Mark Thoma on NAFTA
By David Henderson
Yesterday, economist Mark Thoma wrote a piece on Donald Trump’s claim that NAFTA was a disaster. It’s titled “Is Donald Trump right to call NAFTA a ‘disaster’?”
I thought Thoma would say it wasn’t a disaster because, however imperfect NAFTA was–and it was imperfect–it was a step toward free trade. (It was also a customs union, which isn’t the same as free trade but, on net, it was a step toward free trade also.) Thousands of tariffs were cut, sometimes to zero, on Mexican products sent to the United States and on U.S. products sent to Mexico. When taxes (tariffs are taxes) are cut on goods that you buy, you’re better off.
But that’s not how Thoma judged NAFTA. Instead, he wrote:
Is he right? Was NAFTA a disaster? The answer to that question depends on how we measure the results. For the U.S. — where the Bill Clinton administration sold the agreement as a job-creating policy because U.S. exports would grow by more than its imports — the agreement has not lived up to its promise.
Estimates vary, but it appears that somewhere in the neighborhood of 350,000 to 700,000 jobs were lost due to the agreement, and when these workers eventually found new jobs, their incomes fell slightly (though some claim that incomes went up modestly).
Of course, Thoma has every right to use whatever standards he wants to judge trade agreements. He chooses the standard that Bill Clinton chose. I find that strange given that he is an economist and economists tend to judge trade agreements by how much they benefit not just producers, but also consumers. Indeed, probably over half the benefits to a particular country from a trade agreement is the gain in variety of, and drop in prices of, imports.
But Thoma says not a word about consumers.