http://www.gfmag.com/index.php?idPage=777
NEIGHBORHOOD UNREST - MEXICO
Mexico’s recent economic progress could be derailed by turmoil in the US economy and the outcome of the US presidential election.
Global Finance Magazine
By Antonio Guerrero
March 2008
The last time the US economy posted a slowdown, after the 2001 terrorist attacks, the Mexican economy contracted by 0.2%, nearly crushing its industrial sector. With the threat of a US recession looming large and uncertainties over what US-Mexican relations will look like once a new occupant moves into the White House next year, the outlook is beginning to look gloomy south of the border. However, Mexican government officials say the country is better prepared this time around to meet the challenge.
Mexico’s finance ministry estimates assume the US economy will grow by a meager 1.8% this year, prompting officials to reduce their own 2008 GDP forecast in February to 2.8% from the 3.7% forecast the ministry included in the federal budget last September. This would be Mexico’s slowest expansion in three years, after posting 3.2% GDP growth last year. Local banks had already adjusted their forecasts ahead of the government. Banamex, Citi’s Mexican subsidiary, cut its 2008 growth outlook to 2.9% from a previous 3.6%, while BBVA Bancomer slashed its prediction to 2.7% from 3.4%.
With 80% of Mexican exports going to the United States and domestic capital markets moving nearly in tandem with their counterparts in New York, a US recession would have a swift impact on Mexico—and perhaps test many of the structural reforms implemented by the Felipe Calderón administration that have helped to at least partly decouple the two economies. Calderón has tried to ease Mexicans’ fears about a potential US slowdown, saying, “We will seek growth opportunities from within ourselves, in our internal market, in the strong productive apparatus and in the country’s competitiveness.”
Calderón’s reform package includes a fiscal overhaul launched last September that should boost federal revenues by 1.5% of GDP this year, as well as labor reform to introduce greater flexibility. The next hurdle is energy reform, which legislators say should be ready by April. The controversial plan would open the Pemex state-owned oil monopoly to partnerships with private investors to inject capital into a company struggling with rising debt and dwindling oil reserves. Oil accounts for 40% of federal revenues, and, with its output of 1.3 million barrels a day, Pemex is the United States’ third-largest oil supplier.
The Mexican government’s 2008 budget will boost investment by 45%, the biggest increase in 45 years, with most additional spending earmarked for infrastructure projects that will boost competitiveness and create jobs. The aim is to spark 5% annual GDP growth by 2012, falling short of the 6% growth that analysts say is needed to generate the 1.3 million new jobs Mexico requires each year to absorb workers entering the job market. But the Calderón administration counters that its $295 billion public-private infrastructure investment program approved last year should alone create 800,000 jobs.
According to a Merrill Lynch report, “A positive political agenda should create three positive effects in the medium-term: (1) reduce the country’s growth dependence on US activity and oil prices; (2) reinforce domestic engines for growth: credit, domestic consumption and productivity gains; and (3) promote GDP per capita growth, also addressing Mexico’s social agenda: improve social services and decrease poverty.” Merrill Lynch expects economic growth will be supported by 22% credit growth this year, along with a 4.1% expansion in domestic consumption.
US Election Raises Tension
While Mexico is hoping to shield itself from a US recession, it may be harder for it to stay out of the US presidential election as Republican and Democratic candidates alike tackle the issues of immigration, drug trafficking and free trade. Calderón recently asked US presidential candidates to tone down the anti-immigrant and anti-Mexican rhetoric in their campaigns. But candidates may be responding to genuine concerns, as a recent Zogby poll in the US shows more than 76% of respondents said a candidate’s position on immigration will be a “very important” or “somewhat important” factor in deciding whom to vote for this year. Another 36% said “job creation to stem migration” is the most important foreign policy measure the US should take toward Latin America.
The fight against drug trafficking, likely to be a key concern for the next US president, is already being tackled by the Mexican government, with the Calderón administration deploying more than 24,000 troops to regions with high drug production and trafficking activity, as well as extraditing drug lords to the US and seizing large amounts of illicit drugs. The moves have been well received in Washington, where the White House last October announced a $1.4 billion military and security package designed to help Mexico and Central America tackle drug cartels.“
Given the dimensions of the problem, cooperation with the government of the United States is indispensable,” Mexico’s foreign minister Patricia Espinosa told the press. The US aid package is made more politically palatable to Mexican authorities by, unlike the controversial Plan Colombia, not involving any deployment of US military personnel to Mexico.
