NAFTA Myths and Realities
2014 marks the 20th anniversary of the entry-into-force of the North American Free Trade Agreement (NAFTA). The usual critics have seized on the occasion to make their usual arguments. And as usual, their data are as wrong as their arguments.
For instance, Harold Meyerson of the Washington Post last month blamed job losses on the U.S. trade deficit with our NAFTA partners, Canada and Mexico, which he cited as $181 billion in 2012.
Writing in the New York Times, David Bonior last week wrote much the same: Citing the same number, he claimed the U.S. has lost jobs and seen inequality rise due to the trade deficit with our North American neighbors.
The trade balance is a poor measure of success or failure in trade policy, but the U.S. in fact registered a combined trade surplus with Canada and Mexico in 2012 of $21 billion in manufactured goods, $44 billion in services, and $2.9 billion in agricultural products. These surpluses aren’t new, and they continue today.
As the links show, these are official U.S. government data from the Departments of Commerce and Agriculture.
The total U.S. goods and services trade deficit with Canada and Mexico reached about $50 billion in 2012, but it’s entirely due to America’s sizeable net oil imports from our two neighbors. It’s hard to see how these energy imports could drive job losses in, say, manufacturing.
In fact, the U.S. has such surpluses for all our 20 free-trade agreement (FTA) partners, taken as a group. America’s global trade deficit comes from two sources: large (but declining) net imports of oil, and merchandise imports from non-FTA countries. If you’re worried about the trade deficit, FTAs aren’t the problem — they’re part of the solution.
What are the facts on NAFTA? The Chamber released a report entitled NAFTA Triumphant: Assessing Two Decades of Gains in Trade, Growth, and Jobs. Among the report’s key findings (updated here with 2012 data):
- Since NAFTA entered into force in 1994, trade with Canada and Mexico has risen three-and-one-half fold to $1.2 trillion, and the two countries buy about one-third of U.S. merchandise exports.
- 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.
- 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.
- Canadians and Mexicans purchased $458 billion of U.S. manufactured goods in 2012, generating $38,000 in export revenue for every American factory worker.
- NAFTA has been a bonanza for U.S. farmers and ranchers, with one in every ten acres on American farms planted for export to Canada and Mexico.
- With new market access afforded by NAFTA, U.S. services exports to Canada and Mexico have tripled, rising from $27 billion in 1993 to $89 billion in 2012.
- Canada and Mexico are the top two export destinations for U.S. small and medium-size enterprises, more than 131,000 of which sold their goods and services in Canada and Mexico in 2011 (latest available).
Facts are stubborn things. We hope the facts about America’s trade with our two closest neighbors carry the day.