Perot's dead wrong on NAFTA

Don E. Newquist

May 12, 1993|By Don E. Newquist

ROSS Perot, that master of the sound bite, coined a classic during his on-again, off-again presidential campaign: the "giant sucking sound" he claims we will hear as jobs move from the United States to Mexico under the North American Free Trade Agreement.

These days, the only sound I hear, though, is Mr. Perot's misinformed, misleading and often simply untrue NAFTA-bashing. He is dead wrong.

If Congress passes the legislation to carry NAFTA out, it will create jobs, in the United States as well as in Mexico.

The U.S. International Trade Commission's most recent study of the effects of NAFTA (the eighth in six years) was delivered to Congress in February.

Although certain U.S. industries may suffer limited losses of jobs, it found, the overall U.S. economy will enjoy more jobs, increased exports and higher wages with the agreement than without it.

Virtually every other reputable study (there have been dozens) reaches the same conclusions. Speaking for myself and not for the commission, I must say I find that accumulated evidence persuasive.

Only recently has Mr. Perot cited empirical research to back up his claim. It is a recent study by Pat Choate, a political economist in Washington.

The study says that NAFTA will put more than 5.9 million U.S. jobs in jeopardy of being moved to Mexico. Mr. Choate arrived at this figure by adding up all the jobs in U.S. industries where labor costs account for at least 20 percent of total expenses and the average wage exceeds $7 an hour.

All these jobs, he suggests, are so costly that the temptation will be overwhelming to move them to low-wage Mexico. But there is nothing preventing those jobs from being moved there right now, with or without NAFTA. Why are they still here?

In fact, if companies based their plant locations only on labor costs, there would be few factories left in the United States, or in Europe and Japan.

But firms look at many factors, including a plant's productivity, transportation costs, the availability of raw materials and proximity to markets.

In all these considerations, the United States is a world leader and that is why thousands of U.S. companies still employ millions of workers in this country even though they could pick up tomorrow and move anywhere.

Some companies -- one is Quality Coils of Stonington, Conn. -- have moved plants back to the United States from Mexico after finding that lower Mexican labor costs did not offset the higher productivity of U.S. workers.

In 1986, when Mexico joined the General Agreement on Tariffs and Trade, it reduced its once high tariffs to no more than 50 percent of the value of imported goods. President Carlos Salinas de Gortari continued to reduce tariff rates until they now average only 10 to 13 percent for manufactured goods from the United States.

The result has been an expansion of U.S. exports to Mexico, which reversed what was a $5.6 billion U.S. merchandise trade deficit in 1987 to a $5 billion U.S. trade surplus in 1992. Those exports helped to create hundreds of thousands of new jobs here.

One would think that Ross Perot would have a better understanding of the economics of trade. In fact, he may. Even as he urges Congress to kill NAFTA, his family stands to reap the benefits of increased trade through the Perot-developed Alliance Airport complex north of Dallas, which is being promoted as a trade hub between the United States and Mexico.

NAFTA could end up proving Mr. Perot wrong in a way he won't be able to rebut: It could give him hundreds of new American employees.

Don E. Newquist is chairman of the United States International Trade Commission.

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