Hillary Clinton and NAFTA

Did Hillary Clinton oppose moving forward on NAFTA in 1993? Robert Reich tells what he remembers:

Hillary and Barack, Afta Nafta, by Robert Reich: Was Hillary Clinton really against NAFTA in 1993? I was in the administration then, and I remember her position quite precisely. And I'll get to that in a moment. But before I do, I want to say something: It’s a shame the Democratic candidates for president feel they have to make trade – specifically NAFTA – the enemy of blue-collar workers and the putative cause of their difficulties. NAFTA is not to blame. ... What happened? The economy ... crashed in late 2000, and the manufacturing jobs lost in that last recession never came back. They didn’t come back for two reasons: In some cases, employers automated the jobs out of existence... In other cases, employers shipped the jobs abroad, mostly to China – not to Mexico.

NAFTA has become a symbol for the mounting insecurities felt by blue-collar Americans. While the ... winners from trade ... far exceed the losers, there’s a big problem: The costs fall disproportionately on the losers -- mostly blue-collar workers who get dumped because their jobs can be done more cheaply by someone abroad...

Even though the winners from free trade could theoretically compensate the losers and still come out ahead, they don’t. America doesn’t have a system for helping job losers find new jobs that pay about the same as the ones they’ve lost... There’s no national retraining system. Unemployment insurance reaches fewer than 40 percent of people who lose their jobs... We have no national health care system to cover job losers and their families. There's no wage insurance. Nothing. And unless or until America finds a way to help the losers, the backlash against trade is only going to grow.

Get me? The Dems shouldn't be redebating NAFTA. They should be debating how to help Americans adapt to a new economy in which no job is safe. Okay, so back to my initial question. The answer is HRC didn't want the Administration to move forward with NAFTA, but not because she was opposed to NAFTA as a policy. She opposed NAFTA because of its timing. She wanted her health-care plan to be voted on first. She feared that the fight over NAFTA would use up so much of the White House's political capital that there wouldn't be enough left when it came to pushing for health care. In retrospect, she was probably right.

Comments

[dissent]

Outsourcing manufacturing and service jobs to low wage countries is designed to drive wages down. That is the point. As we say in software, it's not a bug it's a feature. Given that fundamental fact, a little policy massage for "retraining" seems an odd thing to have faith in. For decades liberal policy wonks have been chattering about fixing our poorly performing public schools, and they are so very unfixed. I find it impossible to imagine the Federal Govt wading against the outsourcing stream and creating useful "retraining" programs. Even if (a big if) these are widely available, high quality programs, for what jobs? Has Reich noticed the proliferation of low wage jobs and the disappearance of well paid jobs? Again, it's not a bug, it's a feature.

[ken melvin]

What's the net for the US? Who's winning? By how much? Who's losing? How much? What happens to the losers?

[Sonia]

Health reform that creates obvious large numbers of important loosers is probably doomed from the start. Any obvious limitations on incomes of workers in the health care sector will create a "Harry and Louise" backlash. The failure of the Clinton administration to early on engage the Congress combined with a failure to understand the significance of the fact that most middle class individuals were satisfied with their own doctors set the process up for failure.

[hammerhead]

"She feared that the fight over NAFTA would use up so much of the White House's political capital that there wouldn't be enough left when it came to pushing for health care. In retrospect, she was probably right."

Nope, she was probably wrong. With or without NAFTA, the Clinton White House never had the "political capital" to push Hillary's health care plan through.

Even without NAFTA, US jobs would have migrated to countries with less expensive labor. The migration of cheap labor in and out of America was nothing new. Mill work, for instance, had long ago moved from the northeast to the southeast. It was only a matter of time until it moved out of the country. Water seeks its lowest level.

Unfortunately, once our manufacturing moved offshore, our country lost any semblance of self-suffiency. And now that we've become ethanoholics, we may even have lost the ability to feed ourselves.

[hari]

NAFTA or no NAFTA, THAT'S THE QUESTION!!!

