Why be afraid of NAFTA?

Andrew J. Cowin

September 24, 1993|By Andrew J. Cowin

CRITICS of the North American Free Trade Agreement (NAFTA) are so pessimistic about America's ability to compete in the world they feel threatened by a country whose entire gross national product is surpassed by America's four largest companies.

General Motors, Exxon, Ford and IBM had combined sales in 1991 of about $380 billion. Mexico's total GNP: $320 billion.

Much of the opposition to NAFTA comes from organized labor, especially the industrial unions. These are the rough-and-tumble guys who helped build America. They ran from no one, and from nothing. Now, they're so cowed by competition, so afraid of a fight, so unsure of America's ability to outproduce and out-innovate even a relatively poor country like Mexico that defeating NAFTA has become their No. 1 priority.

Face the facts, guys: The United States is the world's only remaining superpower. It is the world's wealthiest nation, and the most technologically advanced. For better or worse, even American "culture" -- its books, movies, music, TV shows and Michael Jackson -- permeates the world. From Beijing to Baghdad, CNN is in.

Forget the scare tactics. Mexico is no threat to the United States. America's economy produced $6 trillion worth of goods and services last year; Mexico's produced about one-eighteenth that amount.

But these are only statistics. What NAFTA really means can best be seen by looking at American history. In the past, America has prospered when it expanded its borders and markets, and it has suffered when it succumbed to isolationism.

Perhaps America's greatest success was the Louisiana Purchase. In 1803, Thomas Jefferson paid $15 million for territory held by the French. That money bought most of the territory west of the Mississippi River in what is now the middle third of the United States. The advantages of the Louisiana Purchase should be obvious. Its more than 1 million square miles doubled the size of America, and its farmlands became the breadbasket of the world. It was rich with iron and oil as well. It had rivers and tributaries that made commerce easy. And it provided elbow room that let the United States spread out.

Nevertheless, opponents could have come up with many good reasons to oppose the purchase: The boundaries were less than exact; France lacked clear title to the land, and therefore may not have had the right to sell it; and even Jefferson acknowledged that he lacked the constitutional authority to approve the purchase.

Of course, had some contemporary critics of NAFTA been around, some would have warned about letting Mexicans, Creoles, Spaniards and Indians become American citizens. Ross Perot might have warned about that "great sucking sound," as boatyards on the Mississippi lured business away from boatyards on the Hudson River.

Fortunately, doom and gloomers were hard to find in those days. Quite the opposite. America was still confident then, still imbibed with the pioneer spirit. That winning attitude allowed Americans to conquer the continent.

By 1930, however, hard on the heels of an immensely costly world war, attitudes in the United States had changed. Americans became wary of the outside world. Isolationism and protectionism dominated politics. One result was the Smoot-Hawley Tariff Act, which raised the cost of foreign goods sold in the United States and prompted a wave of retaliatory protectionism. The goal was to save American jobs and protect American business. In fact, the tariffs did precisely the opposite.

The worldwide depression deepened and became irreversible. Unemployment and misery gripped Europe, helping the Nazis seize power in Germany. World War II became inevitable.

The difference between 1803 and 1930 was attitude and outlook. In 1803, Americans were optimistic and confident. In 1930, pessimism had taken hold, leading to paranoia and the delusion that America could only get stronger by shutting out the world.

Today, NAFTA provides a new test of American attitudes. We can follow the heroic traditions of this country, the outward-looking, expansionist policies that brought America wealth and power. Or, we can follow the frightened, isolationist policies that brought depression, poverty and war.

The loud bickering over statistics, the disagreements on job losses or job gains, and the duelling press conferences are all distractions and background noise. The real choice goes much deeper. It goes straight to the heart of what we think about ourselves.

Andrew J. Cowin is a fellow in international business and regulatory affairs at the Heritage Foundation, a conservative think tank.

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