How much of US--Mexico--Canada economic improvement and growth has been due to NAFTA?
The Atlantic reports that “new research from the Mexico
Institute at the Wilson Center, a nonpartisan think tank based in Washington,
D.C., found that trade with Mexico creates approximately 4.9 million jobs in
the United States. Supporters of NAFTA estimate that some fourteen million jobs
rely on trade with Canada and Mexico. While the nearly two hundred thousand
export-related jobs created annually by the pact pay 15 to 20 percent more on
average than the jobs that were lost.”
The Council on Foreign Relations states that I”n the years
since NAFTA, U.S. trade with its North American neighbors has more than
tripled, growing more rapidly than U.S. trade with the rest of the world.
Canada and Mexico are the two largest destinations for U.S. exports, accounting
for more than a third of the total. Most estimates conclude that the deal had a
modest but positive impact on U.S. GDP of less than 0.5 percent, or a total
addition of up to $80 billion dollars to the U.S. economy upon full
implementation, or several billion dollars of added growth per year.”
According to the U.S. Chamber of Commerce overall trade between
the three NAFTA partners the U.S.—Canada—Mexico
has increase from roughly $290 billion
in 1993 to more than $1.1 trillion in 2016. Cross-border investment has also
surged during those years, as the stock of U.S. foreign direct investment (FDI)
in Mexico rose from $15 billion to more than $107.8 billion in 2014. As for job
growth, six million U.S. jobs depend on U.S. trade with Mexico, a flow that has
been greatly facilitated by NAFTA, which has helped eliminate costly tariff and
non-tariff barriers. NAFTA has also facilitated a multi-layered integration of
the U.S., Mexican and Canadian supply chains. According to the Wilson Center,
twenty-five cents out of every dollar of goods that are imported from Canada to
the U.S. is actually “Made in USA” content, as are 40 cents out of every dollar
for goods imported into the U.S. from Mexico.
Geronimo Gutierrez, managing director of the North American
Development Bank (NADB),, Mexico imports more from the U.S. these days than do
all of the so-called BRIC nations combined – Brazil, Russia, India and China.
Economic Impact of Trade
The Peterson Institute for International Economics (PIIE),
the United States has been $127 billion richer each year thanks to “extra”
trade growth fostered by NAFTA. For the United States, with its population of
320 million at the time of that study, the pure economic payoff was thus only
$400 per person, while per capita GDP was close to $50,000.”
The costs of the NAFTA compact are greatly concentrated in
specific industries like auto manufacturing. On the other hand, the benefits of the trade
pact are distributed widely across the U.S., as they are in any international trade
agreement.
Trade economists are in unison that it has proven difficult
to separate trade agreement direct effects on overall trade and investment from
other elements, including quick improvements in technology, expanded trade with
other countries such and unrelated domestic developments in each of the
countries in the agreement.
Walter Kemmsies, managing director, economist and chief
strategist at JLL Ports Airports and Global Infrastructure, notes that that “many
of the job losses that are popularly blamed on NAFTA would likely have taken
place even in the absence of NAFTA, in part because of growing competition from
China-based manufacturers”. In the U.S. , Mauro Guillen, head of Wharton’s
Lauder Institute, states that without NAFTA, many American jobs that were lost
over this period would probably have gone to China or elsewhere. “Perhaps NAFTA
accelerated the process, but it did not make a huge difference.”
Job Losses and Lower Wages
Morris Cohen, Wharton professor of operations and
information management, argues that NAFTA on balance, been a good thing for the
U.S. economy and U.S. corporations while many jobs were created in Canada and
Mexico, and this economic activity created a fairly good seamless supply chain between
the three nations.
NAFTA blanket benefits are difficult to measure since trade
and investment are influenced by numerous other economic variables, such as
economic growth, inflation, and currency fluctuations.
Newer pacts are more inclusive providing special protections
for foreign investors; protecting patents and copyrights; privatizing markets
for public services such as education, health, and public utilities; and standardizing
regulations.
China’s Impact
Chinese traded goods grew nearly eight-fold between 1991 and
2007. By 2015, U.S. trade in goods and services with China totaled $659 billion.
And yet, NAFTA continues to be blamed for most the job losses in the U.S. But
China’s emergence as an economic power has made a tidal shift of world trade.
Simultaneously, it has challenged much of the empirical data about how labor
markets adjust to trade shocks
The benefits to the overall Mexican economy were weakened, by
heavy dependence on imported intermediate inputs used in export production, as
well as by Chinese competition. In Mexico and the United States, real wages
have stagnated while productivity has continued to increase, leading to higher corporate
profits and greater inequality.
Blaming NAFTA for all of the disturbing trends may make some
critics and politician feel justified, but as recent researchers shows is
growing more complex today’s economies and the current challenges to economic behavior defies any
simplistic explanations while starting trade wars of protectionism have no
specific end because all the unintended consequences once sa war starts and casualties begin
to accumulate in the process.
