The Efficacy of Trade Adjustment

In a report issued in January, the Public Policy Institute of California looked at the effects of trade adjustment policy in relation to NAFTA. The report comes to some conclusions including the notion that the existing statistics may not adequately measure the effects of increased trade under NAFTA.

I was struck with something totally different. First, the total number of positions in California for the eight years between 1994 and 2002 was a mere 27,759 positions - with the largest effect coming from jobs shifted to Mexico. There is no reasonable assessment in this report of how many jobs were created because of the changes. By any account those displacements, even without counting the positive effects, were minimal. Apparel seems to be the biggest category and anyone who knows something about the apparel industry would understand that the net tradeoff here is positive. We supposedly lost almost 6500 jobs to manufacturing - but during the period the state continued to increase its share of the national involvement with fashion. So while we were losing manufacturing jobs we were increasing in higher paying design and marketing positions. The second fact that comes out of the report is that compared to the rest of the nation- California, whose largest trading partner is Mexico and who has close proximity to Mexico geographically lost fewer jobs as a percentage of the manufacturing workforce than the national average (1.5% to 1.9% nationally). States like North Carolina (presumably textiles) and Pennsylvania had larger raw numbers while places like Idaho, Georgia, Indiana, Louisiana, Michigan, Minnesota, Mississippi, South Carolina, Texas, Virginia, and Wisconsin had higher percentages of total displacements. That says to me that the policy may not be an effective measure of what is actually happening (which the PPIC report agreed with - although I think they think the numbers of displacements were higher).

The net result of NAFTA and other trade liberalizations, despite the continued yapping of some, is positive.