Don't Blame NAFTA for Downturn, Many Economists Say

Analysts point out that it is all but impossible to separate the impact of NAFTA from other economic changes that unfolded before and since it was implemented -- including other free-trade deals, increased competition from manufacturers from Eastern Europe to India and, most significantly, China's rise.

Lawrence H. Summers, a Harvard University professor who served as Treasury secretary under President Clinton, said he remains proud to have supported NAFTA. Overall, he said, NAFTA has bolstered the economy and improved national security while easing U.S. problems with illegal immigration.

"The forces that are driving job dislocations are not primarily trade-related," Summers said. "They are technological improvements, increases in the productive capacity of developing nations and technology that enables greater global integration."

Not a Win or a Washout

NAFTA went into effect with lofty promises that it would be an economic boon to North America. By eliminating tariffs among the United States, Mexico and Canada and liberalizing foreign investment in Mexico, proponents said, the continent would end up with lower prices and higher wages. As living standards rose, the economic incentives fueling illegal immigration would evaporate, boosters said, and exports fostered by the world's largest free-trade zone would add 200,000 U.S. jobs. Proponents predicted that the pact would help convert small trade deficits with Mexico and Canada into surpluses.

Fourteen years later, those promises have not panned out. Illegal immigration across the southern border skyrocketed in NAFTA's wake. Meanwhile, average wages stagnated in the United States and Mexico, and the U.S. trade deficits with Canada and Mexico have ballooned.

But if NAFTA has not lived up to the most optimistic hopes, neither has it been the disaster predicated by its most vocal detractors, economists said.

Articulating the fears shared by many union leaders and other NAFTA opponents, H. Ross Perot predicted a "giant sucking sound" of U.S. jobs being pulled south of the border by NAFTA.

Instead, the treaty's impact has been less dramatic. Hundreds of U.S. textile mills closed as Mexican-made apparel was allowed into the country duty-free. Many of those operations have since come under strong pressure from competition in China. Also hurt were workers at manufacturing concerns in the industrial Midwest and elsewhere. Many saw well-paying jobs move out and wages squeezed by the looming threat that their jobs would be exported.

"NAFTA has weakened the leverage of workers and strengthened the clout and bargaining power of multinational corporations," said Thea M. Lee, policy director of the AFL-CIO. "It is hard to separate how much of any impact has been just NAFTA, but it is clear that NAFTA has accelerated trends that were already in place. It has become emblematic of a corporate-centered trade policy."

At the same time, NAFTA has produced winners. Agricultural exports to Mexico have almost tripled, while U.S. firms such as Wal-Mart have secured a profitable foothold in Mexico. And as the industrial Midwest has suffered, other regions have boomed. Fifteen years ago, the border town of Laredo, Tex., was largely impoverished and had a population well under 100,000. Now, with 260,000 residents, the city is the largest inland port in the South.

Overall, the Texas economy has profited from NAFTA, studies have found, with manufacturers taking advantage of cuts in Mexican tariffs to send more electronics, industrial machinery, chemicals and instruments south, according to a 2006 Federal Reserve Bank of Dallas study. The same report found that the export of Texas lumber and furniture declined after NAFTA.

Lost in this discussion is the importance -- and inevitability -- of integration across North America and how important it is to the nation's long-term economic and national security interests, analysts said.

"NAFTA has become this piñata that everybody has put their frustrations into," said Robert A. Pastor, director of the Center for North American Studies at American University. "NAFTA is not the issue. That debate is finished. What the candidates should be debating now is the future of North America. That requires them to look forward, not backwards to NAFTA."