Both governments may find themselves embroiled in a less congenial dialogue this year over the future of trade between the two nations. In January the last remaining exceptions to the North American Free Trade Agreement (Nafta) were lifted, allowing US corn, sugar, beans and milk to enter Mexico under the pact. While the measure could help lower food prices, Mexican farmers are less than thrilled and not only have unleashed street protests but have called on their government to renegotiate the treaty, which went into effect in 1994.
According to Lawrence Kogan, president and CEO of the Institute for Trade, Standards and Sustainable Development (ITSSD) in Princeton, New Jersey, the controversy may lead to “managed” trade, which he feels is a euphemism for quota-like restrictions on trade in selected agricultural products. “Mexican farmers may end up receiving the short end of the stick here,” says Kogan. “We must wait and see what is ultimately agreed to and then wait to see how it is actually applied in practice.”
Kogan, also a professor of International Trade Law and Policy at Seton Hall University, says the impact on Mexican exports to the US could be determined by who wins the presidency. “A Democratic Congress would likely become emboldened if a Democrat were in the White House. Assuming the Republicans fail to retake Congress, Congress would be more inclined to impose new environmental, health and safety, and labor standards through Nafta and the WTO to raise the cost of Mexican goods and services so that they no longer could compete effectively with US products,” he says.
Meanwhile, capital market investors remain cautiously bullish on Mexico. Merrill Lynch predicts a 23% total return on Mexican equities this year, below the 26% Latin American average and 28% for Brazil, but higher than Chile’s 22% and Argentina’s 19%—adding that the appreciation will be driven by 16% earnings growth (in US dollars) in 2008 and 11% in 2009. Citi upgraded Mexican shares to overweight, arguing that a US recession has been nearly fully priced into Mexican stocks. The sovereign also set a new fixed-income benchmark in January that extended its yield curve to 2040 and saw the order book soar to $3 billion for a $1.5 billion issue that had been upped from an initial $1 billion.
Mexico’s central bank governor Guillermo Ortiz remains more cautious, saying at the World Economic Forum in Davos that Mexico has not yet felt the full impact of the global economic crisis, and there could be more pain ahead. “We’re in round one or two,” he said, “but this is a 15-round fight.”
Showing posts with label nafta. Show all posts
Showing posts with label nafta. Show all posts
Tuesday, April 1, 2008
Sunday, March 9, 2008
Policy Implications: Clinton and Obama on International Trade Policy, NAFTA, and SWF’s
Policy Implications: Clinton and Obama on International Trade Policy, NAFTA, and SWF’s
By Osman Aziz
ITSSD Intern, Blogmaster of the ITSSD Journal on Economic Freedom
Much rhetoric has been exchanged on the campaign trail regarding the status of free trade and the future (or lack thereof) it has in American foreign policy. Both democratic hopefuls Hillary Clinton and Barack Obama have been in a perpetual state of flux over the status of NAFTA (North Atlantic Free Trade Agreement) and the perceived ills that it has accrued for the people of America. However acidic such criticisms of free trade may have appeared on the cameras, questions abound to the actual positions of each candidate on the undeniable progress that trade liberalization has taken in the world. Given the track record, neither Obama nor Clinton actually appear to be enemies of a free trade paradigm, which begs the question as to why such critical stances need to be taken against free trade agreements that, on the whole, have provided greater benefits than damages.
“In the minds of hard-core opponents of free trade, both Mrs. Clinton and Mr. Obama have checkered records in the Senate on trade agreements. Both voted against the Central American Free Trade Agreement but supported a trade pact with Peru last year, citing the inclusion of labor and environmental provisions that were not part of Nafta. Opponents, however, said crucial provisions in Nafta that led to jobs being shipped overseas were also part of the Peru agreement. Mrs. Clinton and Mr. Obama were also among only a dozen Senate Democrats who voted for a trade agreement with Oman in 2006.”[1]
The questions being framed as a position of political pandering is undeniable given the records that both candidates have on trade; but the irrefutable consequences of publicly assailing free trade policies could carry over to other aspects of international trade policy. Recent controversy over the ascendancy of Sovereign Wealth Funds (‘SWFs’) and the apparent lack of “transparency” that they possess has sparked a backlash from Democrats and protectionists alike who point to, without proper knowledge, the inherent “political” interests involved in such funds. Senator Obama’s position on altering the tax code to subsidize businesses that keep jobs in the US also smack of an underlying misunderstanding of economic efficiency and the effect such a position can have on inflating the prices of consumer goods by retaining inefficient employment capacities for higher wages.[2]
The Senators' indirect call for more governmental intervention in the reshaping of NAFTA and the US’ global trade policy seems to reflect a broader ideological agenda. First, it would seem that the candidates are attempting to label ‘trade’ as the cause of what many anticipate will be a US recession. Second, it appears that the Clinton-Obama strategy is to cast more not less governmental intervention in the marketplace as the necessary ‘change’ or ‘solution’ that will bring the US out of its current economic malaise. However, with little to say about the causes and eventual outturn that the current subprime crises harbors with it, protectionism and the scepter of populism may only serve to drive the US economy into further disarray. What appears to underlie these sentiments, are the overlooked benefits that such agreements as NAFTA have really had on the US and the region as a whole.
