Apr 17, 2015 - 12:45pm

The NAFTA You Never Knew


Senior Vice President for International Policy

Senior Vice President, Americas

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Ranch hands round up cattle by horseback and drive them into the pens in Florida. Photo Credit: Ty Wright/Bloomberg

While activist groups and trade skeptics have tried to make it a punching bag, the North American Free Trade Agreement (NAFTA) has proven to be one of the great bipartisan achievements of the 1990s -- and its benefits should be celebrated today. NAFTA has propelled a major expansion in trade that today sustains millions of American jobs.

The Chamber released a report marking the 20th anniversary of the conclusion of the negotiations entitled NAFTA Triumphant: Assessing Two Decades of Gains in Trade, Growth, and Jobs. Among the report’s key findings (updated here with 2014 merchandise trade data and 2013 services trade data, which are the most recent available):

Trade
  • Since NAFTA entered into force in 1994, trade with Canada and Mexico has risen nearly fourfold to $1.28 trillion in 2013, and the two countries buy about one-third of all U.S. merchandise exports.
  • The trade boom continues. U.S. merchandise exports to Canada and Mexico rose by 66% over the past five years, reaching $552 billion in 2014. In fact, our North American neighbors provided 39% of all growth in U.S. merchandise exports in the 2009-2014 period.
  • Canada (population 36 million) again edged the EU (population 500 million) as the top market for U.S. goods exports in 2014. U.S. merchandise exports to Mexico (population 125 million) were nearly double those to China (population 1.4 billion), which is the third largest national market for U.S. exports.
  • In fact, the United States in 2014 had a trade surplus in manufactured goods ($21.6 billion) with its NAFTA partners, just as it has for the past four years. In 2013, the U.S. services trade surplus with Canada and Mexico reached $45 billion. The U.S. remains a significant net importer of petroleum from its North American neighbors.
Jobs
  • Trade with Canada and Mexico supports nearly 14 million U.S. jobs, and nearly 5 million of these net jobs are supported by the increase in trade generated by NAFTA, according to a comprehensive economic study commissioned by the U.S. Chamber. The expansion of trade unleashed by NAFTA supports tens of thousands of jobs in each of the 50 states and more than 100,000 jobs in each of 17 states.
Manufacturing 
  • Canadians and Mexicans purchased $486 billion of U.S. manufactured goods in 2014, generating more than $40,000 in export revenue for every American factory worker. To put this in context, these export earnings are equivalent to about half the annual earnings — including pay and benefits — of the typical American factory worker ($77,500).
Agriculture
  • NAFTA has been a bonanza for U.S. farmers and ranchers. U.S. agricultural exports to Canada and Mexico rose by nearly 50% between 2007 and 2013, increasing from $27 billion to nearly $40 billion. Canada was the largest agricultural export market of the United States until it was overtaken by China in 2013, and U.S. agricultural exports to Mexico have quintupled since NAFTA entered into force even as Mexican agriculture has enjoyed steady growth.
Services
  • With new market access afforded by NAFTA, U.S. services exports to Canada and Mexico have tripled, rising from $27 billion in 1993 to $93 billion in 2013. Among the services industries that are benefitting: audiovisual; finance; insurance; transportation, logistics, and express delivery services; and software and information technology services.
Small Businesses
  • Canada and Mexico are the top two export destinations for U.S. small and medium-size enterprises, more than 125,000 of which sold their goods and services in Canada and Mexico in 2011 (latest available).
So what’s next for this extraordinary partnership?

Our first task here at home is to update our thinking about Mexico and Canada. In today’s global economy, partnership with our closest neighbors has served to make U.S. industry and agriculture more competitive.

The United States, Mexico, and Canada have created a regional economy that has enabled all three parties to compete in the global marketplace and deliver rising standards of living to our fellow citizens. We created some of the world’s first cross-border value chains, and this has evolved to the point that North Americans don’t really trade anymore; rather, we make things together.

Nonetheless, in order to thrive in the 21st century, our three countries must double down on this collaboration. Since 2013, the U.S. Chamber and leading Mexican trade association Consejo Coordinador Empresarial (CCE) have co-sponsored the U.S.-Mexico CEO Dialogue, an initiative designed to provide private sector input and solutions to bilateral economic challenges confronted by the United States and Mexico.

A key component of the Dialogue’s policy advocacy has centered on the critical theme of North American competitiveness. The upcoming June 10-11 CEO Dialogue meeting in Washington will mark the first time that Canadian chief executives will be at the table to tackle what the Dialogue believes to be our four priority sectors: energy, infrastructure, workforce development, mobility of high-skilled workers.

The synergies across North American economies in all four of these areas are too powerful to ignore. Remarkable developments across our continent in the energy space — that have allowed us to tap previously inaccessible sources of energy such as shale and renewables — requires a commensurate investment in regional infrastructure to facilitate delivery of products to local and global consumers. Simultaneously, historic growth-oriented reforms in the energy sector and in other areas in Mexico necessitate enhanced efforts to develop human capital and facilitate movement of skilled workers across continental borders.

Our nations sometimes compete and sometimes disagree, but we are bound together by an extraordinary opportunity to generate even more prosperity across North America. Let’s keep at it.

About the Authors

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.

About the Author

Neil Herrington, Senior Vice President, Americas, U.S. Chamber of Commerce
Senior Vice President, Americas

Neil Herrington is senior vice president for the Americas Department at the U.S. Chamber of Commerce.