Withdraw From NAFTA & The WTO?

OK, I know that some of you will complain that this post is like shooting fish in a barrel, but I'm going to take on one of Rep. Kucinich's worst ideas from last night's debate. Specifically, he called for (and promised if elected) a full and immediate withdrawl from both NAFTA and the WTO. He brought out some really nice graphs that showed a significant drop in something (I'll assume that they did represent manufacturing jobs as he claimed) at some point in time (I'll even assume that that time corresponds with NAFTA and the WTO). Despite the graphs, I absolutely believe that withdrawl is the wrong path to take.

First, I find it very curious that in general the biggest protectionists in politics are almost always the same ones that want us to sell out our sovereignty to other nations. They want us to be internationalists and engaged in the political realm and isolationist in the economic. Never does it occur to them that the two are inextractibly linked.

The want us to be a totally self-sufficient nation, able to produce everything we need in order to maintain our standard of living. That is a nice, utopian goal. But as with most utopian goals it is unachievable.

Even during WWII, when 10% of the world's economic output used to travel over the same hill in Pennsylvania, the United States was not completely self-sufficient. Were we the biggest manufacturing plant in the world? Yes. But we still needed energy and material inputs (generally oil and exotic materials) from other nations.

Now, we are even more dependent on others, particularly those in the Middle East. Could we bring home more manufacturing? Sure. Everything that is currently being manufactured in Asia or South America or Europe could most certainly be made here - by American workers. It might cost more, but surely the increase in employment in the United States would more than offset the higher costs, right?

What the isolationists want to dismiss is the concept of economic specialization. We used to always talk about it as such:

A given unit of labor in the US can be used to either grow 1 bushel of tomatos or to produce 5 semiconductors. A similar unit of labor in Mexico can grow 2 bushels of tomatos or can produce 3 semiconductors. Each nation has 10 units of labor available.

The US would be capable of producing a maximum of 10 bushels of tomatos or 50 semiconductors. We could also choose to allocate labor to produce say 5 bushels of tomatoes and 25 semiconductors.

Mexico similarly would be capable of producing a maximum of 20 bushels of tomatos or 30 semiconductors. Or the could choose to produce 10 bushels of tomatos and 15 semiconductors.

Now obviously the US is more efficient at making semiconductors and the Mexicans are better at growing tomatos. If each nation specializes, there are 50 semiconductors and 20 bushels of tomatos available to divide between both nations. If the US trades 25 semiconductors for 10 bushels of tomatos then the US has 5 more bushels of tomatos than they would have for having produced 25 semiconductors for domestic consumption and the Mexicans would have 10 more semiconductors than if they had produced 10 bushels of tomatos for domestic consumption. Both sides benefit from the trade.

We could bring all the manufacturing back home that Kucinich is up in arms about, but how many high-tech jobs would have to be surrendered? How many service jobs would have to go by the wayside? Fact is, our economy is really geared more towards service than it is towards manufacturing any more. To ramp up our manufacturing to be as close to self-sufficient as possible our standard of living would decline. Manufacturing is no longer our specialty.

That's not to say that we should completely abandon manufacuring. As I like to say, everything in life is a balance. Manufacturing is not only an economic concern, it is also a national security concern. Prudence says that we need to maintain a certain level of manufacturing capacity in the event that conflict breaks out and we become isolated from our suppliers. The trick is maintaining the balance.

Kucinich wants to push us out of balance. He's willing to sacrifice the economy in a quest for more manufacturing jobs. Sounds an awful lot like a command economy to me.

The Soviet Union already proved that the government is not the best source for determining the proper mix of jobs in the economy. That is a task better left to the invisible hand of capitalism. The government does have in interest in promoting a degree of economic inefficiency in the interest of security, but nowhere near the degree that Kucinich is proposing.

Withdrawing from NAFTA and the WTO is a bad idea precisely because it would force the United States to become more of a manufacturing economy overnight.