Ross Perot added his memorable “insight” to the debate over the North American F
ID: 1254500 • Letter: R
Question
Ross Perot added his memorable “insight” to the debate over the North American Free Trade Agreement (NAFTA) when he warned that passage of NAFTA would create a “giant sucking sound” as U. S. employers shipped jobs to Mexico, where wages are lower than wages in the United States. As it turned out, many U. S. firms chose not to produce in Mexico despite the much lower wages there. Explain why it may not be economically efficient to move production to foreign countries, even ones with substantially lower wages.
Explanation / Answer
Trade does cause certain jobs to disappear, certain companies to go out of business, and certain sectors of the economy to shrink. That is what we would expect from increased competition, domestic as well as international. But trade as a rule does not affect the total number of jobs or the overall rate of employment or unemployment. Studies that claim that trade expansion, trade deficits, or trade agreements have caused the loss of some specific number of jobs during a certain period of time are misleading if they imply that today
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.