“While it is politically incorrect to say so, NAFTA has been good for all of North America. By opening the continent to investment and trade, capital has found more efficient uses, with benefits to producers and consumers alike. In NAFTA's first decade after 1993, trade between the U.S. and Mexico multiplied to $232 billion from $81 billion. Trade with Canada has also blossomed, with Canadian exports to the U.S. by surface transport rising 79% in a decade and U.S. exports to Canada increasing 38%. The deal also increased U.S. productivity. U.S. firms found they could be more globally competitive by putting some manufacturing in Mexico or Canada while retaining high-end production in the U.S.” [3]
By virtue of the fact that the same can be said regarding the projected benefits of the US-Peru FTA a year down the road reveals the hidden side that neither Senator is willing to uncover, namely the increase in economic efficiency that is followed by the passing of such free trade agreements. The very fact that increases in real GDP for all three nations member to NAFTA by approximately 50% each is evidence unto itself of the successes it has yielded, adding further distress to either the withdrawal, or the amending of an agreement that has worked so far.[4] Unilateral withdrawal from NAFTA, a trade agreement that has epitomized the inherent benefits of trade liberalization would be a fool hardy move and would send the wrong signal to the rest of the world regarding the US’s stance on international treaties, which up to this point has been maintained by a track record of trust and reciprocity. The fact that much rhetoric over NAFTA was staged in Ohio begs the question as why such sentiments are not being capitalized on in Texas. Given the fact that Ohio suffers from a six percent unemployment rate may help to explain the shifting positions of Senators Clinton and Obama (whether or not job loss can be attributed to NAFTA is a matter discussed later). The fact that such critical stances haven’t been assumed in Texas is evidence of the Democrats’ incessant need to position regarding the matter of free trade.
“As fiercely as they've fought in Ohio over the issue, the rivals haven't focused much on free trade in Texas, which has seen job growth and a huge spike in exports since NAFTA went into effect in 1994. ‘Every trade agreement has winners and losers,’ said Southern Methodist University economist Thomas Osang, who studies free trade. Texas had many of the industries poised to benefit, notably electronics and chemicals, and those industries outweighed losers such as lumber and furniture roughly 2-1.”[5]
Although Senators Clinton and Obama capitalize on protectionist and neo-mercantilist rhetoric in securing the votes necessary for election, the potential policy implications that such talk will have up to this point seems innocuous at best. What should come at greater concern are new up and coming issues such as SWF’s and sparking further regional trade agreements after aggregate bilateral agreements stabilize macroeconomic policy. Hostility to these new issues have already arisen on the campaign trail, and with no definitive voting record to base any judgment off of, speculation becomes a tricky game. The recent move by the Department of the Treasury to increase oversight of SWF’s and the additional pressure being applied to the IMF, although not nearly as caustic as the perspective promoted by Clinton and Obama, smacks of the age old argument surrounding “oversight” and regulation.
