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NAFTA's Success Augurs Well for Other Trade Negotiations

Feb 18, 2014

As President Obama prepares to meet Wednesday in Mexico with Mexican President Peña Nieto and Canadian Prime Minister Stephen Harper, opponents of trade expansion (e.g., Public Citizen) are decrying the North American Free Trade Agreement (NAFTA) as a failure over its 20 years of existence. Since NAFTA did not accomplish its goals, they claim, new trade agreements now under negotiation, such as the Trans-Pacific Partnership (TPP), will also fail.

But the reality is that NAFTA has proved an economic success, benefiting the people of Mexico, Canada and the United States. Its success augurs well for a completed TPP.

Last summer Business Roundtable released, "Benefits of Trade & U.S. Trade Agreements: Drivers of American Growth at Jobs," examining the results of the 14 free trade agreements the United States has concluded with a total of 20 countries. Our study demonstrated that since NAFTA went into effect on Jan. 1, 1994, U.S. exports to Canada $291.8 billion, an increase of 190 percent; U.S. exports to Mexico climbed $216.2 billion, up 420 percent!

The U.S. Chamber of Commerce also studied the impact of NAFTA, releasing in 2012, "NAFTA Triumphant: Assessing Two Decades of Gains in Trade, Growth and Jobs." Some key findings:

  • 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.
  • NAFTA has been a boon to the competitiveness of U.S. manufacturers, which added more than 800,000 jobs in the four years after NAFTA entered into force. Canadians and Mexicans purchased $428 billion of U.S. manufactured goods in 2011, generating $36,000 in export revenue for every American factory worker.
  • NAFTA has been a bonanza for U.S. farmers and ranchers, helping U.S. agricultural exports to Canada and Mexico triple and quintuple, respectively. One in every 10 acres on American farms is planted to feed hungry Canadians and Mexicans.
  • With new market access and clearer rules afforded by NAFTA, U.S. services exports to Canada and Mexico have tripled, rising from $27 billion in 1993 to $82 billion in 2011.

The Chamber's John G. Murphy recently expanded on those findings in a blog post, "NAFTA Myth and Realities," rebutting those like Harold Meyerson and David Bonior who claim NAFTA has caused U.S. trade deficits with our North American trading partners:

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.

The meeting of the three North American leaders in Toluca, near Mexico City, is important to build momentum in the negotiations over the Trans-Pacific Partnership. The U.S., Canada and Mexico are in talks with Australia, Brunei Darussalam, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam to accomplish an ambitious, comprehensive and high-standard trade agreement, in the process opening up markets of 452 million people, representing 15 percent of combined global trade, to exports of U.S. goods and services. (See also BRT report, "U.S. Trade and Investment with TPP Countries Benefits Every State.")

The protests of the opponents are also baffling, in that many of the goals they hold dear will be further protected by the TPP. The standards in U.S. free trade agreements have evolved since NAFTA, being strengthened in such areas as labor, environment, intellectual property rights,  etc.  The TPP creates an important opportunity to update the standards that govern U.S. trade with these other countries.

To achieve all these good things -- more exports, more jobs, higher standards -- the United States must also enjoy the ability to negotiate effectively and requires Congressional passage of Trade Promotion Authority. That authority -- requested by President Obama and supported by Republicans and Democrats alike -- ensures that Congress and the President can work together to forge beneficial trade agreements for the United States and the American people.

We're bound to see more misrepresentations of NAFTA and the TPP as the three North American leaders meet in Mexico, but the claims cannot disprove what the record shows: Trade benefits America.