The Pros And Cons Of NAFTA

In 1992, Ross Perot declared during the 1992 presidential campaign that if implemented, NAFTA (North American Free Trade Agreement) would create a “giant sucking sound” of jobs going south to cheaper labor markets of Mexico. Granted, Perot heard the sound, however, he missed the market. In June 2007, Candidate Obama conceded the failings in NAFTA subsequently as President; he endeavors using the invisible hand of geopolitics by drawing Japan closer through the Transpacific Partnership Agreement (TPP). In the process, he isolates the true “sound” of China’ comparative advantage by upgrading existing standards (NAFTA) and setting new high standards (TPP) that includes forty percent of the global economy. However, Thomas Sowell in Applied Economics:

Thinking Beyond Stage One discloses the agreement’s tangible incentive regarding China, “foreign investors [have] to be able to rely on having their investments remain their private property, rather than being subject to confiscation or “nationalization” as it is phrased politically.” Accordingly, Presidential candidate Donald Trump, writing in the Wall Street Journal, provides insight to the true opportunity cost of TPP, “If an American company wants access to the Chinese consumers, that company must share its intellectual property, a condition that violates international fair-trade standards, World Trade Organization rules and common sense.” Correspondingly, Sheila Smith, a Senior Fellow for Japan Studies at the Council on Foreign Relations confirms, “Japan’s own economic competitiveness is clearly the antidote to dealing with a rising China”. Furthermore, Smith adds, hedging the weight of the economic trade balance to Japan in the region forces, China, “to make the sorts of reforms that would be necessary to join the TPP”.
The Obama administration in marketing the Trans-Pacific Partnership (TPP) to the American public believes the agreement, “levels the playing field for American workers and American businesses, leading to more Made-in-America exports and more higher-paying American jobs here at home”. However, as Ludwig von Mises instructed in his work Economic Policy: Thoughts for Today and Tomorrow, “We must oppose the confiscation of property, the control of prices, inflation, and all those evils from which we suffer.” Subsequently, limiting Chinese regional influence (income) by marginalizing their business practices the expectation then, converts to China creating rational choices by evaluating "marginal effects of change". Simultaneously, Smith discloses, the Japanese incentive in having waited a long time for a free trade agreement with the United States. Consequently, the TPP becomes the “vehicle for Japan to integrate its economy more thoroughly with the United States”. Therefore, the TPP guidelines “invisible hand” experiments in reducing the comparative disadvantage created by China’s regulatory manipulation. Nevertheless, the “sucking sound” of jobs Perot heard from NAFTA, the US government tolerated as a marginal benefit until human capital of intellectual property rights created a marginal cost too high for big business.
Ted Alden, the Bernard Schwartz Senior Fellow at the Council on Foreign Relations believes, “China is worried about losing that foreign investment—losing it to other countries in the region or even to the United States—that will likely be a pretty big incentive to consider seriously joining the TPP at some point down the road.” However, Gary Clyde Hufbauer and Jeffrey J.

Schott, experts at the Peterson Institute for International Economics and the authors of NAFTA Revisited disclosed, “NAFTA was designed to promote economic growth by spurring competition in domestic markets and promoting investment from both domestic and foreign sources." Consequently, with foreign investors growing progressively agitated with the freedom of competition inside China, regardless, the invisible hand effect of NAFTA has US workers’ wages at a pace below labor productivity. Mohammed Aly Sergie writing for the CFR in NAFTA's Economic Impact discloses Alden alternately proclaiming, “Income inequality in the United States has risen in recent years, in part due to pressures on the U.S. manufacturing base.” Will the TPP level the playing field for American workers and American businesses towards a comparative advantage? History indicates to listen for the sucking sound for marginal benefit

determinations.