Jobs and goods make a run for the border.

Gary Shoesmith, director of the Center for Economic Studies at the Babcock School of Management at Wake Forest University, traveled to Latin America with Gov. Jim Hunt's trade mission last summer. Here are his observations on the North American Free Trade Agreement and the nation's mercantile trade deficit with Mexico.

BNC: Is a trade deficit as bad as some politicians and pundits say?

Shoesmith: A trade deficit means we're transferring production and jobs overseas. There's no getting around that. At the same time, it may simply indicate that we're taking advantage of much cheaper products from another country. In the long run, as a nation, we'd like to balance our trade. We want to take advantage of trade deficits with some and offset those with surpluses with others. We'd buy products with high labor content while selling technology products.

You found that, post-NAFTA, U.S. textile and apparel employment is down, but employee productivity is up, so exports, especially to Mexico, continue to grow.

Between '93 and '98, textile and apparel employment in the United States declined by 18.2%. Despite the massive job losses, shipments in both have risen since '93. In textiles, U.S. shipments are up 8.5%, or $11 billion. In apparel, shipment are up 3.4%. And shipments per worker are up 28% in textiles and 40% in apparel. Automation is as responsible for the loss of employment as increased trade.

What about North Carolina?

Textile and apparel employment is down 22.6%, so we've suffered a little more. But the entire industry nationwide is on a fairly steady and rapid decline. Employment will keep declining as automation and intense foreign price competition continue.

You blame the Mexican financial crisis, not NAFTA, for the job losses.

Trade with Mexico was liberalized in the late '80s, before NAFTA, and the trade deficit with Mexico didn't occur till the mid-'90s, when their financial crisis hit. Even before NAFTA, Mexico opened its borders far more than we did ours. They reduced their tariffs to a much greater degree than we did. Then comes the financial crisis. Between December '94 and mid-'95, the peso depreciated more than 50%. And Mexico's gross domestic product shrank 6.2%. Mexican consumers had fewer pesos, and each peso was worth half of what it had been. Compare a 50% depredation in the peso to the 2% reduction in U.S. tariffs and tell me which is bigger. That's why we're running a trade deficit.

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