This entry was posted on April 13, 2008 and is filed under Free Trade NAFTA.
Senators Barack Obama and Hillary Clinton on the wrong track!
In the run-up to the Pennsylvania primaries both Democratic Presidential Candidates say they will renegotiate NAFTA with the aim of protecting American workers from jobs lost to Mexico and Canada.* To this observer renegotiation in the manner proposed by the Democrats would likely have the opposite effect to that intended and may prove strategically catastrophic to the American worker and manufacturing.
Two new economic powerhouses have developed since NAFTA was formed: the European Union and China. Both of these powerhouses compete with the United States but are also providing attractive new target markets for NAFTA technology intensive goods. The United States needs to recognize this and develop an aggressive offensive industrial strategy to confront the new reality. Protectionism is defensive, useless and dangerous in this situation.
NAFTA can be fixed to compete with China by strengthening integration between the three economies. In particular we need to use NAFTA resources – labor, management skills, and technology leadership, for example – to achieve the greatest competitive benefit. The lower cost Mexican labor - $2 per hr in Mexico vs $18 per hr in the USA - is an essential competitive ingredient to be used to the maximum. Canadian manufacturing is not competitive with the United States anyway- only about 60-70% the productivity - but has stronger ties in some regions where the United States needs them.
While difficult to imagine in the current political environment, what in fact is needed is a much, much stronger union than NAFTA. Yes, renegotiate but it makes more strategic sense to build positively on what NAFTA has and radically strengthen rather than weaken it. Indeed NAFTA’s best chances strategically and long term is probably by way of complete economic union. A stronger NAFTA is good for all in the region. The protectionism and division envisaged by the Democrats will harm American manufacturing and its workers! The Democrats have significant potential to enhance American worker fortunes by improving trade relations with not just the NAFTA members but other regions of the world. A return to a friendlier, more enlightened, kinder gentler America in international affairs alone will positively impact the economy in short order.
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* Concurrently the leaders of Mexico, Canada and the United States are meeting for the annual NAFTA summit.
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