**First** The tweet version of the below post (for those of you who cant handle the length of text Im about to put on here) NAFTA destroys American jobs, while simultaneously creating positive economic growth, thus justifying its existence. Now, prepare to be bored out of your SKULL!! This is an argument Im having on my class discussion boards with another student. HER: The North American Free Trade Agreement (NAFTA) eliminated the majority of taxes on goods traded between the US, Canada, and Mexico, thus enabling trade to grow significantly over the last twenty years. Many critics believed that the NAFTA would cause job loss due to competition, however there is no evidence to support those claims (Gwartney, et al, 2013). As of 2011 NAFTA has caused trade to more than triple between the member nations. NAFTA has created one of the worlds largest free trade areas, which now integrates over 460 million people producing approximately $18 trillion worth of goods and services (Paramonov, 2012). NAFTA has also created growth amongst farmers and businesses while also giving the consumer more choices and a higher purchasing power (Paramonov, 2012). Now, at 20 years old, NAFTA has proven to critics that it would not lead to joblessness or poverty (O’Grady, 2014). “Freedom to trade with the neighbors (Canada, Mexico and the U.S.) has instead created wealth and opportunity and made the continent more globally competitive” (O’Grady, 2014). O’Grady believes that energy and immigration should have originally been part of NAFTA and could have potentially avoided today’s issues, such as the keystone pipeline. ME: I disagree with, and counter, Gwartneys statement regarding job loss due to NAFTA. The Economic Policy Institute conducted a study in 2011 regarding the shift in employment after NAFTA was enacted. According to the study, NAFTA led to the net displacement of 682,900 U.S. jobs by 2010. In addition, over 60% of the net job losses were high paying manufacturing jobs. (Scott, 2011) No one would dispute the argument that trade has increased due to NAFTA. It’s hard to look at it as a good thing, though, when workers must accept lower wages during negotiations, due to the fact that a firm/company could easily relocate their manufacturing facilities to Mexico, where they can obtain cheaper labor, no tariffs, and a workforce that’s less likely to strike. The fear and threat of losing ones job is enough to cause them to work for less and less money. From a purely economic standpoint, yes, NAFTA has “improved” the economy. But, as I’ve stated in previous writings, it seems that a healthy economy requires that many people will go without. But from a non-economic standpoint – from the standpoint of a Christian who believes that it’s our duty to take care of those in need, I find it difficult to agree with a trade agreement that allows families, our friends and neighbors, to go hungry simply to make a few extra dollars; money that’ll never end up in the hands of those who need it. HER: Though there was a shift in employment due to NAFTA, it did not cause the unemployment rate in the US to increase. From the Office of the US Trade Representative here are a few myths versus facts for you to ponder: Myth: NAFTA has cost the U.S. jobs. Fact: U.S. employment rose from 110.8 million people in 1993 to 137.6 million in 2007, an increase of 24 percent. The average unemployment rate was 5.1 percent in the period 1994-2007, compared to 7.1 percent during the period 1980-1993. Myth: NAFTA has suppressed U.S. wages. Fact: U.S. business sector real hourly compensation rose by 1.5 percent each year between 1993 and 2007, for a total of 23.6 percent over the full period. During 1979-1993, the annual rate of real hourly compensation rose by 0.7 percent each year, or 11 percent over the full 14-year period. (Office of the U.S. Trade Representative, 2008). I disagree with you that NAFTA allows families, friends, and neighbors to go hungry to enable companies to earn a higher profit margin. I challenge you to find hard facts that support your claim. Those responsible for enabling people to go hungry are most likely greedy business owners making immoral decisions based on personal gains and not based on the greater good of others. I think the irritation you are displaying is misplaced on NAFTA when it should be focused on corporate immorality. ME: First, your facts are about employment/unemployment overall; not in specific job areas. The employment rate can go up 20%, and jobs can still be lost; example: If 500 people get laid off from a factory, and then those 500 people (plus 100 teenagers) end up working at a burger joint, then technically Unemployment went down. The drastic difference in numbers listed in your example (24% employment increase, yet only an 11% hourly rate increase) illustrates this perfectly; people were getting laid off from high-paying jobs, and being forced to take jobs with lower pay. In addition, your number about the business sector (23.6% increase over the same period) also illustrates the same thing; CEOs, management, upper-level corporate employees were getting higher wages (possibly due to the availability of low-cost labor in other countries). Had you said that low-level laborers had a massive employment spike, or that their wages drastically increased, Id be more inclined to agree with your assessment. But the numbers you listed truly drive home the point; NAFTA allows companies to outsource their low-level labor to cheaper areas, lay off American employees, and upper-management gets a fatter paycheck. And since the gains outweigh the costs, its still considered positive economic growth. I completely agree that corporate immorality should be the focus of any irritation that people display. But, sadly, NAFTA enables that corporate immorality. If theres anything Ive learned about human nature, its that if you enable someone to act immorally, then they will act immorally. According to my Accounting textbook, there are 3 conditions to be met for an individual to act unethically; Pressure, Opportunity, and Rationalization. (Wild, 2013) The pressure exists, because the modern American economic business model creates an environment dependent on product returns being greater than product costs. As long as the opportunity cost of providing a good/service is lower than the return we can expect to gain, trade continues; were literally expected to get more than we give (Gwartney, 2013). The pressure to obtain economic gains creates pressure to act immorally/unethically, as long as the individual can get away with it. This is unlikely to change. Due to property rights laws, business owners have a strong incentive to organize and operate their business in a manner that will maximize the value of their output to consumers while keeping the cost of producing output low (Gwartney, 2013). Rationalization exists, because the law of economic efficiency dictates that an economy is efficient as long as all potential gains from trade have been realized. Coupled with the concept of economic equilibrium, as long as there are still potential gains to be obtained, producers will still be driven to provide a product to realize those potential gains (Gwartney, 2013). Since the model functions in this way, immoral/unethical behaviour can be rationalized as long as it supports the projected outcome of the economic model. This is unlikely to change under the current American economic model. Finally comes Opportunity. In comes NAFTA. NAFTA provides business firms with the opportunity to keep production costs low (by outsourcing employment, or by purchasing products from other countries). The lack of a tariff allows these business owners a cheaper means to produce their goods. And, like Gwartney says, they still Choose their own price, output level, and methods of production. NAFTA creates the opportunity. Now that the rationalization, and pressure requirements have been met (due to the structure of the American economic model), NAFTA provides the opportunity; immoral/unethical behaviour will begin. Perhaps its unfair to blame NAFTA, simply for providing the opportunity. I mean, there are two other factors, right? Pressure and Rationalization. But the pressure and rationalization stem from the existence of the current American economic model. So, if we want to keep NAFTA blameless, then the obvious alternative is that the current American economic model perpetuates a system of immoral and unethical behaviour. But your thread was about NAFTA... I already wrote a post that puts the blame on the economic model a couple weeks ago.
Posted on: Tue, 12 Aug 2014 20:19:48 +0000
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