Tuesday, March 04, 2008

It's Not NAFTA, It's Unions and Taxes.....Stupid.

Depending on which Obama aide or which Clinton spouse you listen to, NAFTA is either responsible for many of the economic woes in the rust belt, or one of Bill Clinton's greatest(only)accomplishments. Once again, Hill and BHO can't have it both ways.

Fred Barnes lays it out here:

Buckeye Blues
Don't blame NAFTA.
by Fred Barnes
03/04/2008 12:00:00 AM

WHEN VOTERS IN OHIO go to the polls today, they will have heard over and over again from Democratic presidential candidates Barack Obama and Hillary Clinton that their state's economic troubles are caused by the North American Free Trade Agreement (NAFTA) and other trade treaties.

But there was fresh evidence last week that NAFTA has had little to do with Ohio's doldrums, its job losses in particular. When the U.S. Air Force awarded a $40 billion contract for 179 new aerial refueling tankers, Ohio wasn't in the running as a site where the aircraft might be built. Instead, they'll be built in Alabama outside Mobile.

Why? The answer is simple: Alabama's business climate is good and Ohio's isn't. When major business projects are looking for the best site, job-hungry Ohio is rarely considered. And NAFTA has little or nothing to do with it.

Surely Obama and Clinton know this. If they don't, their understanding of the economy is lacking. If they do, their attacks on free trade were aimed to please NAFTA-hating union members. In truth, NAFTA is a boon to the Ohio economy. Roughly 55 percent of Ohio's exports go to Canada and Mexico, America's NAFTA partners. That exceeds the national share of exports--35 percent--to those countries.

For Alabama, the awarding of the tanker contract was only its latest economic coup. Earlier this year, Thiessen Krupp, the German steel company, decided to build a $3.7 billion plant near Mobile. And Alabama has attracted three foreign automakers to build plants in the state: Mercedes,
Honda, and Hyundai.

Ohio was once an economic powerhouse, but now it lags behind Alabama in almost everything that might lure new business to the state. "Ohio has raced past 41 other states and now ranks 5th in state and local taxes measured as a percentage of income," David Hansen, president of the Buckeye Institute, wrote last year. Alabama, in contrast, ranks 46th in tax burden.

In economic competitiveness, Ohio has fallen to 47th in the nation, according to the American Legislative Exchange Council. Alabama is 18th. "The cost of doing business makes us very competitive," says Bob Sisson, vice president of the Mobile Chamber of Commerce. Relative to Ohio, it certainly does.

Ohio also lacks a highly educated workforce, key to bringing new business to the state. Alabama state and local officials have overcome this problem by promising to train workers for the new, high-tech manufacturing plants that agree to come.

"Although the nation has bled factory jobs in recent decades," wrote Jim Tankersley of the Chicago Tribune, "other states have surged past Ohio because they created knowledge-driven jobs and Ohio did not."

One more thing. Ohio is a highly unionized state. The Wall Street Journal called this "Ohio's most crippling handicap" in job creation. Alabama is a right-to-work state in which union organizing is difficult.

This, of course, gives Alabama an important talking point. After all, other things being equal, would a large corporation prefer to locate a new factory in a union state or a right-to-work state? Would it rather hire a union workforce or a non-union one? Those questions answer themselves

their credit, Alabama officials have packaged a set of strong incentives for business development. And especially in Mobile, local business leaders have done their part. Mobile is aggressively pro-business.

The decision on where Northrop Grumman and European Aeronautic Defence & Space Co., the parent of Airbus, would put their tanker facility was decided in 2005, contingent on winning the Air Force contract. They were offered a site at a former air force base near Mobile at no cost, plus lucrative tax incentives. Mobile also has a deep water port, a railroad hub, and two interstate highways nearby.

The Alabama model is one Ohio could emulate. But it would require, at a minimum, significant tax reductions and a more flexible labor market. A renegotiated NAFTA? Despite the noisy claims of Obama and Clinton, that would barely make a difference at all.

Fred Barnes is executive editor of THE WEEKLY STANDARD.

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