During the great NAFTA debate of 1993, Americans were told the only jobs we would lose to Mexico were "dead-end" jobs that our high-tech labor force should no longer be doing. At the same time, we would be creating the kinds of jobs Americans do best, like building commercial jetliners.
And indeed, since 1994, America has lost 689,000 jobs in textiles and apparel -- dead-end jobs to pundits, but to the folks who lost them, the best jobs they ever had.
Suddenly, however, after the textile industry went to Mexico, the auto industry followed, though the jobs of U.S. autoworkers were among the best-paid on earth. Mexico now exports 90 percent more cars to the United States than America exports to the entire world. In 2000, the United States, which invented the auto industry, had a trade deficit in autos and auto parts of almost $120 billion.
Now comes the turn of aerospace, the crown jewel of U.S. manufacturing. It, too, is heading south. As Joel Millman of The Wall Street Journal writes: "Like the automakers that turned the cities of Tolucca, Hermosillo and Sautillo into Little Detroit in the 1990s, Boeing Corp., General Dynamics Co., Honeywell International Inc. and General Electric Co.'s GE Aircraft Engines are beginning to make Mexico a base for both parts manufacture and assembly."
What is the attraction of Mexico over an America that used to monopolize commercial aircraft production? "You can only cut costs so much with new machinery," says John Monarch, president of GE supplier Smith West. "Pretty soon you need to lower labor costs, too." Driessen Aircraft Interior Systems pays its Mexican workers only $20 a day, which breaks down to $2.50 an hour -- less than half the U.S. minimum wage.
Now, if aircraft can be made by Mexican workers for $20 a day and computers can be made by Chinese workers for $10 a day, what is left that America manufactures that cannot be made, far more cheaply, outside the United States? Answer: virtually nothing.
To our ruling class, it does not matter where manufacturing is done, or by whom. If it can be done at lower cost abroad, let foreign workers take the jobs from U.S. workers. The betrayal is justified in the name of efficiency. As for our $450 billion merchandise trade deficit, who cares? After all, trade deficits do not matter
Or so America's elites now believe. To them, foreign trade is its own reward -- and those who concern themselves with matters like the loss of our manufacturing base, or economic independence, are living in the past, as they march confidently into the new Global Economy. But while America may believe that none of this matters, other nations act as if it matters greatly, and they are ruthlessly exploiting our indifference to our own industrial decline and death.
Consider our three largest trading partners: Mexico, Canada and Japan. A year after NAFTA, Mexico devalued and the peso lost two-thirds of its value. This tripled the prices of U.S. goods in Mexico, while slashing the prices of Mexican goods in the United States by two-thirds. Our trade surplus with Mexico vanished, and Mexico rose out of recession by capturing a good slice of the American market from the American businesses and workers who formerly had it.
After the U.S.-Canada trade deal, Canada let its dollar fall 25 percent against the U.S. dollar, giving Canadian loggers and wheat growers a decisive advantage over their American rivals. Today, the U.S. trade deficit with Canada and Mexico is among the largest on earth.
Since Sept. 11, Japan has let the yen fall 12 percent against the dollar, giving Japanese exporters an immediate and huge advantage over U.S. manufacturers. Clearly, Japan intends to export its way out of its slump, at the expense of U.S. manufacturers.
Treasury Secretary Paul O'Neill calls Japan's devaluation of the yen "protectionism." Correct. But almost every nation on earth has devalued against the dollar to seize a share of the U.S. market, at the expense of U.S. manufacturers. Yet, our elites have adopted a policy of Ghandian pacifism in the face of this protectionism -- these trade wars launched against an unresisting America.
While other nations act as though trade deficits do matter, and yet believe manufacturing is vital to their health and dynamism, the Americans, who once cared deeply about such issues, no longer seem to care. Thus, nothing and no one stands in the way of stripping the United States of its entire manufacturing base.
We believe we are wise and the rest of the world foolish. Of one thing we may be sure. Time will tell us who were the fools.