“Second, we have proposed that the international community collaborate on the development of a multilateral framework for best practices. The International Monetary Fund, with support from the World Bank, should develop best practices for sovereign wealth funds, building on existing best practices for foreign exchange reserve management. These would provide guidance to new funds on how to structure themselves, reduce any potential systemic risk, and help demonstrate to critics that sovereign wealth funds can be responsible, constructive participants in the international financial system.”[6]
This sort of even-handed approach by US lawmakers and Hillary Clinton is diametrically opposed to the position adopted by Barack Obama. Citing that the largest investment arms are located predominantly in the Middle East, Obama crafted the debate surrounding SWF’s as a matter of the US’s reliance on oil from the region while ignoring wholesale the fact that such investment vehicles as the Abu Dhabi Investment Authority and Kuwait Investment Authority are reacting as developing countries would be expected to act. Although Senator Obama does echo the sentiment regarding oversight and greater transparency that Senator Clinton trail-blazed, it seems as though it is difficult to assess how these two candidates will react when placed in the Oval Office and are tasked with the responsibility to react to new trends originating from developing nations. The apparent dearth of information regarding such emerging trends as decoupling theory and international financial integration on the part of the politicians vying for office so far reflects a more deeper and profound misunderstanding of the macroeconomic policies that will need emerge in the near future to handle such trends. Subsidizing producers in the US that produce consumer goods will only provide for more expensive goods, which coupled with a weakening dollar, will severely affect foreign nations’ economies which rely off of a robust trade with the US.[7] It seems that the only ostensibly legitimate contentions that the Democrats have so far leveled against the existing establishment are issues over labor and environmental policies.
Contentions over NAFTA: Why the Labor Rights/Environmentalist/Job Loss argument carries little to no weight
The contention that NAFTA has provided for a negative paradigm in terms of labor rights and environmental protections reflect yet another disturbing trend, that of misinformation. Although much talk has been thrown about regarding the lack of a sustainable provision for labor rights in NAFTA, the very fact that a supplemental labor stipulation under the North American Agreement on Labor Cooperation (NAALC) is provided for under NAFTA contradicts such claims.[8] The existence of a five year strategic agreement through the Commission of Environmental Cooperation also provides a framework through which environmental policy can be worked out.[9] Both Hillary Clinton and Barack Obama lambaste NAFTA as the sole perpetrator in the loss of jobs across the board within the US to foreign firms. Although NAFTA never promised a net total increase in jobs themselves, the fact that overall productivity increased significantly during the years that NAFTA has been in affect provides a clear contradiction to the overarching contention of job loss.
“U.S. employment rose from 112.2 million in December 1993 to 137.2 million in December 2006, an increase of 25 million jobs, or 22 percent. The average unemployment rate was 5.1 percent in the period 1994-2006, compared to 7.1 percent during the period 1981-1993… Growth in real compensation for manufacturing workers improved dramatically. Average real compensation grew at an average annual rate of 1.6 percent from 1993 to 2006, compared to just 0.9 percent annually between 1980 and 1993”[10]
The hidden benefits of an increase in overall productivity translate into cheaper consumer goods that would have been much more expensive if left to inefficient producers within the US. Constituency, instead of fact, seems to be playing a more significant role in swaying the supposed sentiments of both Senators Clinton and Obama (although the leaked memo detailing Obama’s “political positioning” may serve to shed a different light on things)[11]. Senator Clinton, whose reliance on the AFL-CIO has pushed her to a more protectionist stance, differs marginally from Senator Obama, whose support hails from the Teamsters and the Service Employees International Union, both of which benefit from increased trade with other nations.[12] Without a clear agenda from either democratic candidate on what they see as the ills of NAFTA and free trade, it seems as though the stances that each candidate has so far amplified has been done so with more emotion than substance. The three primary contentions that each candidate has regarding NAFTA specifically are addressed already within the agreement or are on their way to being accomplished under the current framework, leaving much to be asked about the actual disagreements each candidate has with not only NAFTA, but with free trade as a progressive paradigm.
[1] The New York Times. Despite NAFTA Attacks, Clinton and Obama Haven’t Been Free Trade Foes. February 28, 2008.
[2] The Wall Street Journal. CAPITAL: Decoding Candidates on Trade. February 21, 2008
[3] The Wall Street Journal. Unilateral Democrats. February 28, 2008
[4] US Department of Commerce. NAFTA-A Success for Trade. October 2007
[5] Todd J. Gillman, Gromer Jeffe. McClatchy - Tribune Business News. Punches Fly over Trade, Rival Tactics as Democrats Debate in Ohio. Washington: Feb 27, 2008.
