Democratic presidential debate televised <br>by CNN. Photo by <a href="">sea turtle</a> (<a href="">CC</a>).
Democratic presidential debate televised
by CNN. Photo by sea turtle (CC).

Policy Innovations Digital Magazine (2006-2016): Briefings: Let's Make a New Deal

Mar 3, 2008

Controversy surrounding the 15-year-old North American Free Trade Agreement (NAFTA) was unexpectedly resurrected in the run-up to Tuesday's crucial Democratic primaries in Ohio and Texas.

Hillary Clinton and Barack Obama have both pledged to explore renegotiation of the trade pact signed into law by President Bill Clinton in 1993. Supporters credit NAFTA with hastening Mexico's economic and political liberalization, while critics associate the agreement with a decline in U.S. manufacturing and corporate avoidance of strict U.S. environmental and labor standards.

"There are workers in Youngstown, Ohio who've watched job after job after job disappear because of bad trade deals like NAFTA," Obama said in a speech after his Wisconsin primary win.

Senator Clinton has said she opposed the accord as far back as 1993, and her campaign points to her biographer and insiders from Bill Clinton's administration to back up her claims of long-standing opposition. "Our market is the market that everybody wants to be in. We should quit giving it away so willy-nilly," she once said.

What effect has NAFTA had on the American economy? According to Matthew Slaughter, Dartmouth economist and former member of President George W. Bush's Council of Economic Advisers, "The concerns of people feeling pressure in places like Ohio are real. Unfortunately, NAFTA hasn't had nearly as much of an economic impact as some people say."

Official estimates indicate that NAFTA has contributed less than a one percent increase to U.S. GDP since 1994. Obama and Clinton have seized on this underperformance as evidence of the agreement's shortcomings. But there is little evidence to support the claim that NAFTA is responsible for the loss of manufacturing jobs in places like Ohio.

"There have been very significant manufacturing job losses in the United States during the last fifteen years. But trade agreements and free trade in general only account for between nine and twenty five percent of total manufacturing job losses. The rest is attributable to bad economic policy, technological change, and other factors," said Kevin Gallagher, director of graduate studies and assistant professor of international relations at Boston University.

Nevertheless, at their debate in Cleveland last week, both candidates expressed readiness to toss NAFTA overboard.

"I will say we will opt out of NAFTA unless we renegotiate," said Clinton. "I have said we will renegotiate NAFTA [and] you would have to say to Canada and Mexico, 'That's what we are going to do.'"

"We should use the hammer of a potential opt-out," Obama concurred.

So how realistic is it to renegotiate a multi-billion dollar trade deal?

According to Gallagher, the candidates should be careful what they wish for. "If you try to renegotiate NAFTA, Canada and Mexico are going to have a few things they'd like to add to a new agreement as well. And these are things that U.S. interests are not going to support. These are things like protections for Mexican corn farmers and changes in certain energy provisions that the Canadians aren't too happy with," he said.

The United States imports more oil from Canada than any other country, giving Ottawa leverage in any renegotiation. There is also a lingering dispute over the Canadian government's stake in the softwood timber industry, which Washington characterizes as an unfair subsidy. The Canadians would likely seek concessions on that issue as well.

"Other countries pay attention. They're watching us," said Slaughter. "These kinds of discussions don't help us when we sit down to negotiate treaties."

Both candidates have been accused of playing up their anti-NAFTA rhetoric for the benefit of Ohio's Democratic voters. Clinton has been forced to explain a litany of past comments in support of the trade deal, a hallmark of her husband's administration. Canada's CTV television network reported last week that an Obama campaign staffer urged Canada's Ambassador to the United States not to take the senator's NAFTA bashing seriously.

What will the voters make of the mismatched rhetoric and reality? "Let's face it," said Gallagher, "In an election year, if someone believes that they lost their job because of NAFTA, you can't tell them that it's not true and then say, 'Please vote for me.'"

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