Obama's NAFTA 'Border Incident'.

Senator Obama has managed to cause what the Wall Street Journal refers to as a 'border incident', causing a diplomatic incident with Canada recently when he declared that he would unilaterally withdraw from the NAFTA agreement.

He made the promise at last week's Democrat Campaign Debate in Ohio, and said "that he will opt out [of NAFTA] unless we renegotiate the core labor and environmental standards."

Unfortunately, he 'misunderestimated' how quickly things can get turned around in the media, especially in the midst of a political campaign.

As it turns out, there was a memo that was sent to a Canadian diplomat from Obama's chief economic adviser, Austan Goolsbee, that told them that Mr. Obama's vow was merely campaign rhetoric aimed at Ohio primary voters.

However, according to the Chicago Tribune, the much-defiled NAFTA isn't even a bad thing for America:

Most experts agree that NAFTA has been a net asset. A 2003 report by the Congressional Budget Office found it has boosted the output of both the United States and Mexico. Since Goolsbee is a first-rate economist, we doubt he is telling Obama anything different.

In fact, the accord has served to open up foreign markets to American companies while reducing prices for American consumers. It has also proven good for most workers: Inflation-adjusted average hourly earnings, which declined in the decade before NAFTA took effect, rose in the following ten years. NAFTA doesn't deserve all or even most of the credit, but it hasn't been the scourge often portrayed.

The Wall Street Journal comes to similar conclusions, pointing out that Obama's 'campaign rhetoric aimed at Ohio primary voters' was incredibly misguided.

Leaving Nafta alone would be great news for Ohioans in particular, as the Cato Institute's Daniel Griswold recently noted. Canada and Mexico buy more than half of Ohio's exports, and since Nafta's 1993 enactment the U.S. economy has added a net 26 million new jobs. The average real hourly compensation (wages and benefits) of workers has climbed 23% and real median household net worth has increased by a third.

We suspect Mr. Goolsbee knows all of this, because the benefits of free trade are one of the few things that economists of the left and right agree on. The Commerce Department reports that while countries with which we enjoy free trade agreements generate only 7.5% of global GDP, they consume more than 42% of U.S. exports.

In other words, Obama's using the template of 'NAFTA is bad' as a campaign tool only illustrates how little he actually understands about the United States' economy. Even I 'get' that our trade with North American countries is a two-way street, and we're benefiting from it greatly. If he actually had any interest in reducing trade deficits, he'd redirect his gaze from our northern border and look towards Asia.

And, USAToday agrees:

The reality is that NAFTA has relatively little to do with either the overall job losses or job gains. China is a far larger factor. But the number that best displays the nonsensical nature of the debate is 66% — the increase in the manufacturing output of American industry since 1993.

It's impossible to look at an economy that has increased its manufacturing output so dramatically while simultaneously cutting its manufacturing workforce and not see a much larger force at work than NAFTA.

That force has been the unprecedented and sweeping gains in worker productivity that have allowed U.S. companies to churn out more goods with fewer people. Some of this has come from outsourcing the most labor-intensive parts of manufacturing, particularly to Asia. But much of it is from the use of more automated systems for assembly lines and high-tech inventory management.

And, Newsweek (via FactCheck.org) provides an even more stunning set of numbers that NAFTA opponents often ignore:

NAFTA critics often point to the loss of manufacturing jobs, which have declined by 3.1 million between Jan. 1994, when NAFTA was implemented, and January of this year. But total nonfarm employment, meanwhile, has increased by 25.6 million in the same time period. Whatever effect NAFTA may have had on U.S. jobs, however, Obama is relying on a statistic that has been criticized, questioned and contradicted by other researchers.

In other words, there's been a net gain of 22.5 million jobs in the United States since NAFTA was implemented in 1994.

Obama just doesn't get it, and it's yet another reason why he'd be a poor choice for President. Our friends in Canada get it. Hopefully, our friends in the Democratic Party will, too.