NAFTA to expand globally?

Article from Friday's Seattle Times, below.

How has NAFTA shaped small businesses involved in import-export, John? I
believe I read a post from you, many years ago, about how NAFTA basically
turned a variable cost into a fixed cost, which benefitted larger
businesses, while small mom-and-pops were disadvantaged. Pre-NAFTA an
importer or exporter paid a flat % duty, the playing field was level, since
every exporter, for example, paid the same percentage duty for the similar
product, regardless of volume. If I remember your point correctly, post
NAFTA, the paperwork issues for a given product, with no duty, created more
work initially to get the product across the borders. For the small flexible
company with lots of products and low volumes for any one product
(generally) the paperwork was a nightmare compared to just paying an 8%
tariff or whatever the duty happened to be, that everyone had to pay.
However, for the large companies, moving big volumes of each product and
office staff available to fill out paperwork, NAFTA was a bonanza, as the
overhead associated with getting a product to meet NAFTA was relatively
small by comparison.

In other words, NAFTA was less about "free trade" and more about favoring
BIG BUSINESS OVER SMALL BUSINESS. As a result of NAFTA, again if memory
serves (and with growing bouts of half-zeimers I am not so sure of my facts)
you indicated that many small import-export businesses in the US found it
easier to do business overseas, sans-NAFTA, than with our neighbors in
Canada and Mexico.

I was in El Paso, Texas many years ago, right on the Mexican border, post
NAFTA. A person I was visiting with there at the workshop, said that there
used to be (pre-NAFTA) two pages of company listings under Import-Export in
the El Paso phone book. When I was there, there was only about 2 column
inches of listings. Can I assume a lot of small players got out of the
business??

Now, reading the article below, it looks like the US political machine is
going to expand its assault on domestic small business by expanding
NAFTA-like legislation to a wider range of countries. What challenges or
opportunities will this create for the small businesses represented in this
forum? Am I overstating the downside? Or did NAFTA create small business
niche opportunities in this industry for trade between North American
contries?? If so, will the same principles apply to quasi-NAFTA's around the
globe??

Looking forward to your analysis...

Malcolm
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Lost jobs blamed on trade accord
By Alwyn Scott

Seattle Times business reporter

In a state that bills itself as the nation's most trade-dependent, it's hard
to find a politician who's against global free trade.

But a new report argues that the record U.S. trade deficit with Canada and
Mexico is costing good jobs, the opposite of what free-trade advocates
promised when the North American Free Trade Agreement (NAFTA) took effect in
1994.

The Economic Policy Institute (EPI), a Washington, D.C., think tank, said
Thursday that NAFTA has cost the U.S. more than 1 million jobs and billions
of dollars in lost wages.

The institute, partly funded by labor unions, said that while NAFTA
generated a rise in trade, it has hurt working people, particularly those
with minimal education.

U.S. pursuit of new NAFTA-like trade deals in Thailand, South Korea, Central
America and other regions has given the debate a fresh urgency.

"We've lost jobs because of growing trade deficits" with Mexico and Canada,
said Robert Scott, an EPI economist and a co-author of the report. Since
1993, the cumulative trade deficit with the NAFTA partners has grown to $107
billion, the report said.

Scott estimates that the rise in U.S. exports since NAFTA created 941,000
U.S. jobs. But the larger rise in imports from NAFTA partners displaced 1.9
million jobs that would have been created without the trade deal.

The net total of 1 million jobs lost includes 659,000 in manufacturing and
hit hardest in industry-heavy states like Michigan, Indiana, Mississippi and
California.

Washington state gained an estimated 14,688 jobs due to the rise in U.S.
exports to Canada and Mexico after NAFTA, according to the study. But jobs
displaced by rising imports cost the state 31,203 jobs, for a net loss of
16,515 jobs, or about 0.6 percent of the state's job base.

Others economists disputed the study. The number of factory jobs in the U.S.
has plunged in recent years, but many economists say more productive U.S.
workers are the cause, not trade.

While manufactured imports cause job dislocation, "it would be wrong to
equate jobs dislocated with net jobs lost in the economy as a whole," said
Gary Hufbauer, an economist at the Institute for International Economics in
Washington, D.C.

Hufbauer said the growing U.S. trade deficit wasn't caused by NAFTA but by
larger economic forces - the U.S.'s high budget deficit and low savings
rate.

Bill Center, president of the Washington Council on International Trade,
said that by blaming trade, the EPI study misses the real predicament for
U.S. workers - a lack of education, training and government assistance for
moving from manufacturing to other jobs.

"They're letting the politicians off the hook," Center said. "Politicians
should fix health care, fix education ... Those are the kinds of things we
should be addressing. Not trade."

Alwyn Scott 206-464-3329 or ascott@seattletimes.com

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