MISSOURI WATCH: SHOW ME ATTITUDE ON TRADE IS COMMON SENSE

"An interesting question" was the way a Federal Reserve economist answered when I asked him about the effects of the free trade agreement with Mexico on our economy in Missouri. I had expected something more academic from a Ph.D in economics from one of the best universities in the country when I broached the subject of the North American Free Trade Agreement, which since its inception has greased a slide of Missouri manufacturing plants to south the border, taking along hundreds of highly trained Missouri engineers, production experts and other workers.

In essence, the Federal Reserve finance expert was merely repeating general principles that his fellow economists were taught in the past from bookish professors. When it comes to international trade policy, the traditional (and superficial) motto is "Free trade is good, any trade restraint is bad."

It may time to update that old bromide, for surely no one really believes that all free trade is good. Even this poor writer would not endorse food imports that carry a serious disease risk. Who wants to bring in beef from England's mad cows? And should trade channels be kept entirely open for trade with the likes of Libya, Iraq or North Korea? In the free trade school these are rare exceptions that do not disprove the rule.

NAFTA is again in the news as the Clinton administration gathers support for an extension of the agreement to all of the western hemisphere. Chile is next on the list, but that's just the beginning. I have a feeling a lot of people besides Pat Buchanan and Ross Perot are lukewarm about NAFTA.

Has the agreement with Mexico improved our trade pattern with that country? Probably not, on the whole. It isn't even certain that Mexico itself is, on balance, better off. The U.S.-Canadian portion of the treaty is another matter.

Some of the reporting on our Mexican trade has been less than candid, intended more to persuade than inform. It is true, as often reported, that U.S. exports to Mexico have increased since the agreement's ratification. U.S. exports to Mexico rose from $41.6 billion in the year of NAFTA's signing to $56.8 billion in 1996. That's the good news.

The problem is that much of the recent export volume was not eagerly sponged up by Mexico's consumers. Most of them are too poor to buy many exports from anywhere. Only between 10 and 6 percent of our exports to Mexico have been consumer goods, while a third of the total has been capital goods that in a great many cases go into construction of U.S.-owned or U.S.-controlled manufacturing plants. Another sizable portion of the total is component parts of manufactured goods that are shipped south for assembly and then later reshipment.

In spite of our larger exports to her, our trade balance with Mexico has shifted from a $1.67 billion surplus in 1994 to a $16.2 billion deficit in 1996.

Putting this in parochial terms, the transfer of manufacturing processes out of Missouri and the rest of the country amounts to a transfer of jobs as well. I have been unable to find reliable estimates of how many Southwest Missouri jobs left our state when the huge Zenith plant in Springfield went south for the duration. An assorted number of other manufacturing facilities in our state have followed the same route, taking with them thousands of jobs.

I have one other worry. First the plants, then the jobs, and then there's the plaguing question of when the transfer of management will begin, if it hasn't already. It is not really necessary that Mexican manufacturing be controlled from St. Louis, Kansas City, Memphis or New York.

The facts cited thus far pose an even more troubling dilemma: why is it that our relocating of manufacturing to Mexico and elsewhere seems not to have improved America's international trade balance? This country's 1996 trade deficit in goods was a whopping $188 billion. The current account deficit was only moderately smaller.

What does all this add up to? Are we being deucedly clever in farming out low-level jobs to Mexico, Honduras, Chile, making Uncle Sam an industrial colonialist? Or are we on a course toward replicating the England of a century ago whose counting houses and shipping dominated trade over half the globe? And, finally, will the U.S. be any better off?

Maybe economists have the best answer: Free trade is good; don't raise disconcerting questions.

~Jack Stapleton of Kennett is the editor of Missouri News and Editorial Service.