Candidates blame NAFTA for pushing American companies to close plants here and move production south. But from 1994 through 2001, reports the Cato Institute, U.S. manufacturers invested $200 billion a year at home -- and only $2.2 billion a year in Mexico. After NAFTA passed, U.S. manufacturing output soared, and it's now at the highest level ever. American farmers have seen their exports boom.
From listening to the Democrats, you'd never guess that our exporters got more out of the deal than Mexico's did. NAFTA actually made it easier for U.S. companies to stay here and sell products in Mexico. How? By phasing out tariffs on goods shipped there -- which, on average, were 2.5 times higher than ours. We gave nickels to get dimes.
Edwards and Co. hold fast to the superstition that tariffs and other trade barriers are essential to our prosperity. Reality is that admitting imports makes Americans more prosperous by reducing prices of consumer and capital goods. It also strengthens American companies by forcing them to be more efficient and innovative.
So why do so many people, including approximately 100 percent of those who turn up at Democratic debates, hold this and other trade agreements in such contempt? One obvious reason is they want to appeal to labor unions, which generally prefer protectionism.
But Gary Hufbauer, an economist at the Peterson Institute for International Economics, suspects one reason lies in a different issue: illegal immigration. Some NAFTA supporters thought it might generate enough growth in Mexico to keep Mexican workers at home. When the tide of illegal immigrants grew, it bred resentment here.
That reaction partly helps to explain the Democratic retreat. By denouncing NAFTA, the presidential candidates can appeal to Americans alarmed about our porous borders without offending Hispanic voters.
But they should remember two crucial things: Bill Clinton presided over an era of enviable prosperity, and he did more to expand free trade than any president since Franklin D. Roosevelt. If they want to get back to the land of Oz, Democrats would be advised to follow the same Yellow Brick Road.
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