For nationalism and patriotism, it is a good slogan for the time being. Yet, US govs have traditionally done, in my life time, is that they've promoted expansion of trade rather than aid! Was that a good global policy to allow developing countreis to earn their way into the rich-mans-club (OECD) or not?

[lonesome moderate]

I can hardly express disagreement with these sentiments, since they're basically the same thing that I've been saying on this forum for the past couple of years, along with Anne and maybe one or two other people. We were always greatly outnumbered by NAFTA's critics, however, and I eventually became convinced that free trade was such a loser politically that the next president had to take this anger and frustration into account, and distance him/herself from free trade.

Now, that we have a leading presidential candidate criticizing NAFTA, though, most posters here seem to have lost interest. I wonder why.

[hari]

The assumption is simply that the leading candidate knows what he's talking about when it comes to external trade. I'm not at all sure he/she does. Their background/experience is such that it leaves a lot to be desired when discussing comparative trade advantage and factors of trade which have only recently made US an export country. US was most of its post-war period a dominantly non-exporting nation.

The question is why did trade liberalization become a policy instrument under Clinton Admin? Globalization?
Hi Fi 24/7 markets? WTO?

[david]

One of the weirdest of trade ticks is the idea that comparative advantage is hard something hard for ordinary folk to understand. Big block letters written in crayon, handed over by someone who thinks it's just way too sophisticated for me to get. I don't get it.

[lonesome moderate]

Hari - The WTO didn't exist before Clinton took office, so I think we can rule that out as a reason ;-).

My belief, and I think the belief of the Clinton Administration, was that, with communism extinct, free trade was the best way to build world peace. The idea is that, if the world consists largely of a bunch of reasonably wealthy countries whose economies are largely dependent on export/import relationships with other fairly wealthy countries, then these nations would recognize the insanity of going to war with each other.

I for one haven't totally given up on that idea, although we'll need better leadership to make it really work.

[lonesome moderate]

Regarding specifically NAFTA, the line I always heard was that "we would rather have Spain than Bangladesh on our southern border". To me if you look at it in isolation it's hard to look at NAFTA as anything but as success, but it has perhaps not been as great a success as we had hoped. Also, as Reich says, American workers facing trade pressures (particularly Midwesterners) are for some reason more likely to blame Mexico than China, even though China has in fact had a much larger impact. I don't really understand why this is--perhaps someone closer to that reality can offer a clue?

[robertdfeinman]

NAFTA did not have a big effect on the loss of jobs in the US, but the next primary is in Ohio where everyone believes that it did, so the candidates pander. Big surprise.

NAFTA did have a big negative effect, but it was on the Mexican economy. That's why there is a flood of peasants moving from the countryside to Mexican cities and into the US as well. Cheap corn imports from the US have destroyed the subsistence farming economy. It is also why there is a low grade civil war going on in Mexico as well.

NAFTA was meant to benefit US farmers, and it is doing that. It will also benefit firms like Walmart as restrictions on trucking from Mexico are lifted. Walmart is promoting increased port facilities in Mexico so it can avoid the unionized ports in California. Walmart imports something like $9 billion in goods from China. After the containers are unloaded in Mexico they will be put onto trucks run by non-unionized Mexican drivers and moved into the US. That's who benefits from NAFTA.

The question is why did manufacturing move out of the US? There seems not to be a single answer. Clothing and shoes have a high labor component and are cheap to ship, so moving these industries abroad makes economic sense (at least for the firm's owners).

But what's the rationale for moving heavy industry, or drug production or semi-conductors? Much of this work is automated and labor is not a high percentage of the overall cost. Even the complaints of Detroit don't add up. Japanese automakers are building cars in the US with US labor. The claim by the big three that they have legacy benefits to cover doesn't wash. If they had been setting money aside in a prudent fashion all along these costs would have been covered. Instead they underfunded benefits and paid out the "profits" leaving the hole for the future. The future has arrived.

Personally, I think much of the reason for moving production abroad was motivated by a desire to run away from organized labor and allow the autocrats who typically run large firms to manage without having to deal with other power centers. In other words outsourcing is part of an ego trip by CEO's. One can see the same ego motivated actions in merger actions. CEO's want bigger bragging rights, but most mergers turn out poorly and most acquiring companies suffer a loss in stock price when they are announced.

