Exports and Imports and Economic Analysis and Banking & Finance and International Business

HICKS: Free trade isn't costing Americans jobs

July 16, 2011

My local paper ran a funny story a few days back, soliciting local reactions to the last space shuttle flight.

One quote came from a fellow who was relieved that the flights were coming to an end. His concern was that the shuttle flights were punching holes in the ozone layer, thus contributing to global warming. This amused even my 7-year-old, who has only a budding grasp of physics.

Clearly the comment was tongue-in-cheek, because the race for village idiot is well-financed and far too competitive to enter this late in the electoral cycle. Our humorist wouldn’t stand a chance.

Within a day or two of this article, an equally absurd letter about trade agreements and the decline of the American economy appeared in the same paper. Indeed, letters to the editor decrying trade agreements appear with remarkable frequency in papers around the country.

I actually find it astonishing that there are still Americans who devote themselves to opposing free trade on the grounds that it hurts the economy. There is no more easily disproven fiction than that offered by protectionists, yet it continues to provide grist for discussion. The whole matter makes Elvis sightings and flat-Earth debates appear to bubble forth with reason and evidence.

The free-trade argument was largely settled in an economics book published in 1815. David Ricardo’s book was influential enough to ultimately change the commercial design of the British Empire. Unfortunately, the technical argument requires mastery of algebra, and so sadly appears too infrequently in newsprint. Perhaps this is better, though. The anti-free-trade crowd is not given to the sort of abstract reasoning required of economic theory. It is better to simply stick with the evidence.

The most-often-cited complaint about free trade is that it destroys American jobs. The 1994 implementation of NAFTA is the most-often-referenced event. Exposing these arguments to data devastates them.

U.S. employment skyrocketed after NAFTA and has been higher in each and every year since then. There’s more. Not only did NAFTA not result in net declines in U.S. employment, it was also accompanied by almost continual manufacturing growth. Indiana is a fine example.

The year-over-year growth in manufacturing production in Indiana saw its fifth-best year out of the last 50 years following the passage of NAFTA. Indiana’s manufacturing sector grew an astounding 12.5 percent in 1994. It has been higher in every year since, including the darkest days of 2009. Indiana’s manufacturing employment rose in the years following NAFTA. This trend continued nationwide throughout the 1990s. Likewise, manufacturing wages rose after NAFTA and are higher in inflation-adjusted terms than before NAFTA.

Any contention that the U.S. economy has shrunk, wages dropped or manufacturing production declined following NAFTA are simply untrue. The data are available in every public library and the Internet. Then again, the anti-free-traders might be running a clever campaign for village idiot. If so, they deserve your vote.•

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Hicks is director of the Center for Business andEconomic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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