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Is Trump factually incorrect about NAFTA?

Sunday, October 2, 2016 19:32
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(Before It's News)

Mary Anastasia O'Grady of the Wall Street Journal is a journalist I respect. She believes that Trump's criticism of NAFTA is not justified by the facts.

…Nafta disrupted the economic status quo in the U.S.—as it did in Mexico. There have been winners and losers. But the U.S. dislocations are minor compared with those that occur from technological advances or when companies move production from high-tax, union-dominated U.S. states to low-tax, right-to-work states, and especially so when compared with the economic efficiencies gained.

Mr. Trump gave a quick nod to one genuine U.S. disadvantage during the debate when he talked about cutting U.S. corporate tax rates to spur investment at home. But his main message was that under Nafta Mexico is “stealing” U.S. jobs.

In fact, an interconnected North American economy has made U.S. manufacturing globally competitive. U.S. companies source components from Mexico and Canada and add value in innovation, design and marketing. The final outputs are among the most high-quality, low-price products in the world.

…But from 2010-14 almost $70 billion was invested in the North American automotive industry. Mr. Trump claims that investment is going to Mexico but two-thirds of it went into the U.S., according to a January 2015 report by the Michigan-based Center for Automotive Research.

This investment dynamism helped generate 264,800 new U.S. jobs in motor-vehicle production and parts between January 2010 and June 2016, according to the Bureau of Labor Statistics. That’s a 40% increase in employment despite the increasing trend toward robotics in the industry. Shut down Nafta and these workers and future job seekers will pay.

U.S. agriculture would also suffer. U.S. farm products now enter Mexico practically tariff-free and in 2013 (the latest year that data is available) it was the third-largest foreign market for U.S. farm output after China and Canada.

…competitive again.
ENLARGE
PHOTO: GETTY IMAGES/ISTOCKPHOTO
By MARY ANASTASIA O’GRADY
Oct. 2, 2016 5:45 p.m. ET
63 COMMENTS
Donald Trump said during the first presidential debate that the North American Free Trade Agreement (Nafta) “is the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.” Such hyperbolic rhetoric—butchered syntax and all—was undoubtedly cheered by his base. But it is not supported by the facts. As a result it harms his case with Republican holdouts, whom Mr. Trump needs to win but who distrust his fast-and-loose economics.

The Republican is promising to force a renegotiation of Nafta. But he doesn’t seem to realize that Mexico gave up more tariff protection than the U.S. did when the agreement was signed in 1993. If Nafta is reopened, Mexico is unlikely to accept new limits on its access to the U.S. market. If a standoff leads to the end of Nafta, both countries would revert to their commitments under World Trade Organization rules and the existing “most-favored nation” tariff schedule. That would hurt, not help, the U.S. economy.

Mr. Trump is so reckless on trade that he makes Hillary Clinton and the Democrats, who wrote the book on Big Labor protectionism, seem sane. At least she acknowledged in the debate the importance of opening new markets abroad. “We are 5% of the world’s population. We have to trade with the other 95%,” she said.

Unfortunately neither of the candidates is good on this critical issue but the Republicans advising Mr. Trump should know better. His attempt to slam Nafta by pointing to a 16% value-added tax that Mexican importers pay, for example, is misleading. This tax applies to transactions on both foreign and domestic-made goods, like the New York sales tax. It doesn’t discriminate against imports, and the importer recovers it by charging it to the customer. That’s Econ 101.

Nafta disrupted the economic status quo in the U.S.—as it did in Mexico. There have been winners and losers. But the U.S. dislocations are minor compared with those that occur from technological advances or when companies move production from high-tax, union-dominated U.S. states to low-tax, right-to-work states, and especially so when compared with the economic efficiencies gained.

Mr. Trump gave a quick nod to one genuine U.S. disadvantage during the debate when he talked about cutting U.S. corporate tax rates to spur investment at home. But his main message was that under Nafta Mexico is “stealing” U.S. jobs.

In fact, an interconnected North American economy has made U.S. manufacturing globally competitive. U.S. companies source components from Mexico and Canada and add value in innovation, design and marketing. The final outputs are among the most high-quality, low-price products in the world.