For-profit firms are run as modern day duchies and the heads of them are just as vain as their predecessors (and as clueless).

[joe]

It's interesting how Mark Thoma handpicks Reich blogs; pick when Reich'S views tally with his own views (e.g. the above post), and ignore when they do not (e.g. the one that was critical of Krugnman's NY piece criticizing Obama)

[anne]

http://matthewyglesias.theatlantic.com/archives/2008/02/nafta_crosstalk.php

February 29, 2008

NAFTA Crosstalk
By Matthew Yglesias

Yesterday, Canadian television reported that Obama advisors were telling Canada's ambassador in Washington not to take the candidate's NAFTA rhetoric too seriously. Now what really seems to have happened * is that Austan Goolsbee tried to get someone from the Canadian consulate in Chicago to be a bit less worried about Obama. Whatever the details, this kind of ambiguous messaging is likely to recur time and again.

I recall being at a meeting in Cambridge, MA around the time of the 2004 Democratic Convention where John Kerry's top economic and foreign policy advisors were essentially promising a group of assembled ambassadors that all of his anti-trade rhetoric was just empty rhetoric. This seemed like a typically Kerryish thing to have happen, but it would serve Obama may to try to avoid the same kind of thing repeating.

* http://talkingpointsmemo.com/archives/180716.php

[anne]

Canadians immediately became aware of what seems to be Austan Goolsbee's assurance, an assurance that was foolish because it was unnecessary. We even like some Canadians, so at least those so fortunate can rest secure. Eh.

[Mark Thoma]

Of course I don't post things I think are wrong. Why should I?

Sometimes there's value in pointing out why something is wrong, but other times, even when good counterarguments are part of the post, posting something gives it the light of day it might not have gotten otherwise and only serves to give the argument a wider audience. If people are already well aware of something, it's often worth rebutting since it's already found the light of day, but it doesn't do a lot of good to say "here's something you didn't know about and here's why it's wrong."

In addition. Reich's rss feed is on the sidebar - so everything he posts gets some attention here. I don't post everything he posts, or everything anyone else posts on their blog -- I have to sort things into those I want to post and those I skip over. Why would I select something I think is wrong or does not advance an issue at the expense of something that does?

So I really don't get your problem with my selecting the things I think are worth presenting, and casting the rest aside.

[hari]

@ Mark -

I must defend you and specially the practical use of the Sidebar because I find it most useful (when I get tired of repeated arguments of the same gender and root!).

[hari]

@lonesomemoderate -

@rdf -

You both make compelling arguments on NAFTA and its genesis.

I know Clinton was responsible for creating WTO (I was involved at the time with Gatt Rounds). What I did was simply make a list of things which form the genesis of a globalization policy framework under Clinton/Rubinomics.

In the current context of debate about the nexis of NAFTA and its trade impact, even PK will eventually come around to admit that domestic inequality has a fiscal economic determinate which need to be fully studied and explained.

It's a Rational Fool who thinks the quantum of trade with Mexico has contributed to income inequality. And, as long as unis continue to produce "theoretical" modelling gods rather than "practical" transformers of economy, short-terminism against long-term national interest, the chances are not good (for the moment) to turn this huge giant of a capitalist mecca around...

[jm]

The claim that America does not have system for helping losers is grossly inaccurate. Whenever bank managers are so irresponsible in their mad scrabble to make big bonuses by lending other people's money to people who are unlikely ever to pay it back (and so don't mind borrowing on terms that make the loans apparently very profitable for a long enough time for the bankers to "make their numbers"), we have an institution called the Federal Reserve Bank that forces interest rates on the CDs bought by small savers so low that the banks can make enough money off them to restore their capital so those money-losing bankers can do it all over again.

And since the inflation this generates wipes out the debts of innumerable spendthrifts, it helps an even larger army of money-losers.

In America, you've just got to be the right kind of loser.

