Michele Nash-Hoff Michele Nash-Hoff is president of Electro Fab Sales and chair of the California Chapter of the Coalition for a Prosperous America.
[Michele Nash-Hoff| July 25, 2016 |San Diego Business Journal]
The proposed Trans-Pacific Partnership will cause the same economic havoc as the North American Free Trade Agreement. The boost to the San Diego economy from NAFTA came on the backs of American workers in the rest of the country. NAFTA went into effect in January 1994, and the agreement was supposed to reduce market barriers to trade among the United States, Canada and Mexico to reduce the cost of goods, increase our surplus trade balance with Mexico, reduce our trade deficit with Canada, and create 170,000 jobs a year. Twenty years later, the fallacy of these supposed benefits is well documented.
According to the report “NAFTA at 20” released in 2014 by Public Citizen’s Global Trade Watch, “More than 845,000 specific U.S. workers have been certified for Trade Adjustment Assistance (TAA) as having lost their jobs due to imports from Canada and Mexico or the relocation of factories to those countries.”
The report also documents the fact that “the small pre-NAFTA U.S. trade surplus with Mexico turned into a massive new trade deficit, and the pre-NAFTA U.S. trade deficit with Canada expanded greatly.” According to Census Bureau data, in 1993, the non-inflation adjusted U.S. trade surplus with Mexico was $1.6 billion, and in 2015, the U.S. trade deficit had grown to $60.7 billion. The non-inflation adjusted U.S. deficit with Canada grew from $4.4 billion in 1994 to $15.5 billion in 2015.
When our country imports more goods than it exports, we go in debt as a country to pay for these goods. We then have to borrow money or increase taxes to have enough money to run our government. This is why we now have a nearly $20 trillion national debt.
According to the Coalition for a Prosperous America, trade deficits also diminish the U.S. Gross Domestic Product. The U.S. trade deficit caused our GDP to be 3 percent less in 2015 that it would have been with balanced trade. The trade deficit has reduced U.S. GDP by 2.5 to 5.5 percent each of the past 10 years.
In addition, the report states, “NAFTA has contributed to downward pressure on U.S. wages and growing income inequality.” What this means is that as Americans lost their higher paying manufacturing jobs, they had to compete with the glut of other Americans for the non-offshorable, lower paying, low-skill jobs, in retail, hospitality, and food service.
The report revealed an unintended consequence of NAFTA — the increase of illegal immigrants to the U.S. in the past 20 years. According to the report, the increased export of subsidized U.S. corn to Mexico resulted in the destruction of “…the livelihoods of more than one million Mexican
campesino farmers and about 1.4 million additional Mexican workers whose livelihoods depended on agriculture.”
Many of these rural Mexicans emigrated, swelling the ranks of the illegal immigrants competing for low-wage jobs in the United States.
How San Diego Benefited
The greater San Diego region has benefited from the effect of this downward trend in wages in Tijuana and Tecate. Many regional companies already had assembly in Mexico prior to China’s being allowed to enter the World Trade Organization in the year 2000, and the mass exodus to China began. Those companies chose to keep or expand manufacturing across the border instead of going offshore to China.
We lost fewer manufacturing jobs in the San Diego region than other parts of California partly because of this fact, as well as having more low-volume, niche product manufacturing than Los Angeles and the Bay Area. The continued downward pressure on wages in Mexico has now made Mexico competitive with China, and companies are bringing manufacturing back to Mexico if they cannot justify San Diego using a Total Cost of Ownership Analysis.
NAFTA has not benefited American people nationwide. It may have benefited American corporations that expanded their sales in Mexico or moved manufacturing to Mexico to increase their profits. However, I am sure that none of owners of the more than 60,000 manufacturing firms that have closed in America since 1994 or the nearly one million American workers who lost their jobs because of NAFTA would say she or he benefited from this trade agreement.
The last thing we need is another free trade agreement such as the Trans-Pacific Partnership Agreement that was negotiated behind closed doors by the Obama administration for nearly six years with more than 400 corporate advisers helping to write it.