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Trade Deals and Jobs: The Elevator Pitch: Afterthoughts 1

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Want the elevator pitch version of: NAFTA and other trade deals have not gutted American manufacturing—period?

Here it is: Technology has driven our manufacturing share of non-farm employment down from 30% to 12%. Lousy macroeconomic policies--Reagan and Bush 43's generation of large wrong-time government deficits, an inappropriate overly strong dollar policy kept long past its sell-by date, etc--further pushed it down from 12% to 9%. Our assisting in the extraordinarily rapid industrialization of China from 9% to 8.7%. NAFTA from 8.7% to 8.6%. And given all the benefits we have gotten from NAFTA--and the much bigger ones Mexico has gotten--NAFTA was a good (albeit small) deal for the U.S.

If the United States had done the big things right in economic policy, the share of American workers with manufacturing jobs would nevertheless have still fallen from the 30% it was in 1950 to perhaps 12% today: that's how big the tide of technology has been, sending the proportion of the labor force in manufacturing on the same downward trajectory the proportion of the labor force in agriculture has followed in the past five centuries and the proportion of the labor force hunting and gathering followed ten thousand years ago. Germany did everything right as far as supporting its manufacturing sector and nurturing manufacturing jobs, and that is what happened in Germany.

The United States did a number of things wrong: Reagan deficits, Bush 43 deficits, a strong dollar policy kept long after its sell-by date, insufficient attention paid to nurturing many of our very valuable communities of engineering practice. As a result, our decline in manufacturing has been larger: because of those policy mistakes, we would now have not about 12% but about 9% of our workers in manufacturing.

But bad trade deals? NAFTA and China-WTO? Their effects have been to carry us down by 0.4%-points—from 9% to 8.6%. Maybe. And we have derived powerful compensating and I believe dominating benefits from those trade deals: lots of good stuff, cheap.

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