Viva NAFTA? - pros and cons of NAFTA - Cover Story

National Review, Oct 18, 1993 by Tom Bethell

Is NAFTA a free-trade accord? Or have President Clinton's side agreements turned it into a document locking us into an international regulatory behemoth?

THE FIRST thing to say about the North American Free Trade Agreement is that the protectionist attacks on it by Ross Perot, Dick Gephardt, Ralph Nader, Jesse Jackson, and others are nonsensical. Jimmy Carter was not exaggerating when he characterized Perot as a demagogue "with unlimited financial resources, who is extremely careless with the truth, and who is preying on the fears and uncertainties of the American public." The agreement will not create a giant sucking sound and it will not result in the loss of tens of thousands of American jobs. Possibly it will create jobs, as supporters maintain. But the jobs issue that has dominated the debate is a distraction. In searching for the good and the bad in NAFTA, the issue points us in entirely the wrong direction.

Cato Institute Chairman William Niskanen, a NAFTA supporter, finds the jobs issue "extraordinarily overblown on both sides," and doesn't think the agreement's effect on jobs is measurable. In general he finds the agreement "messy," with "an awful lot of junk in it," but still, "on net it is beneficial." Michael Kinsley of The New Republic is right when he says that "the person who will get a job because of NAFTA isn't even aware of it yet; the person who may lose a job because of it is all too aware." Robert Samuelson of Newsweek is right when he criticizes the idea that Mexico "will hijack our industrial base." If this were true it would already have happened. "Mexico's wages have long been lower than ours, and most of its exports already enter our market without any tariff," says Gary Hufbauer of the Institute for International Economics.

Milton Friedman of the Hoover Institution says: "I strongly support the passage of NAFTA, even though it does not go as far as I would like. It is mislabeled. It should be called the North American Managed Trade Agreement because it retains so many restrictions on free trade. Nonetheless, it is a step in the right direction ..." Those who are skeptical of endorsements by economists should know that support for free trade is one of the few areas where liberal and conservative economists have been both in agreement and overwhelmingly correct (if you think that economic growth is a good thing and that monopoly is undesirable).

The Catch

NAFTA'S goal is to reduce tariffs among Mexico, Canada, and the United States over a period of years, making it easier to trade goods across national borders, and increasing economic efficiency in North America. These goals are laudable, and if there were nothing more to NAFTA than that, it would clearly deserve the strong support of all who believe in liberty and free markets.

But that is not all. NAFTA comes with side agreements on labor and the environment, and yet another on "import surges." The latter permits a "snap-back" to pre-NAFTA tariff rates "if increased exports from Mexico are a substantial cause of, or threaten, serious injury to a domestic industry." In other words, a specifically protectionist provision has now been unambiguously written into a "free-trade" agreement.

These side agreements were not made public until September, by which time politicians of all persuasions had declared for or against the treaty: in so doing, they were totally dependent upon the interpretation of a small number of staff aides and think-tank researchers, some of whom had themselves only seen summaries of these documents. Representative Dick Armey, who supports the agreement, told me that he had not actually studied the legalese, but was relying on Joint Economic Committee staffer Edward Hudgins, who had. The same was no doubt true of all 434 other congressmen--except that many of them wouldn't even have had the services of Mr. Hudgins so readily at their disposal.

Armey told me that the agreement wasn't perfect but probably took us "as far and as fast as we can go in the direction of free trade" right now. He would have preferred a two-page document, he said, but the side agreements were more in the nature of "sunshine commissions" than "concessions of our own autonomy."

The principal concern is the side agreement on "environmental cooperation," which will create a Commission with an "aggressive and important workplan," a Council made up of the three countries "top environmental officials," a Joint Advisory Committee, and, yes, a Secretariat. As the example of Maastricht has shown, the powers that such transnational bodies feel free to exercise within a few years of their creation can only be described as uncertain. In a speech to the House of Lords recently, Margaret Thatcher made a last-minute but unavailing attempt to derail the movement toward closer European union and loss of national sovereignty. "Thatcher declared she had been hoodwinked as prime minister into letting Britain slide toward a federal-type Europe," AP reported. "'Yes, we got our fingers burned," she said, accusing the EC of using a 1986 act that demolished trade barriers to sneak in regulations on everything from labor rights to water standards."