NAFTA has been a punching bag on the campaign trail this election year, and activist groups continue to issue poorly-supported “studies” that blame it for a host of ills.
However, the North American Free Trade Agreement (NAFTA) has proven to be one of the great economic policy achievements of the 1990s — and its benefits should be better understood. NAFTA has propelled a major expansion in economic activity that today sustains millions of American jobs.
The U.S. Chamber last fall updated our 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 its key findings:
- Since NAFTA entered into force in 1994, trade with Canada and Mexico has risen nearly fourfold to $1.3 trillion in 2014, and the two countries buy more than one-third of all U.S. merchandise exports.
- The trade boom continues. U.S. merchandise exports to Canada and Mexico rose by 66% over just the 2009-2014 period, reaching $552 billion in 2014. In fact, our North American neighbors provided 39% of all growth in U.S. merchandise exports in the same 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 128 million) were nearly double those to China (population 1.4 billion), which is the third largest national market for U.S. exports.
- While the trade balance is a poor measure of the success of any given set of trade policies, trade skeptics wrongly claim NAFTA has led to big deficits. In fact, the United States in 2014 had a trade surplus in manufactured goods ($21.6 billion) with its NAFTA partners. The U.S. cumulative trade surplus in manufactured goods over 2009-2014 topped $89 billion. In 2014, the U.S. services trade surplus with Canada and Mexico reached $41.8 billion. The U.S. remains a significant net importer of petroleum from its North American neighbors.
- 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 $487 billion of U.S. manufactured goods in 2014, generating nearly $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).
- NAFTA has been a bonanza for U.S. farmers and ranchers, helping U.S. agricultural exports to Canada and Mexico to increase by 350%.
- While China overtook Canada as the largest U.S. agricultural export market in 2013-2014, Canada resumed the top spot in 2015. U.S. agricultural exports to Mexico have quintupled since NAFTA entered into force even as Mexican agriculture has enjoyed steady growth.
- With new market access afforded by NAFTA, U.S. services exports to Canada and Mexico have tripled, rising from $27 billion in 1993 to $92 billion in 2014.
- Among the services industries that are benefitting: audiovisual; finance; insurance; transportation, logistics, and express delivery services; and software and information technology services.
· Canada and Mexico are the top two export destinations for U.S. small and medium-size enterprises, more than 126,000 of which sold their goods and services in Canada and Mexico in 2013 (latest available).
Trade is not a panacea for our economic challenges. The U.S. Chamber is actively taking part in today’s debate about the need to improve the federal training and transition assistance programs made available to workers displaced by changes in technology, shifting consumer tastes, and at times by trade.
But trade agreements such as NAFTA represent an opportunity to shape globalization, which is economic phenomenon akin to technological progress. As such, globalization is a fact of life, not a policy choice, and it can only be halted at great cost.
Amid calls to “rip up” U.S. trade agreements, revisiting these facts is important. Replacing NAFTA with a tariff wall around our economy would decimate millions of high-wage American jobs and slam families just trying to make ends meet.
We can’t let that happen.