Tuesday, March 04, 2008


Commentary on a Remark by John McCain

Recently the Presidential candidates, McCain, Clinton, and Obama, have been campaigning in Ohio and Texas. Economic issues seem most important in the voters' minds. In Ohio voters are down on NAFTA and similar free trade agreements because they see that manufacturing jobs have left Ohio and have gone to China, India, Indonesia, and other low-wage countries. In Texas voters are high on NAFTA because the agreement has opened markets for agricultural products in Mexico, other central American countries, and countries farther away. Of course American agricultural products are selling in those countries at prices that the local farmers can't meet. Many farmers have had to leave their farms and travel to cities and ultimately to the United States, mostly illegally, in search of work that will pay them money to support their families.

So, is NAFTA a good deal for the United States? Some politicians say it is, overall. Some economists say that free trade agreements have created more new jobs in this country than the number of jobs that have been lost.

It is interesting to compare the Democratic and Republican responses to the charge that NAFTA has cost jobs in industrial States like Ohio. The Democratic candidates express an intention to renegotiate the NAFTA agreements to put in requirements about working conditions, fair wages, environmental protection, and the like. The Republican candidate, Sen. McCain, urges the taking down of still more barriers to free trade and opines that with all barriers removed American workers and American industries can compete successfully with workers and industries anywhere else in the world. He speaks of the innovation that Americans introduce in a manufacturing process to improve both the efficiency and the economy of the process.

Most of the industries that have left the United States and have become established in Sri Lanka, Cambodia, Indonesia, China, India, Honduras, and the like went through an innovation process about a hundred years ago. Today when I go to a store to buy a shirt I find that it is made in one of those countries. An American textile firm that pays its workers an American salary of, say, twelve dollars an hour plus benefits, can not compete with a factory in China or India or Cambodia in which workers are paid five dollars a day with no benefits.

In fact, I did buy shirts today. They were made in Sri Lanka and India. They cost an average of twelve dollars apiece. I went on to Trader Joe's and bought some raisins. The information on the package indicated that they were grown and harvested near Fresno, California. There were also some raisins from Chile. The Chilean raisins and the Californian raisins all cost less than three dollars a pound. We compete very well on agricultural products; we lose our shirts if we try to compete on textile products. Of course, agricultural workers are paid less in the United States than workers in shirt factories - if there are any shirt factories left in the country.

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