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The North American Free Trade Zone
| Article
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21897 |
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Section : |
EDITORIAL
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| Issue
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1 / 1993 |
767 Words |
| Author
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Morton A. Kaplan
Editor and Publisher |
The newspapers and television are full of stories about lost jobs that will stem from the proposed North American Free Trade Zone [NAFTZ]. (I will ignore the fact that the North American Free Trade Agreement [NAFTA] stops somewhat short of free trade.) These stories are so misleading that I would call them dishonest except for my belief that the reporters simply do not know better.
The arguments for free trade do not rest only on comparative advantage. There are also efficiency reasons unrelated to comparative advantage that weigh in the calculation. Almost every nation that has protected its industries or commercial enterprises has found that it also protects their inefficiencies. Although it has moved with massive slowness, the American automobile industry has been forced by Japanese competition to produce better cars more cheaply. It has been forced to adopt innovations often invented by Americans that it refused to incorporate prior to that competition.
A case can be made for protecting infant industries until they can achieve a scale that removes them from international competitive disadvantage. However, even these measures must be adopted with caution, for almost invariably protected industries take advantage of protection to cover inefficiency and sloth. The Japanese are the best, and a rare, example of a nation that used initial protection to become competitive rather than merely to protect immediate profits. The American automobile industry is an example of one that delayed improvements until it was nearly in a moribund state.
Of course the NAFTZ will destroy some jobs and industries in the United States. But this occurs every time that a more efficient competitor arises in the United States and every time that a technological innovation occurs. The development of the automobile decimated the buggy whip industry and undermined the market for horses. The refrigerator did immense damage to the ice industry. Change, any change, destroys. And some workers and investors get hurt in the process. Those are costs, but they are far outweighed by the gains.
When Henry Ford invented the assembly line, he put out of business some small manufactures who hand built cars. He also produced cheap automobiles and paid what, for the time, were high wages. Because cheap automobiles could be afforded by more people, his invention also created many more jobs than were lost. During World War II, Henry Kaiser rationalized shipbuilding. Soon there were fewer jobs for master shipbuilders, but many more jobs for skilled tasks in building ships.
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