NAFTA is a Free Trade Success Story


Posted by Alexander Hendrie on Tuesday, September 13th, 2016, 2:00 PM PERMALINK

According to both major presidential candidates, the North American Free Trade Agreement (NAFTA) has caused economic destruction resulting in lost U.S. jobs and growth over the past two decades. Both Hillary Clinton and Donald Trump have even suggested that it should be revisited to ensure America gets a better deal. The truth is, NAFTA has been a positive economic force and it should serve as proof to pass more free trade agreements.

Free trade agreements are fundamentally about reducing barriers that impede international commerce. Typically, this involves two or more countries removing discriminatory tariffs, trade quotas, and other regulations on a reciprocal basis.

This is beneficial for two reasons. First, fewer barriers on American exports means less money taken by foreign governments out of the pockets of workers and business owners seeking to trade overseas. Second, fewer barriers on imports into the U.S. results in more competition and access to a greater range of products at lower prices for consumers across the country. In all, more than 1 in 5 American jobs are tied to trade, and these workers earn 16 percent more than jobs in industries not tied to trade.

NAFTA is no exception. The trade agreement has supported more than six million high paying jobs, has increased income for workers, and has contributed to increasing economic efficiency in North America. In the two decades since NAFTA went into effect, trade with Canada and Mexico increased by almost 350 percent to $1.2 trillion, while manufacturing exports have increased 258 percent.

Despite these facts, critics of NAFTA allege that the agreement opened the door to outsourcing. Not true, according to a study by the Heritage Foundation. Since NAFTA went into effect, manufacturing has become 42 percent more productive and workers have earned 21 percent more. Of jobs that have been lost to foreign competitors, most have gone to Asia, so cannot be attributed to NAFTA. American workers productivity has increased by more than 80 percent in the past 25 years, and workers earn $15,000 more than the average U.S. worker.

It is also untrue to characterize NAFTA-induced investment in foreign countries as a loss for American workers. As a study by the Peterson Institute for International Economics found, every 100 U.S. manufacturing jobs created in Mexico supported 250 American jobs. In all, nearly two million jobs across the U.S. depend on trade with Mexico. 

Rather than withdrawing from trade, presidential candidates should ensure the U.S. does not fall behind in the global economy.  There are currently over 400 free trade agreements in the world, yet the U.S. is part of just 14 and is the top trading partner with just over 20 countriesOne of our biggest competitors in the developed world – the European Union – has agreements with over 50 countries and is the top trading partner with 80 countries. 

Our inaction will only empower other competitors like China, which has 11 agreements with 18 countries, to catch up with the U.S. and set the rules of global commerce. China is negotiating its own agreement with countries in South East Asia,  so they have a prime opportunity to set the economic rules of the region if the U.S.-led Trans-Pacific Partnership stalls.

NAFTA has clearly been beneficial to the U.S. economy. Similarly, there should not be any doubt of the need for the U.S. to pursue more free trade agreements. Doing so will benefit workers, businesses, wages, and jobs.

 

Photo Credit: https://www.flickr.com/photos/basileflickr/

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