[save_the_rustbelt]

Senators Clinton and Obama are crisscrossing Ohio promising milk, honey and two chickens in every pot. A half hour after the primary is decided they will forget that Ohio exists (do I sound cynical?) until September. McCain is going to save Ohio also - gag.

Best estimate by both political parties in Ohio is that NAFTA cost Ohio 50000 - 55000 manufacturing jobs, of about 275,000 job lost overall. Of course, this is a net figure, what few jobs were created barely made a dent.

Nobody really gives much of a damn about blue collar workers - except for a brief period at election time.

[save_the_rustbelt]

Hey, question:

Both Democrat candidates are promising to improve the situation for US workers by improving wages and working standards for foreign workers.

Ah, that will improve the lives of foreign workers, but I don't see a single speck of benefit for US workers, unless all of the foreign workers start receiving US wages and benefits.

Both parties are throwing blue collar workers overboard, it is just that the Democrats do not tie a cement block to each leg first, which I guess makes them better.

[ken melvin]

Rusty - so Ohioans will vote for McCain?

[anne]

"Best estimate by both political parties in Ohio is that NAFTA cost Ohio 50000 - 55000 manufacturing jobs, of about 275,000 job lost overall. Of course, this is a net figure, what few jobs were created barely made a dent."

Document this. Using self-defeating metaphors, by the way, is merely self-defeating and never allows for any constructive approach to a problem.

There are many ways in which workers might have been helped for years in the middle west, but the arguments used continually make programs that could help impossible. Mention infrastructure and there are sneers. Mention education, including no tuition public college and university education and there are sneers. Mention universal health care and there are sneers. On and on.

[anne]

http://delong.typepad.com/sdj/2008/03/robert-reich-on.html

March 1, 2008

Robert Reich on NAFTA
By Brad DeLong

He writes:

Robert Reich's Blog: Hillary and Barack, Afta Nafta: * It’s a shame the Democratic candidates for president feel they have to make trade – specifically NAFTA – the enemy of blue-collar workers.... NAFTA is not to blame.... When NAFTA took effect, Ohio had 990,000 manufacturing jobs. Two years later, in 1996, it had 1,300,000 manufacturing jobs. The number stayed above a million for the rest of the 1990s. Today, though, there are about 775,000 manufacturing jobs in Ohio.

What happened? The economy... crashed in late 2000, and the manufacturing jobs lost in that last recession never came back... employers automated the jobs out of existence, using robots and computers... [and] shipped the jobs abroad, mostly to China – not to Mexico.

NAFTA has become a symbol for the mounting insecurities felt by blue-collar Americans. While the overall benefits from free trade far exceed the costs, and the winners from trade (including all of us consumers who get cheaper goods and services because of it) far exceed the losers, there’s a big problem: The costs fall disproportionately on the losers -- mostly blue-collar workers who get dumped because their jobs can be done more cheaply by someone abroad who’ll do it for a fraction of the American wage.... Even though the winners from free trade could theoretically compensate the losers and still come out ahead, they don’t. America doesn’t have a system for helping job losers find new jobs that pay about the same as the ones they’ve lost – regardless of whether the loss was because of trade or automation. There’s no national retraining system. Unemployment insurance reaches fewer than 40 percent of people who lose their jobs.... There's no wage insurance. Nothing....

Get me? The Dems shouldn't be redebating NAFTA. They should be debating how to help Americans adapt to a new economy in which no job is safe. Okay, so back to my initial question. The answer is HRC didn't want the Administration to move forward with NAFTA... because of its timing. She wanted her health-care plan to be voted on first...

There are other, secondary causes of declining numbers of manufacturing jobs in Ohio. The Bush budget deficits certainly don't help.

* http://robertreich.blogspot.com/2008/02/hillary-and-barack-afta-nafta.html

[anne]

http://www.epi.org/printer.cfm?id=2903&content_type=1&nice_name=webfeatures_snapshots_20080227

February 27, 2008

Ohio Voters and Candidates Take a Dim View of NAFTA
By Ross Eisenbrey

[However, I can easily find a claim that NAFTA cost 363,000 jobs in auto related employment. What can be substantiated?]

