In a report just released by the bi-partisan U.S. Congressional Budget Office, it is claimed that international trade “yields several benefits for the U.S. economy.” So-called Preferential Trade Agreements, aka PTAs, are treaties that claim to remove barriers to trade and set rules for commerce between two countries or among a small group of countries. As of August 2016, the United States has established 14 PTAs with 20 of its trading partners. They are – of course – controversial, and part of the U.S. Presidential election fight between Clinton and Trump, both of whom are disliked by a majority of voters in their own parties.
CBO says that workers in occupations, businesses and industries that expand because of trade may, repeat may, make more money. Here’s the reality clause in the report – “whereas workers in occupations, businesses, and industries that shrink may make less money or experience longer-than-average unemployment. Such losses can be temporary or permanent.” Therein lies the demise of U.S. middle class manufacturing jobs. Since 1984 when NAFTA arrived, Michigan alone has lost more than 200,000 manufacturing jobs.
The report comes at a time when Presidential candidate Hillary Clinton is on the defensive, among other things, over her family’s support for NAFTA, aka the North American Free Trade Agreement, if philandering Bill can be called family. NAFTA, arguably, is a one-sided trade deal that wasn’t free when it comes to auto and other blue color workers who suffered under it. Now, NAFTA trade with the U.S. accounts for about 16% of the U.S. gross domestic product and a whopping 28% of U.S. trade. Canada’s share of U.S. trade is 20%.
One-time presidential Candidate Ross Perot characterized the NAFTA agreement by saying that you could hear the “giant sucking sound” of U.S. jobs heading south. Well, that appears to be the truth, the whole truth, although there is no Bill Clinton stained blue dress here that can refute complicated economic statistics to prove it.
The trade question was, is and remains – how do we treat our neighbors, and how do they treat us? Candidate Trump has decided, vehement and negative views on trade matters. Trust him. He claims he will release his non-tax returns later – returns that would help to explain his economic participation with various foreign entities and how he got around paying any taxes whatsoever for decades. The whole subject of trade is dirty, and both candidates know it. Both candidates are soiled, too.
The Ideology
CBO claims that trade increases competition between foreign and domestic producers. That “increase in competition causes the least productive U.S. businesses and industries to shrink; it also enables the most productive businesses and industries in the United States to expand to take advantage of profitable new opportunities to sell abroad and obtain cost savings from greater economies of scale.”
As a result of this assertion, CBO maintains, trade encourages a “more efficient allocation of resources in the economy and raises the average productivity of businesses and industries in the United States.” An AutoInformed translation of this political babbly-gook is that somebody loses a job; many people lose jobs. However, it’s all good.
Blithely, CBO says “through that increase in productivity, trade can (note the weasel word can – where’s the data?) boost economic output and workers’ average real (inflation-adjusted) wage. In addition, U.S. consumers and businesses benefit because trade lowers prices for some goods and services and increases the variety of products available for purchase. Oh yeah? Workers without any wages purchase little in our experience.
In a breathtaking, sweeping conclusion that is bound to be challenged, CBO says that “economic theory and historical evidence suggest that the diffuse and long-term benefits of international trade have outweighed the concentrated short-term costs. That conclusion has consistently received strong support from the economics profession.”
Hum, talk to people who take a shower after work, not before and see how they feel.
The economics profession, of course, includes academics with tenured lifetime positions, as well as people who work for multi-national corporations that only care about profits.
It gets murkier. A non-economic reason says CBO for establishing PTAs is “to achieve foreign policy goals.” Those goals include supporting the economies of U.S. allies and promoting the adoption of preferred domestic policies, such as environmental conservation or stronger workers’ rights.
Really. How about the Saudi’s supporting terrorism or the WTO China deal? Defend either says AutoInformed.
It’s true that some PTAs have basic labor and environmental standards and – allegedly – protections for intellectual property. CBO claims that if the costs of compliance are high, those types of rule-based reforms can impede trade and investment flows, making some businesses less competitive in foreign markets.” Well what does this mean in American English? We look the other way while dealing with corrupt governments and rigged markets?
Have Preferential Trade Agreements Affected the U.S. Economy?
In CBO’s view, the consensus among economic studies is that PTAs have had a “relatively small positive effect on total U.S. trade (exports plus imports) and on the U.S. economy.” The effects have been small because the agreements were mostly between the United States and countries with much smaller economies and because tariffs and other trade barriers were generally low when the agreements took effect (So we are giving away the store?)
The indirect effects of PTAs on productivity, output, and employment in the United States have also “been small and positive.” Empirical estimates support that view, claims CBO. But in its own words “those estimates are uncertain and may be understated, because the effects of non-tariff provisions are hard to measure and because issues with data keep researchers from identifying how PTAs affect the service sector.”
Moreover, the effect of PTAs on the federal budget is also unclear, according to CBO. In assessing the budgetary impact of previous preferential trade agreements, CBO’s cost estimates have indicated that they would slightly lower the amount of federal revenues received from tariffs. “However, those results did not consider how the macroeconomic effects of PTAs might alter the federal budget. Nevertheless, the small size of the effects on output suggests that the overall budgetary effects have also been small.” Data, of course, is lacking here.
No wonder former President Harry Truman was looking for a “one-handed economist.” So is AutoInformed, and we suspect millions upon millions of workers are searching as well.
See AutoInformed.com on
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- Unifor Reaches Deal with GM Canada. Strike Avoided
- Obama Administration Submits Controversial FTAs to Congress. Largest Loss of Jobs since NAFTA Coming
- Ford Invests $1.6 Billion in Mexico. NAFTA Sucking Sound of Lost U.S. Jobs Continues During Fierce Presidential Race
- Michigan, Ontario Automotive MOU – NAFTA without Mexico?
- NAFTA Strikes Again as Kia Opens Pesquería Mexico Plant
