficits."