Is NAFTA really the ‘worst deal ever’? | McClatchy Washington Bureau

Contrary to Donald Trump’s characterization of the North American Free Trade Agreement as “the worst trade deal maybe ever,” the trade pact with Canada and Mexico has been a success when measured by increased commerce across the three nations.

Trump savaged NAFTA during Monday night’s debate, and Hillary Clinton didn’t defend the deal. It was negotiated by Republican President George H.W. Bush, passed with Republicans’ support and signed by Clinton’s husband, President Bill Clinton, after side deals on labor and the environment were added.

Trump argued that NAFTA, which took effect in 1994, cost Rust Belt states like Ohio and western Pennsylvania manufacturing jobs. He vows to bring back these sorts of low-skill jobs.

“That’s a highly misleading metric because the evidence shows that trade agreements, over a period of time, make little or no difference to the total number of jobs,” said Gary C. Hufbauer, a leading researcher for the Peterson Institute for International Economics, a nonpartisan but pro-trade think tank. “Trump doesn’t get this. A lot of people don’t get this. What trade agreements do is change the composition of jobs, the kind of industries they’re in.”

In other words, U.S. manufacturing jobs might have declined, but the decrease was offset by warehousing jobs, trucking jobs, banking jobs in trade finance and in other areas that feed into international commerce.

Exact numbers are in dispute. The more liberal Economic Policy Institute says NAFTA led to the loss of 700,000 U.S. jobs over its first two decades. The U.S. Chamber of Commerce said in a 20-year report on NAFTA that it helped create 5 million jobs through trade and increased competitiveness.

When trade is measured more broadly, it has led to numerous changes in the U.S. economy, such as expansion in the Washington state seaports of Seattle and Tacoma, the creation of a rail and truck hub in California for trade with China, Miami’s evolution into a hub city for all things Latin America and even a Europe-focused container port in Charleston, South Carolina. All are significant changes that corresponded with the surge in global trade.

Trade agreements generally expand market access for finance and other services and reduce the tariff, a tax on traded goods, to zero for most sectors and products over an agreed-upon time so that sectors can prepare and adjust. Sensitive protected sectors such as agriculture historically have had the longest phase-in periods and sometimes retain volume quotas. By its very nature, trade has winners and losers.

“A good way of measuring an agreement is did it increase two-way trade more than it would have otherwise,” said Hufbauer. “Texas and California benefit a lot because two-way trade with Mexico is much, much higher than it otherwise would have been if we didn’t have NAFTA.”

A McClatchy analysis of trade data shows that two-way trade between the United States and Mexico rose by 391 percent from 1995 – the second full year of NAFTA – to the end of 2015. Trade with NAFTA partner Canada grew by 112.4 percent in the same period, a slower rate that reflects that a U.S.-Canada free-trade agreement had been in effect since 1987. U.S. trade with the world grew by 182.4 percent from 1995 through 2015, to almost $3.751 trillion.

Two-way trade has grown sharply because of agriculture. Mexican tomato growers benefited greatly, at the expense of Florida growers. But U.S. corn farmers have been among the biggest winners. U.S. exports of yellow corn have grown from 66 million bushels in the 1993-94 growing season to 444 million bushels – 24.9 million pounds of corn kernels – in the 2014-15 season – a 572 percent increase.

“An overwhelming win,” said Paul Bertels, vice president of production for the National Corn Growers Association, based in Chesterfield, Missouri.

Corn used to feed farm animals moves from Illinois, Missouri, Iowa and elsewhere by barge and rail to Mexico, and the increases have allowed Mexico to boost its livestock.

“Over the last few years, they’ve really become a growing market for U.S. pork products,” he said.

During the 1992 presidential campaign, third-party candidate Ross Perot warned of a giant sucking sound of jobs going to Mexico. In fact, the majority of manufacturing jobs in the following decade went to China, which joined the World Trade Organization and sought to attract foreign investors.

Perot and his son Ross Perot Jr. benefited handsomely from NAFTA as their Hillwood Development Co. helped build the Fort Worth Alliance Airport, an industrial airport opened in 1989 that’s now a hub for air cargo into Mexico, complete with railroad connections for freight and a FedEx state-of-the-art facility. Alliance Air Services, a Hillwood subsidiary, manages the airport.

“The easiest way for HRC (Hillary Rodham Clinton) to respond to Trump’s attacks on NAFTA is to state that NAFTA came into force in 1994 and over the next six years the US economy enjoyed one of strongest sustained periods of economic growth in the post-WWII era,” Neil Dutta, head of U.S. economics for forecaster Renaissance Macro Research, wrote Tuesday in a note to investors. “So, how bad could it have been?”