NAFTA Cost Michigan 43,600 Jobs

Jackie Headapohl, Michigan Live NAFTA, a treaty among Canada, Mexico and the United States, removed tariffs and other trade barriers among those countries in 1994. But according to the Economic Policy Institute, a pro-labor, progressive organization, that treaty cost Michigan 43,600 jobs. The EPI issued a report yesterday, "Heading South: U.S.-Mexico trade and job displacement after NAFTA," which examined the difference between exports and imports to calculate the loss of jobs. The study claims that U.S. trade deficits with Mexico have displaced 682,900 U.S. workers, the majority of them in the manufacturing sector. According to the EPI, trade both creates and destroys jobs. While exports tend to support domestic employment, imports lead to job displacement. "As imports are substituted for domestically produced goods, production that supports domestic jobs falls, displacing existing jobs and preventing new job creation," it says. However, another recently published study, "Trade and Unemployment: What Do the Data Say?," by three European economists published in the journal, European Economic Review, reached the opposite conclusion. They say free trade creates jobs by boosting overall productivity, enabling companies to hire more workers. "Trade enhances competition which weeds out inefficient firms and allows more productive ones to expand. ... People tend to focus on the seen consequences of a policy, in this case, competition from trade eliminating some jobs at relatively inefficient companies." The Mackinac Center for Public Policy, an organization which promotes free market policies, disagrees with the conclusions made in the EPI study, according to its fiscal policy director Michael LaFaive, who examined the five-year impact of NAFTA on the U.S. economy. "The net effects of free trade expand jobs and opportunities for Americans," LaFaive said. "As trade flows, money comes back in to the U.S. and allows for specialization." Job creation, he adds, is a result of "creative destruction." For example, if an inefficient or nonproductive manufacturing company is lost to foreign competition, the money that was invested in that company is freed to its next highest use, LaFaive said, perhaps as an investment in a biochemical company. "Free trade tends to be a net plus for nations," LaFaive said. "It is better for everyone. Protectionism raises costs to domestic consumers." Still, the EPI calls for caution in future free trade agreements, such as the U.S.-Korea Free Trade Agreement. Although those in favor of the agreement say that the resulting growing exports would support 70,000 U.S. jobs, the EPI says it could lead to trade deficits and job loss. Read original post here.