Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, November 8, 1993 TAG: 9311080043
SECTION: NATIONAL/INTERNATIONAL PAGE: A-4 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
As the battle over the North American Free Trade Agreement nears its climax, no issue has been more hotly contested than whether jobs will be gained or lost. It will be at the center of Tuesday night's televised debate between Perot and Vice President Al Gore.
The trouble, in the view of many economists who have studied the agreement, is that both sides are overstating NAFTA's impact.
They view Perot's claim of 5.9 million jobs "at risk" as absurd on its face. The United States would have to run a $100 billion trade deficit with Mexico - equal to its total deficit with the world this year - to produce a loss of even 2 million jobs, they contend.
While the administration is much more modest in its claim that 200,000 new jobs will be created by 1995 from NAFTA, economists say that figure is also being fudged.
They say the administration in its calculations is only totaling up the jobs gained from increased U.S. exports to Mexico while not taking into account any jobs lost from increased Mexican imports into this country.
So what is the right number?
Most analysts say the operative answer is "small."
Some say the United States would gain jobs from the pact since the phase-out of Mexican tariffs - 2 1/2 times as high as U.S. tariffs - and the removal of other barriers would allow U.S. companies to sell more in Mexico.
One of the most often cited studies in this camp was done by Gary Hufbauer and Jeffrey Schott, two economists at the Institute for International Economics, a Washington think tank.
Using 1990 as a base year, Hufbauer and Schott forecast that NAFTA and other trade liberalization measures already undertaken by Mexico will increase American exports enough to create 316,000 new U.S. jobs by 1995. At the same time, 145,000 U.S. jobs will be lost as a result of rising Mexican imports - a net gain of 171,000 jobs.
They arrive at that conclusion by tracking America's trade balance with Mexico and using the government's estimate that each $1 billion gain in U.S. export sales supports 19,600 jobs.
NAFTA opponents say by this reasoning, Mexico's trade liberalization has already provided America with 148,000 of the jobs forecast by Hufbauer and Schott, leaving only 23,000 that could be credited to NAFTA.
While outnumbered by the studies forecasting positive results, there are economic studies that show the United States will lose more jobs than it gains under NAFTA.
The pessimists generally base their forecasts on expectations of a greatly increased flow of U.S. investment dollars into Mexico to build new factories, capital they believe will come at the expense of American workers - Perot's giant sucking sound.
The Economic Strategy Institute put net job losses at between 32,000 and 220,000 over the next decade, based on an assumption that foreign investment in Mexico would increase by $63 billion during this period, much of it coming from the United States.
However, ESI President Clyde Prestowitz, a former top trade official in the Reagan administration, came out in support of NAFTA last month and said his think tank's earlier forecast was too pessimistic.
Prestowitz said that after talking with many manufacturers, he came to believe more American companies will shut down their Mexican facilities and move those jobs back to the United States because of the reduced tariff barriers.
Whether economists are predicting net job losses or net job gains, there is general agreement on one point - NAFTA will not have much impact on an American labor market of 128 million people.
The congressional Joint Economic Committee said the best conclusion it could reach after surveying 16 frequently cited NAFTA studies was that the trade pact could result in anywhere from a net job gain of 200,000 to a net job loss of 200,000 over a five-year period.
If the outcome is a loss of 200,000 jobs, that would compare to 9 million people who lost their jobs for one reason or another during the last five years of the 1980s.
If the optimists are right and the gain is 200,000 jobs, that would compare to 177,000 jobs that were created in October alone.
by CNB