[6] US Department of the Treasury. Under Secretary of International Affairs David H. McCormick Testimony Before the Joint Economic Committee. February 13, 2008
[7] The Economist. Finance and Economics: An Independent Streak: Decoupling 1. Jan. 26th 2008
[8] Office of the US Trade Representative. NAFTA-The Road Ahead. (2007)
[9] Office of the US Trade Representative. NAFTA Environment Ministers Adopt Trade and Environment Stratgeic Plan. (06/23/2005)
[10] Office of the US Trade Representative. NAFTA Facts: NAFTA Benefits. (October 2007)
[11] Financial Times. Obama under fire over NAFTA Memo. March 3, 2008
[12] Bhagwati, Jagdish (Financial Times). Obama’s free trade credentials top Clintons. March 3, 2008
By Osman Aziz
ITSSD Intern, Blogmaster of the ITSSD Journal on Economic Freedom
Much rhetoric has been exchanged on the campaign trail regarding the status of free trade and the future (or lack thereof) it has in American foreign policy. Both democratic hopefuls Hillary Clinton and Barack Obama have been in a perpetual state of flux over the status of NAFTA (North Atlantic Free Trade Agreement) and the perceived ills that it has accrued for the people of America. However acidic such criticisms of free trade may have appeared on the cameras, questions abound to the actual positions of each candidate on the undeniable progress that trade liberalization has taken in the world. Given the track record, neither Obama nor Clinton actually appear to be enemies of a free trade paradigm, which begs the question as to why such critical stances need to be taken against free trade agreements that, on the whole, have provided greater benefits than damages.
“In the minds of hard-core opponents of free trade, both Mrs. Clinton and Mr. Obama have checkered records in the Senate on trade agreements. Both voted against the Central American Free Trade Agreement but supported a trade pact with Peru last year, citing the inclusion of labor and environmental provisions that were not part of Nafta. Opponents, however, said crucial provisions in Nafta that led to jobs being shipped overseas were also part of the Peru agreement. Mrs. Clinton and Mr. Obama were also among only a dozen Senate Democrats who voted for a trade agreement with Oman in 2006.”[1]
The questions being framed as a position of political pandering is undeniable given the records that both candidates have on trade; but the irrefutable consequences of publicly assailing free trade policies could carry over to other aspects of international trade policy. Recent controversy over the ascendancy of Sovereign Wealth Funds (‘SWFs’) and the apparent lack of “transparency” that they possess has sparked a backlash from Democrats and protectionists alike who point to, without proper knowledge, the inherent “political” interests involved in such funds. Senator Obama’s position on altering the tax code to subsidize businesses that keep jobs in the US also smack of an underlying misunderstanding of economic efficiency and the effect such a position can have on inflating the prices of consumer goods by retaining inefficient employment capacities for higher wages.[2]
The Senators' indirect call for more governmental intervention in the reshaping of NAFTA and the US’ global trade policy seems to reflect a broader ideological agenda. First, it would seem that the candidates are attempting to label ‘trade’ as the cause of what many anticipate will be a US recession. Second, it appears that the Clinton-Obama strategy is to cast more not less governmental intervention in the marketplace as the necessary ‘change’ or ‘solution’ that will bring the US out of its current economic malaise. However, with little to say about the causes and eventual outturn that the current subprime crises harbors with it, protectionism and the scepter of populism may only serve to drive the US economy into further disarray. What appears to underlie these sentiments, are the overlooked benefits that such agreements as NAFTA have really had on the US and the region as a whole.
“While it is politically incorrect to say so, NAFTA has been good for all of North America. By opening the continent to investment and trade, capital has found more efficient uses, with benefits to producers and consumers alike. In NAFTA's first decade after 1993, trade between the U.S. and Mexico multiplied to $232 billion from $81 billion. Trade with Canada has also blossomed, with Canadian exports to the U.S. by surface transport rising 79% in a decade and U.S. exports to Canada increasing 38%. The deal also increased U.S. productivity. U.S. firms found they could be more globally competitive by putting some manufacturing in Mexico or Canada while retaining high-end production in the U.S.” [3]
By virtue of the fact that the same can be said regarding the projected benefits of the US-Peru FTA a year down the road reveals the hidden side that neither Senator is willing to uncover, namely the increase in economic efficiency that is followed by the passing of such free trade agreements. The very fact that increases in real GDP for all three nations member to NAFTA by approximately 50% each is evidence unto itself of the successes it has yielded, adding further distress to either the withdrawal, or the amending of an agreement that has worked so far.[4] Unilateral withdrawal from NAFTA, a trade agreement that has epitomized the inherent benefits of trade liberalization would be a fool hardy move and would send the wrong signal to the rest of the world regarding the US’s stance on international treaties, which up to this point has been maintained by a track record of trust and reciprocity. The fact that much rhetoric over NAFTA was staged in Ohio begs the question as why such sentiments are not being capitalized on in Texas. Given the fact that Ohio suffers from a six percent unemployment rate may help to explain the shifting positions of Senators Clinton and Obama (whether or not job loss can be attributed to NAFTA is a matter discussed later). The fact that such critical stances haven’t been assumed in Texas is evidence of the Democrats’ incessant need to position regarding the matter of free trade.