[Joe]

Mark, I liked your defense of how you select posts for this blog. (You didn't have to defend what you do in your own blog, after all.) I learned economics from Krugman's writings, and I think he his is often the correct and lone voice on many issues. However, I felt strongly, as Reich did, about his views on Obama.

[anne]

Though Barack Obama is a brilliant campaigner, nonetheless criticism when due is important and will tell us how Obama will take criticism if elected. I am completely hopeful, the more so with a tolerant and thoughtful and necessarily flexible Obama.

[ken melvin]

Obama is not a cult, it's a new religion.

[anne]

Actually, distortion of religious symbolism is precisely a line of attack Republicans will use against Obama; a line of attack already being used.

[Lafayette]

Change Spending Propensities

dissent: Has Reich noticed the proliferation of low wage jobs and the disappearance of well paid jobs?

Everybody has noticed. We are not blind. When there is no job alternative, the unemployed take what is available ... and those are lower-paying service jobs that require few or no real skills.

But, you don't rail against the only viable long-term option, which is enhancing workforce skills by moving up the competence ladder. Unless, of course, we'd do better to spend our efforts comforting people that their low-paying service-sector jobs are the "way to go". (Is that what you propose?)

They aren't. The service-sector work simply incarcerates un- and semi-skilled personnel in minimum-wage subsistence employment.

The way to go is (1) Increase upper-income marginal rates to 92%, (2) Institute a national Value-Added-Tax to allow recession-proof tax funding (shared with the states) and (3) Spend massively on Secondary-school, Trade/Professional Training and University education (all of them free, gratis and for nothing).

Then wait five to ten years for the impact on the economy to be felt. An increase in talents change Spending Propensities, which stimulate Demand in services. This leads directly to more local employment opportunity.

What to do till it does? Swim vigorously to keep one's head above water.

Reich above is correct that America's Social Safety Net has holes wide enough to drive a truck through. So, there are a great many who fall right through into sub-subsistence living. Increased taxation (particularly of upper-income levels) and Public Service spending are the only solutions worth considering. Besides, the spending will also create jobs.

(Of course, Wall Street Golden Boys will take a serious hit ... but who cares?)

There is NO QUICK FIX. Not with Barack, not with Hillary, not with McCain. Nobody has a quick fix to a mess we've been getting into for decades.

[wjd123]

Last night I watched the results of the primaries come in on MSNBC. I wanted to see if Tim Russert or anyone would mention that if we wanted to withdraw from NAFTA we could within six months. That they would opt-out is the leverage Hillary and Obama said they need to renegotiate the agreement. It's renegotiate or else and not renegotiate or nothing. The latter makes no sense.

So every time Russert mentioned the fact that both democratic candidates "wanted to renegotiate NAFTA" he should have added "or they will opt-out of it." That never happened. In fact I never heard anyone mention the results of not renegotiating.

I don't think that this is accidental. Corporate America doesn't want to hear anything about opt-outs. Perhaps, Russert has been promised greater access to the candidates if he doesn't press them on the opt-out leverage part of their promise? Russert was the one who asked about opting out in the last debate.

I think that Obama's "Downing Street Memo" to the Canadian Embassy helped Hillary win so decisively in Ohio. His economic adviser made it sound as if the decision not to opt-out of NAFTA has already been made. All the fuss is just for show.

Hillary pressed this advantage weakly. She hasn't mentioned the word opt-out since the last debate. Obama has the "understanding" hung around his neck and Hillary won't mention the opt-out part of the renegotiating equation. She as bad as Russert. She is either going to have to make the connection or lose her advantage by the time she reaches Pennsylvania.

NAFTA haters need reassured that the opt-out is on the table and is a real option. Without that assurance they'll both be seen as blowing smoke.

She can make the connection before Obama does and win Pennsylvania big, or she can be suspected of just not getting caught with her own Downing Street Memo and settle for not exceeding expectations.

Oh, one other thing. Will someone in the press core tell John McCain that NAFTA is an agreement and not a treaty.