Monday, May 23, 2016

Free Trade, the Leftist Issue and the Truth - Raoul Lowery Contreras

by Raoul Lowery Contreras

What free trade critics never mention is the jobs allegedly lost to trade relative to the number of jobs that are created by trade.

Free enterprise and capitalism are being attacked by both presidential candidates Hillary Clinton and Donald Trump. Both say they are for “free trade” but are against free trade deals negotiated over the past three decades by the United States.

Those trade deals have benefited American consumers, all of them in a macro sense, to the tune of billions of dollars in savings and benefits. A few Americans have lost jobs in the process in a micro sense. They did not lose their lives, they weren’t taken out and shot like the farmers murdered by Russian Communists in the Ukraine that objected to losing their private farms to the government and/or working on government farms for an equal share of the proceeds in the great communist scheme of life.

In the largest sense, the number of lost jobs to trade over the past 30 years is infinitesimal. For example, in the first 20 years of the North American Free Trade Agreement (NAFTA) a documented 50,000 jobs a year were lost. By contrast, two and-a-half million jobs are lost in the average 18-month recession since 1946.

What free trade critics never mention is the jobs allegedly lost to trade relative to the number of jobs that are created by trade. Over time, certain jobs classifications are more affected than others. Manufacturing, for example. Though fewer Americans work in manufacturing, the U.S. is producing more manufactured goods with fewer people. Technology and automation are responsible. At the same time, when trade grows so do attendant jobs. The United States Chamber of Commerce estimates 14 million people work in trade with Canada and Mexico alone. The Woodrow Wilson International Center for Scholars estimates six million in trade with Mexico alone.

All 50 states trade with Mexico. Question: Do all 50 states have trade relations with all 28 European countries like they do with Mexico? Governmental agencies ranging from the Census Bureau to state economic and travel commissions have joined to produce staggering statistics about individual states and their trade with Mexico.

California, for example, sells $26.8 billion worth of goods to Mexican private firms and public agencies. Texas sells $101 billion worth of goods and services to Mexico. Vermont, tiny little Vermont, sells $213 million worth of goods and services. Alaska sells $8 million worth to Mexico. The state of Maine exports $43 million to Mexico. But outside California and Texas, the Rust Belt states sell astounding amounts of manufactured goods to Mexico. Michigan -- $12.17 billion; Ohio -- $5 billion, Indiana -- $4 billion, Wisconsin – $2.51 billion, Illinois -- $7.3 billion, and on and on.

On jobs, a miniscule number of jobs have been lost to Mexico in the 22 years since NAFTA began in January, 1994. The other side of the jobs story is best reflected in the 692,000 California jobs involved in trade with Mexico; or, 463,000 jobs in Texas working in trade with Mexico. Or, 14,372 jobs in Vermont, 128,000 in the state of Washington, or 75,500 in the state of Oregon. All 50 states export billions worth of goods and services to Mexico and employ millions in production of goods and service for the Mexican market.

Critics of trade with Mexico are not only a political anathema for Free Enterprisers, they strike the heart of the country’s philosophy of trade and violate our national consumer society’s rights and vision, its way of life and standard of living.

MACRO=Very large numbers of workers and people, benefits for the entire population, the common good for 320 million people that can be measured in standard of living, national wealth…

MICRO=Tiny numbers of workers, individuals, isolated people in small numbers, the common good is sacrificed for a tiny few…

The Peterson Institute has calculated that wages lost to trade (such as companies moving out of the U.S.) can be calculated to one-time loss of $1258 per worker (130 million workers), say in 2008, while the “prosperity quotient” of the aggregate population in the form of consumer savings though lower prices and greater choice of products amounts to billions for a period of five years (2008, 2009, 2010, 2011, and 2012). In other words, wages take a one-time hit in the year the loss occurs. The prosperity quotient is for five years for the year the wages were lost, thus the prosperity gain is cumulative at 20 percent per year for five years. Peterson economists calculate that over $700 billion in prosperity effect occurs over five years for each static year of wages lost (2008).  

The entire American population benefits by billions in consumer savings, in wages to the millions working in trade with Mexico and national income that is unmatched by trade with any nation in the world. For every dollar we send to China, for example, a grand total of four cents comes back in the form of China buying our goods and services. For every dollar we send to Mexico, forty cents comes back to the United States. So what is the problem?

Raoul Lowery Contreras


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