“As fiercely as they've fought in Ohio over the issue, the rivals haven't focused much on free trade in Texas, which has seen job growth and a huge spike in exports since NAFTA went into effect in 1994. ‘Every trade agreement has winners and losers,’ said Southern Methodist University economist Thomas Osang, who studies free trade. Texas had many of the industries poised to benefit, notably electronics and chemicals, and those industries outweighed losers such as lumber and furniture roughly 2-1.”[5]
Although Senators Clinton and Obama capitalize on protectionist and neo-mercantilist rhetoric in securing the votes necessary for election, the potential policy implications that such talk will have up to this point seems innocuous at best. What should come at greater concern are new up and coming issues such as SWF’s and sparking further regional trade agreements after aggregate bilateral agreements stabilize macroeconomic policy. Hostility to these new issues have already arisen on the campaign trail, and with no definitive voting record to base any judgment off of, speculation becomes a tricky game. The recent move by the Department of the Treasury to increase oversight of SWF’s and the additional pressure being applied to the IMF, although not nearly as caustic as the perspective promoted by Clinton and Obama, smacks of the age old argument surrounding “oversight” and regulation.
“Second, we have proposed that the international community collaborate on the development of a multilateral framework for best practices. The International Monetary Fund, with support from the World Bank, should develop best practices for sovereign wealth funds, building on existing best practices for foreign exchange reserve management. These would provide guidance to new funds on how to structure themselves, reduce any potential systemic risk, and help demonstrate to critics that sovereign wealth funds can be responsible, constructive participants in the international financial system.”[6]
This sort of even-handed approach by US lawmakers and Hillary Clinton is diametrically opposed to the position adopted by Barack Obama. Citing that the largest investment arms are located predominantly in the Middle East, Obama crafted the debate surrounding SWF’s as a matter of the US’s reliance on oil from the region while ignoring wholesale the fact that such investment vehicles as the Abu Dhabi Investment Authority and Kuwait Investment Authority are reacting as developing countries would be expected to act. Although Senator Obama does echo the sentiment regarding oversight and greater transparency that Senator Clinton trail-blazed, it seems as though it is difficult to assess how these two candidates will react when placed in the Oval Office and are tasked with the responsibility to react to new trends originating from developing nations. The apparent dearth of information regarding such emerging trends as decoupling theory and international financial integration on the part of the politicians vying for office so far reflects a more deeper and profound misunderstanding of the macroeconomic policies that will need emerge in the near future to handle such trends. Subsidizing producers in the US that produce consumer goods will only provide for more expensive goods, which coupled with a weakening dollar, will severely affect foreign nations’ economies which rely off of a robust trade with the US.[7] It seems that the only ostensibly legitimate contentions that the Democrats have so far leveled against the existing establishment are issues over labor and environmental policies.
Contentions over NAFTA: Why the Labor Rights/Environmentalist/Job Loss argument carries little to no weight
The contention that NAFTA has provided for a negative paradigm in terms of labor rights and environmental protections reflect yet another disturbing trend, that of misinformation. Although much talk has been thrown about regarding the lack of a sustainable provision for labor rights in NAFTA, the very fact that a supplemental labor stipulation under the North American Agreement on Labor Cooperation (NAALC) is provided for under NAFTA contradicts such claims.[8] The existence of a five year strategic agreement through the Commission of Environmental Cooperation also provides a framework through which environmental policy can be worked out.[9] Both Hillary Clinton and Barack Obama lambaste NAFTA as the sole perpetrator in the loss of jobs across the board within the US to foreign firms. Although NAFTA never promised a net total increase in jobs themselves, the fact that overall productivity increased significantly during the years that NAFTA has been in affect provides a clear contradiction to the overarching contention of job loss.
