Thomas Donohue, U. S. Chamber of Commerce President, believes they do. He blames Labor Unions for blocking the ratification of new trade agreements with Colombia, Panama, and South Korea by the U. S. Congress. In the May 31st issue of Manufacturing & Technology news, Mr. Donahue said “and for reasons that defy logic or common sense, they vehemently opposed the very policies that could create millions of new jobs for American workers. So as the rest of the world races to complete new deals, American is being locked out and left behind … We’ve been sitting on the sidelines too long. It’s time to get back in the game.”
The United States has signed only 22 free trade agreements out of a global total of 262. Let’s take a look at whether they have created millions of new jobs. The U. S. Congress ratified NAFTA in 1993 and it went into effect in 1994. Supporters of NAFTA point out that between 1993-2007, trade tripled between the trading partners from $297 billion to $1 trillion.
I do have personal experience with the consequences of NAFTA because I have been selling the fabrication services of American companies for 28 years and my territory has included northern Baja California, Mexico as I speak, read, and write Spanish. Prior to NAFTA, American companies were required to have “twin plants,” which could be an office in the U. S. and an assembly plant in Mexico. After NAFTA, the office on this side of the border was eliminated, and engineering and purchasing personnel were moved to the Mexican plant. At first, American workers crossed the border to work at the Mexican plant, but over the years, Mexican engineers and buyers replaced them. The ability to meet with employees at the Mexican plants without an appointment changed to the requirement of having written proof of an appointment with a specific person at a company and the purchase a FN certificate to do business in Mexico (per day or annual). Now, a passport is also required to do business in Mexico.
Opponents of NAFTA and other free trade agreements point out that the “giant sucking sound” predicted by presidential candidate Ross Perot in the 1992 election came true as we’ve lost more than six million manufacturing jobs since 1994. However, we only lost about a half a million between 1994 and 1999; we’ve lost the other 5.5 million jobs since the year 2000. This is the year when China was granted permanent Most Favored Nation status (term changed to Normal Trade Relations in 1998), paving the way for China’s accession to the World Trade Organization in December 2000. It hasn’t been Mexico or Canada that benefited from the majority of these lost U. S. jobs — it’s been China.
In fact, Mexico has also lost jobs to China over the past ten years. The Mexican shoe industry was the hardest hit by competition from Chinese companies, but many decorative products for the home and garden that were once made in Mexico are now made in China. Retail stores in Mexico are now just as full of “made in China” products as are retail stores in the United States. Many American companies that set up maquiladoras in Mexico have closed them and set up manufacturing in China. Japanese and Korean companies have become the major owners of the maquiladoras plants in Baja California, Mexico as companies from these two countries have been the most reluctant to set up manufacturing in China, have wanted to be closer to the U. S. market, and wanted to take advantage of the trading benefits of being located in a NAFTA partner country.
Thus, the answer to the question posed as the title of this article is “yes” trade agreements create manufacturing jobs, but not necessarily in the United States. They create higher-paying manufacturing jobs in our trading partners and are the foundation of the developing middle class in Mexico and our other trading partner countries. Manufacturing jobs are the foundation of the middle class, and the United States is in danger of losing our middle class as we lose more and more manufacturing jobs.