National Journal's CongressDaily, March 13, 2008, Thursday

Copyright 2008 National Journal Group, Inc.

National Journal's CongressDaily

March 13, 2008 Thursday 10:30 am Eastern Time

SECTION: BALANCE OF PAYMENTS

BODY:

Borderlines

For those who didn't hear enough about the North American Free Trade Agreement before the Ohio presidential primary, just wait. In the run-up to the April 22 Pennsylvania primary, both Sens. Hillary Rodham Clinton, D-N.Y., and Barack Obama, D-Ill., are likely to hammer the 14-year-old trade deal with Canada and Mexico, again demanding its renegotiation.

But since campaign rhetoric is intended to rouse passions rather than educate voters, neither candidate is likely to answer the fundamental questions that their attacks have raised: Why NAFTA? Why now? And what could realistically be done about the agreement?

Pennsylvania is prime NAFTA-bashing turf. Between 2000 and 2007, Pennsylvania lost 201,900 manufacturing jobs, 23 percent of its manufacturing workforce. Only a fraction of those losses are directly attributable to NAFTA.

But the disappearance of relatively well-paying manufacturing jobs has contributed to the decline in Pennsylvania's median wage, which has fallen about 1 percent this decade, after adjustment for inflation.

Part of the voters' frustration is a consequence of the Clinton administration's promising "jobs, jobs, jobs" if Congress approved NAFTA back in 1993. There was never a chance that NAFTA could ever generate a significant number of new American jobs. But expectations were raised.

Moreover, the defense of NAFTA has been disingenuous. The Bush administration notes proudly that NAFTA has more than tripled trade between Canada, Mexico and the United States. What it fails to acknowledge: The $12 billion U.S. trade deficit with those partners in 1994 mushroomed to $138 billion in 2007.

NAFTA supporters also dismiss claims that the deal has cost the country jobs, noting that U.S. employment has risen 24 percent since 1993. They point out that manufacturing employment in the United States has been declining since 1979, 15 years before NAFTA. And, said Philip Levy, a resident scholar at the American Enterprise Institute, "trade substitutes better jobs for worse jobs."

But workers who have lost their jobs are not necessarily the same ones who gained employment. So people's antipathy toward NAFTA can be personal. The fact that manufacturing job losses are part of a larger trend is little solace to an unemployed Pennsylvania machinist. And Pennsylvania's wage stagnation suggests NAFTA has not substituted better jobs for worse jobs.

Moreover, workers need not have lost their jobs to resent NAFTA. Studies in the late 1990s by Kate Bronfenbrenner, director of labor education research at Cornell University, showed that in 70 percent of union organizing campaigns nationwide in industries such as auto parts and telecommunications the threat of moving abroad, often to Mexico, was used by management to thwart formation of a union.

"Fewer than 5 percent actually did move," Bronfenbrenner said. "But it didn't matter, because it had such a chilling effect."

Finally, the Clinton and Obama vows to renegotiate NAFTA is both more and less complicated than it sounds.

Enforcement of labor rights and environmental standards are contained in side letters to NAFTA, are not enforceable with trade sanctions and have not proven to be very effective. Clinton and Obama would put these obligations in the body of the agreement, making violators subject to trade retaliation.

This is how the Jordan and Peru free-trade agreements are structured. But this approach has never been tested, so no one knows if it works.

Both candidates would also rewrite the investment code in NAFTA to ensure that corporations do not invalidate local environmental laws through claims that such rules limit their expected investment benefits.

Since 1994 there have been multiple efforts by corporations to do just that, but most cases are still pending and, through 2005, the claimed damages were small and the United States had never lost a case.

Moreover, if NAFTA is reopened, Canada, Mexico and interest groups in the United States will all want their own changes.

Mexico will demand its truckers be allowed to work in the United States. Canada might want limits on its NAFTA obligation to sell oil to the United States in an emergency.

And Lori Wallach, director of Public Citizen's Global Trade Watch, argues for overturning NAFTA's ban on "Buy America" requirements. So renegotiation would be open-ended.

Nevertheless, said Jeffrey Schott, a senior fellow at the Peterson Institute in Washington, "negotiators have learned a lot since NAFTA." So there is no reason why they could not improve on the document.

By drawing attention to NAFTA, the candidates might have made it possible, said Schott, "to have a big picture dialogue on priority concerns for all three countries, which may make it easier to upgrade some specific aspects of the agreement."

So, while the NAFTA debate is more justified than NAFTA defenders will admit, it is also more complicated than NAFTA critics contend.

And since a President Hillary Clinton or Barack Obama will want to do something to follow through on their NAFTA pledges, it might yet be possible to turn this lemon -- either NAFTA itself or the candidates' promises to renegotiate it -- into lemonade.

By Bruce Stokes

LOAD-DATE: March 13, 2008