On both sides of the aisle this presidential election, powerful populist uprisings have supported the notion that, the free trade deals that the U.S. has entered in recent history have resulted in massive job loss.
Specifically, they use the North American Free Trade Agreement (NAFTA) as an example of what will go wrong if we approve the Trans Pacific Partnership (TPP).
The politicians who push this flawed agenda falsely claim that NAFTA eliminated hundreds of thousands of American jobs without growing the American economy. The scariest part of this argument is that while it used to be primarily pushed by fringe candidates, it is now touted by the Democratic and Republican presidential nominees alike even though in 2012 Clinton was quoted saying, “TPP sets the gold standard in trade agreements.”
It is unfair to say that free trade equally benefits everyone involved. Evidence does suggest that, at times, these deals have exacerbated the process of American job loss in already diminishing industries. For example, NAFTA did cause a number of jobs, especially manufacturing jobs in the Midwest, to move to Mexico.
However, the large numbers of “lost” jobs touted by populist presidential candidates are almost certainly inflated. Namely, in a debate with Hillary Clinton in Flint, Michigan, Senator Bernie Sanders claimed, “NAFTA…cost us 800,000 jobs nationwide.”
Sure, this quote plays well to an audience in Flint, where many American cars were manufactured before the introduction of NAFTA.
However, upon closer inspection, it becomes glaringly obvious that these numbers are incorrect.
Sanders bases his claim that 800,000 jobs nationwide were lost on a report conducted by the Economic Policy Institute, a research organization that, on its website, recognizes that “27 percent [of funding] came from labor unions.” This high percentage of funding for the organization should raise some skepticism regarding the validity of the reported numbers. With such strong union support, it is quite possible that the Economic Policy Institute’s report is biased in favor of organized labor.
In order to get a true snapshot of the impact NAFTA has actually had on American jobs numbers, it is important to consider unbiased sources. A quick examination of research performed by the Congressional Research Service, a nonpartisan “legislative branch agency within the Library of Congress” validates the suspicion that the research performed both by the Economic Policy Institute is almost certainly biased. Their report on the economic effects of NAFTA suggests that while it is quite difficult to attain an exact number of jobs gained or lost directly due to the trade policy, “NAFTA did not cause the huge job losses feared by the critics … The net overall effect of NAFTA on the U.S. economy appears to have been relatively modest.” 800,000 jobs lost is certainly not a modest figure.
A similar report conducted by the Organization for Economic Cooperation and Development, a nonpartisan group comprised and funded by the governments of 35 member countries yields a virtually identical result to that of the Congressional Research Service’s report.
According to their statistics, “The net employment effects were relatively small, although there were adjustments across sectors displacing workers.” Again, the numbers released by the Economic Policy Institute were not “relatively small.”
Overwhelming bipartisan data suggests that NAFTA, almost certainly, had a minimal effect on total job numbers. This data raises a new, important question. Namely, what happened to the manufacturing jobs that seemed to have disappeared in places like Flint, Michigan?
Wharton professor Mauro Guillen gives an excellent explanation. He suggests, with regards to job loss, that these blue-collar jobs were already destined to leave the U.S. for countries that could pay employees lower wages and that “perhaps NAFTA accelerated the process, but it did not make a huge difference.
“At the same time, a lot of jobs were created in the U.S. that wouldn’t be there without the Mexico trade.,” Guillen said. “I’m not just talking about Texas or California or Arizona. Many of the products made in Mexico are designed in the United States. So there are a lot of jobs created here.”
Essentially, NAFTA accelerated an already predestined transfer of American jobs to the developing world, while at the same time ushering in a new sector of sustainable American jobs that would be harder to replicate overseas.
History suggests that the vast majority of job loss created by TPP approval will be an accelerated inevitability. Yet at the same time, the jobs it will create are not those that can easily be moved abroad. Therefore, politicians who use NAFTA as a showcase for the evils of free trade are in the wrong.
