Back in 1993, when Vice-President Al Gore represented the Conservative end of the then more Conservative Democratic Party, he debated millionaire and former presidential aspirant, Ross Perot on Larry King Live about the virtues and disadvantages of the North American Free Trade Agreement (NAFTA). The pact eliminated most trade barriers between the United States, Canada, and Mexico. NAFTA passed with the strong support of President Bill Clinton and Republicans in the House of Representatives. If only Democratic votes had counted, NAFTA would have failed in Congress. The vote marked the beginning of the end of the post World War II bi-partisan consensus in support of free trade.
In 1993, Perot cleverly used the metaphor of a "great sucking sound" to represent what he predicted would be the effect of NAFTA on US employment. Instead, the great sucking sound was the precipitous deflation of Perot's pumped-up argument. When the Perot-Gore debate was held in October 1993, the unemployment rate was 6.8%, having decreased from a high of over 7%. During the subsequent years, the unemployment rate plummeted to a nearly all-time low of 4% and now is an historically low 5%. During a most recent recession, the unemployment rate peaked at only 6.3%. If someone had predicted such numbers for the unemployment rate for the years following 1993, they would have been labeled as unrealistically optimistic.
Now, it is at least plausible that without NAFTA the employment numbers would have been even rosier, but that was certainly not the implication of Perot's rhetoric. Perot's clever metaphor would have not had the same saliency if he argued that employment will decrease rapidly, but less rapidly with NAFTA. Twelve years later, it is fair to conclude that Perot was radically wrong. Free trade with Mexico and Canada is consistent with a vibrant and growing United States.
In addition, the reduction of unemployment in the US did not come at the cost of a reduction in wages. From 1993 to the present there has been an increase in real per capita income and median household income. These increases came in the face of downward wage pressure caused by high levels of illegal immigration.
NAFTA has not proven to be as advantageous for Mexico as first anticipated. Much of the growth in US imports has not come from Mexico, but rather from China. Mexican low wages were not sufficient to guarantee its success. Mexico, like China, must be willing to free up entrepreneurial forces from excessively regulatory and corrupt bureaucracy.
Go To Page: 1 2
