Free Trade — post NAFTA

Today’s NYTimes reports Obama Scolds Democrats … .   Well, good for him, but since NAFTA I’ve thought those who see themselves as gaining from these “free trade” bills would assist those who see themselves as losing.   In this later category, there are plenty of folks who are willing to self-identify:  “I can see my job going overseas if we do this deal”.   Well last night, on the News Hour, I heard first evidence of the former: someone willing to announce they will benefit.  One of our sneaker manufacturers (I believe, someone check me on this) announced “If we get this deal, we will create 10,000 US jobs”.   For them, that’s a cost they seem willing to bear.   Let’s say we want to hold them to this commitment.

If we wanted to see this was more than an idle promise, we’d have to put some more information into the Labor Department statistics.  That would add costs, both to the government and private sector.   But, of course, since any trade agreement is sold as a net plus to the economy, we should expect commitment on both sides.   And by commitment, I’m thinking more than just words, which our sneaker manufacturer appears willing to do.   But they can’t be alone.   Here’s where the government, with a plan, steps in.

Each state in the nation offers a number:  How many jobs is this agreement going to cost us?  These are totaled.    And to keep the numbers from being wildly speculative.   Each state’s compensation is calculated on their accuracy of  reporting on a ratio of their estimate to the total, given their population.   The total cost is the cost of creating the jobs.   This is not on the back of any state, and certainly not the federal government.  It’s on the back of those companies pledging to create those jobs.   And not until the pledges of new jobs exceeds the total demand as tallied in the states, is there any free trade agreement.     The rationale is as follows:  “this will create more jobs than its costs”.  Good.

There would be a penalty for a shortfall.   The penalty is the salaries of the un-filled jobs.   The money collected (units of percent for administering) would be disbursed to the states whose job-creation (from these promised jobs) fell furthest from the target.

There are obvious problems, but let’s call them details.   It would be difficult for any company to pledge it’s job-creation to be uniform across the nation according to the perceived need to offset job loss.   So, an additional piece of overhead would be tallying the jobs lost as a result.   We hear too many companies (not necessarily their fault) who lose jobs overseas, if not ship them out by themselves.     Another problem:  small companies.   We can’t ask every mom and pop to take on specific jobs, not to mention the bureaucratic overhead of accounting for need and job-creation credit and loss.   Some provision would allow, if not encourage trade groups, chambers of commerce, etc.   to take on this role.   With carrots and sticks. It all has to add up, so, at the end of the day we can say:  “this trade agreement lived up to it’s promise”.

So, how would we pay for this?   Our sneaker manufacturer has hinted at the way.   Increased economic activity will necessarily produce increased income and corporate taxes.   But this has to be more than wishful thinking.   These increased  taxes would pay for the administration, and the disbursement to the states.   Missing pledged job growth would incur the much greater cost of the salary.  Imagine a corporation, faced with paying 6% of a person’s salary as a tax, or 100% of a person’s salary to the government as a penalty, would have little trouble in finding a productive job for a person to fulfill their pledge.

Now there’s an incentive for job growth.  Let’s get the projected winners to put some skin in the game.

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