“U.S. employment rose from 112.2 million in December 1993 to 137.2 million in December 2006, an increase of 25 million jobs, or 22 percent. The average unemployment rate was 5.1 percent in the period 1994-2006, compared to 7.1 percent during the period 1981-1993… Growth in real compensation for manufacturing workers improved dramatically. Average real compensation grew at an average annual rate of 1.6 percent from 1993 to 2006, compared to just 0.9 percent annually between 1980 and 1993”[10]
The hidden benefits of an increase in overall productivity translate into cheaper consumer goods that would have been much more expensive if left to inefficient producers within the US. Constituency, instead of fact, seems to be playing a more significant role in swaying the supposed sentiments of both Senators Clinton and Obama (although the leaked memo detailing Obama’s “political positioning” may serve to shed a different light on things)[11]. Senator Clinton, whose reliance on the AFL-CIO has pushed her to a more protectionist stance, differs marginally from Senator Obama, whose support hails from the Teamsters and the Service Employees International Union, both of which benefit from increased trade with other nations.[12] Without a clear agenda from either democratic candidate on what they see as the ills of NAFTA and free trade, it seems as though the stances that each candidate has so far amplified has been done so with more emotion than substance. The three primary contentions that each candidate has regarding NAFTA specifically are addressed already within the agreement or are on their way to being accomplished under the current framework, leaving much to be asked about the actual disagreements each candidate has with not only NAFTA, but with free trade as a progressive paradigm.
[1] The New York Times. Despite NAFTA Attacks, Clinton and Obama Haven’t Been Free Trade Foes. February 28, 2008.
[2] The Wall Street Journal. CAPITAL: Decoding Candidates on Trade. February 21, 2008
[3] The Wall Street Journal. Unilateral Democrats. February 28, 2008
[4] US Department of Commerce. NAFTA-A Success for Trade. October 2007
[5] Todd J. Gillman, Gromer Jeffe. McClatchy - Tribune Business News. Punches Fly over Trade, Rival Tactics as Democrats Debate in Ohio. Washington: Feb 27, 2008.
[6] US Department of the Treasury. Under Secretary of International Affairs David H. McCormick Testimony Before the Joint Economic Committee. February 13, 2008
[7] The Economist. Finance and Economics: An Independent Streak: Decoupling 1. Jan. 26th 2008
[8] Office of the US Trade Representative. NAFTA-The Road Ahead. (2007)
[9] Office of the US Trade Representative. NAFTA Environment Ministers Adopt Trade and Environment Stratgeic Plan. (06/23/2005)
[10] Office of the US Trade Representative. NAFTA Facts: NAFTA Benefits. (October 2007)
[11] Financial Times. Obama under fire over NAFTA Memo. March 3, 2008
[12] Bhagwati, Jagdish (Financial Times). Obama’s free trade credentials top Clintons. March 3, 2008
Thursday, March 6, 2008
Clinton and Obama Attempt to Deceive US Voters on Trade Stance, Canada Reveals
http://news.yahoo.com/s/afp/20080306/pl_afp/canadausdemocratsvotediplomacy
Both Clinton and Obama reassured Canada on trade
by Michel Comte
US presidential hopeful Hillary Clinton's campaign, while rapping rival Barack Obama for telling US voters he is anti-NAFTA and saying otherwise to Canada, tried to reassure Canada too, local media said Thursday.
A top aide of Canadian Prime Minister Stephen Harper meanwhile was identified as the likely source of an alleged leak that provoked a diplomatic fiasco involving both US Democratic presidential contenders.
Last month, Harper's chief of staff, Ian Brodie, purportedly made impromptu remarks to journalists about Clinton's US presidential bid, said Canadian reports.
The offhand comments apparently sought to downplay the potential impact on Canada of Clinton and Obama's attacks on the North American Free Trade Agreement (NAFTA) during stops in the US state of Ohio.
Brodie told reporters that the Clinton campaign had called the Canadian embassy in Washington to tell officials to take her anti-NAFTA rhetoric "with a grain of salt," said local media.
Around the same time, a news agency reported that a Canadian government memo detailed a meeting between Obama's chief economic advisor Austan Goolsbee and officials from the Canadian consulate in Chicago.
The memo reportedly said Goolsbee noted Obama's attacks on NAFTA should not be taken out of context, citing fiercely protectionist sentiment in Ohio about the pact and political positioning as a motivation.
Thursday, US Ambassador David Wilkins told public broadcaster CBC this amounted to Canadian political interference in the US political process. "It certainly shouldn't have happened; it was interference," he said.
The affair has certainly embarrassed Canada's diplomatic corps and may have cost Obama votes in the crucial Ohio primaries earlier this week.
