Back in 1992, economist Gary Hufbauer of the Peterson Institute for International Economics famously predicted that NAFTA would create 170,000 new jobs, because the U.S. would be running a $9 billion trade surplus with Mexico.
But, as we know, our Mexican trade surplus instead turned into a raging deficit, now at $91 billion, accounting for an estimated 1 million lost manufacturing jobs.
By 1995, when we were already running a $23 billion deficit with Mexico, Hufbauer famously told Bob Davis at the Wall Street Journal that, "The lesson to me is that I should stay away from job forecasting." (Bob Davis, "Free Trade is Headed for More Debate," WSJ, 4/17/95.)
Unfortunately, Hufbauer has broken his occupational promises like they were so many NAFTA job-creation promises. And while economists like to preach that blue collar workers should lose their jobs when they screw up, there is no such accountability for the neoclassicals.
In a new paper for Peterson, Hufbauer and colleague Jeffrey Schott estimate that the Buy America provisions of the stimulus package would create 1,000 to 1,900 jobs, but destroy 6,500 to 65,000 jobs due to foreign retaliation. While the job creation estimates are based on something approaching a sound methodology, the job destruction estimates are pulled out of a hat, and retaliation is simply assumed.
But as we pointed out this morning, the rumors of retaliation are part of a joint scare campaign by right-wing governments and corporations that have offshored U.S. jobs. For the right-wing Canadian administration in particular, this is a continuation of their attacks on Obama that began in the Ohio primaries.
But the allegations of trade-law violations are misleading, as Hufbauer and Schott at least have the decency to point out:
Existing laws already provide Buy American preferences for much of the public procurement authorized in the stimulus bill...
Of course the bigger question continues to be why political leaders signed up government procurement rules – a quintessential, non-trade domestic issue – to comply with so-called “trade” agreements in the first place. It's clear that, going forward, these rules need to be changed. But the immediate task is to put America back to work.