North American Free Trade Agreement vindicated

July 17, 2001

Free Market Foundation

U.S. labour unions and others who predicted that the North American Free Trade Agreement (NAFTA) would be a disaster must now be eating their words, say observers. In fact, NAFTA which went into effect in January 1994 has been a resounding success by almost any measure.

The best available studies show that on balance NAFTA has boosted jobs and cut inflation without hurting wages.

U.S. merchandise exports to Mexico in 2000 were up almost 170 percent from 1993 while Mexican exports to the U.S. grew by 241 percent.

As for predictions that NAFTA would create enormous numbers of lost jobs in the U.S.A., the U.S. Labour Department has certified only about 316,000 jobs as threatened or lost due to trade with Mexico and Canada while the U.S. added about 20 million jobs over the period.

Experts estimate that NAFTA has shaved about 0.1 percentage points off the annual inflation rate in the U.S.

Mexican assembly plants get 82 percent of their components from U.S. suppliers, according to the U.S. International Trade Commission.

Trade experts say the NAFTA free-trade zone has given U.S. companies a way of taking advantage of cheap labour while still keeping close links to U.S. suppliers.

Experts do note some minor downside effects for the U.S. from NAFTA, but they say they are well worth the many benefits it has delivered.

Source: Charles J. Whalen, Paul Magnusson and Geri Smith, NAFTA’s Scorecard: So Far, So Good, Business Week, July 9, 2001.

For more on NAFTA http://www.ncpa.org/pd/trade/trade6.html

RSA Note:
The above article presents only the repercussions for the U.S. At a guess one can probably infer that Mexico and Canada are generally perceived to be getting the best of the deal.

Eustace Davie, Director, Free Market Foundation.

FMF\10 July 2001