Saturday, January 12, 2008

CAFTA Leads to Trade Surplus

The story is over at the Shop Floor, but the graph shows it pretty clearly:

I don't believe it's important whether we maintain a trade surplus with a given country, or a range of countries. If for example, the US imports a huge amount of raw material from a resource-rich country, and sell little back to that country because it's relatively poor, we run a trade deficit. Is that a bad thing? Clearly not.

Nevertheless, for those who criticize trade deal as being ineffective at promoting a 'positive' trade balance, the CAFTA ought to satisfy your objections:

It’s official. With the trade data just released today by the U.S. Department of Commerce, the U.S. trade balance in manufactured goods with CAFTA (Central American and Dominican Republic Free Trade Agreement), has registered a $2 billion trade surplus. This is a sharp reversal from the pre-CAFTA situation, where in the years before the passage of the CAFTA agreement we averaged an annual manufactured goods trade deficit of about -$1.5 billion.

This agreement is the one that isolationist organizations have called “the job killer.” Just before the Congressional vote on CAFTA, one of these groups pronounced, “Like NAFTA, CAFTA is just another outsourcing agreement that will devastate U.S. manufacturing…CAFTA is a continuation of the failed NAFTA policy that drives our rising trade deficit and mounting job losses.”

This was always a silly statement, because the CAFTA countries already had one-way free trade into the U.S. market. The big deal in CAFTA was that in exchange for making their access to the U.S. market permanent, they would eliminate their trade barriers to Made-in-the-USA products. How we could lose in such a deal is beyond me.

Now the facts are in, showing that logic once again prevails over mythology. Far from being a “job killer,” CAFTA has been a real plus for the United States – as has NAFTA, another trade agreement for which these isolationist organizations have been unable to read the trade statistics.

The next step will be to try to explain to people why imports are actually GOOD for America.

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