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LAYOFFS IN THE CONTEMPORARY AMERICAN ECONOMY

One result of these actions have been a reduction in the level of Canadian exports to the United States. Unfortunately, the resulting loss of jobs in Canada has dampened Canadian demand for American products. Therefore, to date, the CanadianUnited States Free Trade Agreement has had a relatively neutral impact on the American economy, while it has had a detrimental impact on the Canadian economy.

A free trade agreement with Mexico will permit American firms in large number to relocate their production facilities in Mexico to take advantage of lower costs of productionprimarily lower labor costs. The Bush Administration presents this effect as beneficial, because it will lower prices for American consumers. If large numbers of Americans lose their jobs in the process, however, the effect on the United States of free trade with Mexico will be similar to the effects on Canada of the CanadaUnited States Free Trade Agreement. American firms will gain to the extent that they are able to become more price competitive in international markets; however, these export gains will accrue primarily to Mexico, not the United States, because it will be the Mexican production of American firms which is exported.

To be fair, the Bush Administration is counting on a stronger Mexican industrial sector to increase its demand for American hightech data processing equipment, capital goods, and capital. Such an increased demand will benefit the American economy, and it will result in employment growth in hightech data processing equipment and capital goods production. The jobs lost in other sectors of the American economy, however, will not be transferable to the new demand areas; thus, a small army of unemployed and underemployed American workers will be created,

and the American economy will be saddled with increased welfare and dislocation costs.

With respect to longterm participation in the international economy, the United States...

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