The 1994 trade pact created the largest trading bloc in the world by eliminating import tariffs on goods circulating among partners Canada, the United States and Mexico.
In a televised debate last month in Ohio, both Obama and Clinton said if the next US president is a Democrat, Mexico and Canada would be pressured to renegotiate NAFTA.
But free trade and NAFTA in particular is a fiercely contentious issue in Ohio, which has been badly hit by the flight of blue collar jobs abroad, and increased global economic competition.
As the scandal unfolded, Clinton accused Obama's campaign of giving the Canadian government "the old wink-wink" while Republican nominee John McCain said it showed Obama was not a straight shooter.
Obama countered: "Nobody reached out to the Canadians to try to assure them of anything."
Goolsbee's meeting with Canadian Consul General Georges Rioux was later confirmed, but Goolsbee said his remarks were misrepresented.
The Clinton camp has not yet commented on the latest allegations, but acknowledged Canada's Obama smudge gave her campaign a "significant" boost during the recent US primaries.
The Canadian prime minister's office has said Brodie "does not recall" making the statements to reporters said to have set off the scandal, and Harper himself denied that Brodie leaked any information.
On Wednesday, Harper announced a probe into the "blatantly unfair" and possibly "illegal" leaking of the government memo assailing Obama.
But Canada's opposition New Democrats urged Harper to fire Brodie for his alleged Clinton slip and called for a federal police
Both Clinton and Obama reassured Canada on trade
by Michel Comte
US presidential hopeful Hillary Clinton's campaign, while rapping rival Barack Obama for telling US voters he is anti-NAFTA and saying otherwise to Canada, tried to reassure Canada too, local media said Thursday.
A top aide of Canadian Prime Minister Stephen Harper meanwhile was identified as the likely source of an alleged leak that provoked a diplomatic fiasco involving both US Democratic presidential contenders.
Last month, Harper's chief of staff, Ian Brodie, purportedly made impromptu remarks to journalists about Clinton's US presidential bid, said Canadian reports.
The offhand comments apparently sought to downplay the potential impact on Canada of Clinton and Obama's attacks on the North American Free Trade Agreement (NAFTA) during stops in the US state of Ohio.
Brodie told reporters that the Clinton campaign had called the Canadian embassy in Washington to tell officials to take her anti-NAFTA rhetoric "with a grain of salt," said local media.
Around the same time, a news agency reported that a Canadian government memo detailed a meeting between Obama's chief economic advisor Austan Goolsbee and officials from the Canadian consulate in Chicago.
The memo reportedly said Goolsbee noted Obama's attacks on NAFTA should not be taken out of context, citing fiercely protectionist sentiment in Ohio about the pact and political positioning as a motivation.
Thursday, US Ambassador David Wilkins told public broadcaster CBC this amounted to Canadian political interference in the US political process. "It certainly shouldn't have happened; it was interference," he said.
The affair has certainly embarrassed Canada's diplomatic corps and may have cost Obama votes in the crucial Ohio primaries earlier this week.
The 1994 trade pact created the largest trading bloc in the world by eliminating import tariffs on goods circulating among partners Canada, the United States and Mexico.
In a televised debate last month in Ohio, both Obama and Clinton said if the next US president is a Democrat, Mexico and Canada would be pressured to renegotiate NAFTA.
But free trade and NAFTA in particular is a fiercely contentious issue in Ohio, which has been badly hit by the flight of blue collar jobs abroad, and increased global economic competition.
As the scandal unfolded, Clinton accused Obama's campaign of giving the Canadian government "the old wink-wink" while Republican nominee John McCain said it showed Obama was not a straight shooter.
Obama countered: "Nobody reached out to the Canadians to try to assure them of anything."
Goolsbee's meeting with Canadian Consul General Georges Rioux was later confirmed, but Goolsbee said his remarks were misrepresented.
The Clinton camp has not yet commented on the latest allegations, but acknowledged Canada's Obama smudge gave her campaign a "significant" boost during the recent US primaries.
The Canadian prime minister's office has said Brodie "does not recall" making the statements to reporters said to have set off the scandal, and Harper himself denied that Brodie leaked any information.
On Wednesday, Harper announced a probe into the "blatantly unfair" and possibly "illegal" leaking of the government memo assailing Obama.
But Canada's opposition New Democrats urged Harper to fire Brodie for his alleged Clinton slip and called for a federal police
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