NCPA - National Center for Policy Analysis

NAFTA Vindicated

July 3, 2001

U.S. labor 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 here, the U.S. Labor 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 here.
  • 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 labor while still keeping close links to U.S. suppliers.

Experts do note some minor downside effects 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.

 

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