U.S. automotive competitiveness is highly dependent on global free trade. According to the Mexico City-based consulting firm De la Calle, Madrazo, Mancera, 37% of the U.S.’s imported auto components came from Mexico and Canada in 2015. This sourcing from abroad is important to good-paying U.S. auto-assembly jobs. But parts also flow the other way. U.S. parts manufacturers sent 61% of their exports to Mexico and Canada in 2015.

This synergy has made the U.S. auto industry attractive for investment. In the aftermath of the 2008 financial crisis investment in the auto sector contracted. But from 2010-14 almost $70 billion was invested in the North American automotive industry. Mr. Trump claims that investment is going to Mexico but two-thirds of it went into the U.S., according to a January 2015 report by the Michigan-based Center for Automotive Research.

This investment dynamism helped generate 264,800 new U.S. jobs in motor-vehicle production and parts between January 2010 and June 2016, according to the Bureau of Labor Statistics. That’s a 40% increase in employment despite the increasing trend toward robotics in the industry. Shut down Nafta and these workers and future job seekers will pay.

U.S. agriculture would also suffer. U.S. farm products now enter Mexico practically tariff-free and in 2013 (the latest year that data is available) it was the third-largest foreign market for U.S. farm output after China and Canada.

Let’s suppose that Mexico won’t give up ground in a new round of negotiations and Mr. Trump is successful in leading the repeal of Nafta. That would mean a reversion back to the WTO-agreed duties that each country charges nations without trade agreements. In 2013 Mexico’s weighted average tariff on agricultural products was 38.4%, which would be quite a climb over the zero tariff-rate that U.S. exporters now face. U.S. manufacturers that ship to Mexico would be hit with a weighted average tariff on industrial goods of 7.7%.

Keep in mind that Mexico has many bilateral trade agreements. Competitors from those countries would have large duty-free advantages over American farmers and manufacturers.

Mr. Trump’s outlandishness is supposed to be one of his strengths. But when it comes to trade he is not politically incorrect. He is factually incorrect.

Read more here.

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  • What are you wet behind the Ears or something . Don’t know what rock you crawled out from under , but jobs went over seas and factories closed down . Millions went onto unemployment ! And as for the investments it was to prop up car manufacturing so they could try and hold on to some hope ! Bank bail outs took place because millions of jobs were dead . People could not pay for their loans . And as far as better quality , I know you have lost your mind ! We now have China 2nds and 3rds filling our stores . We are sending them our first in metals , wood , coal and other comedies . Millions of American are holding on as their credit limit has just about run out ! What happens when the guys lending can’t give no more ? America goes busted ! We are now 20 trillion in the hole with little chances of ever seeing the light of day again . Our idiot Muslim n the white house has sold off many our war ships and cut them up for scrap to pay the bill and also weaken us . Our credit as a nation that used to be AAA has been down graded to AA . Russia and China has challenged our Gold backed up money . They paid in gold . We were told put up or shut up . Now we are ready to fight them because they know if the American people find out that we no longer have gold to back our money the game is over . The elite have stolen our gold , it is no longer in Fort Knox . Our Constitution told us plainly gold and silver coins were to stand for our currency and none of this would have happened . And that those trying to replace it were to hang for Treason . Well guess what they got by with it . We now have paper that is worth no more than toilet paper . Thank you NAFTA for removing America jobs and breaking America as the Bush and Clinton natzi cartel wanted to happen . More proof of what I am saying Lying Hillary said as she stared the campaign trail Guns were her first agenda . Hitler said the same thing before massacurng millions ! Why remove tax paying law abiding citizens guns ? So the NWO , Natzi , Vatican and UN , muslims could take over America and kill off those unwanted as they did in Germany . NAFTA was a plan to weaken America ! And it did ! We are still reeling from the blow . And the lying unemployment numbers are still out of the ceiling . As their time runs out they are taken off the unemployment list . But jobs have not been filled because they are not there anymore ! Lies ! Lies !! Lies !!! You must be one of the liberal liers ! because of NAFTA crime has gone up as thieves steal metal and other goods from those that have jobs trying to survive themselves . I am a victim of such thrift ! So go hand out you bull crap somewhere else . The last figure I saw was 49% of America is unemployed while the 51% are trying to pay for their government give away programs and survive themselves .

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