Stagnant Wages and Ohio: NAFTA Isn't the Problem
An excellent column by David Leonhardt:
The Politics of Trade in Ohio: Now come Mr. Obama and Mrs. Clinton... tough talk about foreign trade... you'd have to conclude that they believe that Nafta and other trade agreements have caused Ohio's huge economic problems.
"She says speeches don't put food on the table," Mr. Obama said in Youngstown. "You know what? Nafta didn't put food on the table, either." Later, he went further, claiming that Ohio's workers have "watched job after job after job disappear because of bad trade deals like Nafta."
Mrs. Clinton's advisers, meanwhile, have been putting out the word that she tried to persuade her husband not to support Nafta -- which liberalized trade with Mexico and Canada -- when he was running for president....
[However, n]either candidate calls for a repeal of Nafta, or anything close to it. Both instead want to tinker with the bureaucratic innards of the agreement.... They call the country's trade policy a disaster, and yet their plan to fix it starts with, um, cracking down on Mexican pollution....
The first problem with what the candidates have been saying is that Ohio's troubles haven't really been caused by trade agreements. When Nafta took effect on Jan. 1, 1994, Ohio had 990,000 manufacturing jobs. Two years later, it had 1.03 million. The number remained above one million for the rest of the 1990s, before plummeting in this decade to just 775,000 today. It's hard to look at this history and conclude Nafta is the villain. In fact, Nafta did little to reduce tariffs on Mexican manufacturers, notes Matthew Slaughter, a Dartmouth economist. Those tariffs were already low before the agreement was signed.
A more important cause of Ohio's jobs exodus is the rise of China, India and the old Soviet bloc, which has brought hundreds of millions of workers into the global economy.... [Y]our credit card's customer service center isn't in Ireland because of a new trade deal. All this global competition has brought some big benefits, too. Consider that cars, furniture, clothing, computers and televisions -- which are all subject to global competition -- have become more affordable, relative to everything else. Medical care, movie tickets and college tuition -- all protected from such competition -- have become more expensive.
So what can be done for Ohio?
There is actually a fair amount of agreement among economists on this question. The solution should involve more government investment in infrastructure, the medical sciences, alternative energy and other areas that could produce good new jobs. A more strategic approach to investment, one less based on the whims of individual members of Congress, would also help....
Over the last week, the candidates' talk has, at times, been silly and even inaccurate. And Ohio's problems would certainly be easier to solve if, as Luis Proenza, president of the University of Akron put it, the candidates were "more true to reality and less prone to invective." But the larger problem is that Ohio%u2019s voters have good reason to be angry. For years, they have been promised that globalization was making the United States a richer country. They're still waiting for their share of the bounty.
