Trade Policy Special Report
Navigation Bar
Navigation Bar

 Key Stories
 Links &

  blue line

NAFTA at Three

Wednesday, July 16 1997; Page A18

THREE YEARS of experience with NAFTA, the North American Free Trade Agreement, have done nothing to diminish the emotion of the debate nor to bridge the chasm that separated NAFTA proponents and opponents during the 1993 arguments. That's true because the NAFTA debate, now as then, is about far more than trade with Mexico and Canada. It unfairly bears the burden of American hopes and anxieties related to economic globalization. This fall it will be the football that gets kicked around as Congress debates whether to extend NAFTA to Chile and beyond.

The impact of NAFTA itself is modest and exceedingly hard to measure, for several reasons. The U.S. GDP is about 28 times bigger than Mexico's, so trade with that nation is bound to be only one of many influences on the overall U.S. picture. Even before NAF\TA, the United States traded heavily with both its neighbors; NAFTA offered a reduction in tariffs, but not a revolution. And shortly after NAFTA went into effect, Mexico plunged into recession. NAFTA's proponents, foremost among them the Clinton administration, argue persuasively that NAFTA greatly cushioned the impact of that recession on U.S.-Mexi\co trade. Opponents can't dispute that but instead blame NAFTA for pushing Mexico to adopt the misguided policies that produced the recession in the first place – a stretch that a fair reading of the facts won't support.

Overall, NAFTA certainly has not had the hugely destructive impact its opponents forecast, nor has it produced the somewhat less wildly inflated benefits its supporters promised. But after three years, the signs are reasonably good. Canada is America's No. 1 trading partner, Mexico this year will overtake Japan as No. 2, and together they account for fully one-third of all U.S. global trade. That trade provides goods at competitive prices for U.S. consumers, and export industries provide jobs for U.S. workers – jobs that pay higher-than-average wages.

Does all this trade and cross-border investment also suck jobs out of the United States, as NAFTA opponents allege? With U.S. unemployment at a 23-year low, it's a tough case to make. Opponents are more persuasive when they suggest that NAFTA – and globalization in general – pushes wages down, especially for low-skill workers. No one has a total solution, although job training and, in the long term, better primary and secondary education is likely to be key.

Limiting trade, though, is not the way toward increased prosperity for low-skill wage earners or anyone else. The United States, with 25 percent of the global economy but 5 percent (and declining) of the world population, won't be able to maintain its standard of living unless it continues to expand exports and look for new markets. That calls for building on NAFTA, not tearing it down.

© Copyright 1997 The Washington Post Company

Back to the top
Navigation Bar
Navigation Bar
yellow pages