PoliBlog

NAFTA at Ten

The CSM has an interesting article on NAFTA's tenth birthday. On balance, the reviews are positve, altohugh jobs have been lost to Mexico in the last decade"

Yes, US jobs have been lost. But the "giant sucking sound" famously predicted by presidential candidate Ross Perot in 1992 has arguably been more of a whimper. Nor has it created enough jobs in Mexico to stem illegal immigration, as others predicted.

What it has accomplished, without dispute, is increase trade. Commerce between the US and Mexico has nearly tripled in a decade, growing twice as fast as US trade with the rest of the world.

"This increased trade has brought cheaper products and allowed US manufacturers to remain competitive in the world market," says Jorge Gonzalez, chairman of the economics department at Trinity University in San Antonio. "And that is exactly what it was supposed to do. Trade is not an engine for jobs, it's an engine for efficiency."

Of course, economies are dynamic:

The US Department of Labor calculates that about 500,000 jobs - mostly in manufacturing - have been lost to Canada or Mexico since NAFTA was enacted Jan. 1, 1994. Some claim that number is even higher. Robert Scott at the Economic Policy Institute in Washington, for example calculates it at 766,000.

But others say the benefits of NAFTA are unseen. Regardless of how one felt about it during the raucous debates a decade ago, NAFTA's primary benefit for Americans was clear: cheap labor. And today 3,182 plants dot Mexico's countryside.

And as prices for certain goods drop as a result, Americans have more money to spend on other things, thus stimulating the economy. In addition, some workers whose jobs go south are able to retrain for higher-skilled, higher-paid jobs. As Dan Griswold at the Cato Institute's Center for Trade Policy Studies in Washington says, "Trade is not about more jobs or fewer jobs; it's about better jobs, and NAFTA is no exception."

And, some really good news (and one of the reasons I supported NAFTA in the first place):

In fact, many economists agree that NAFTA has played a role in helping turn the Mexican economy from a model of centralized protection to decentralized, democratic capitalism. Closely tied to the US economy, it now has one of the most stable and dynamic economies in volatile Latin America.

And that has prompted steady political reform, says Russell Roberts, a professor of economics at George Mason University in Fairfax, Va. "The bottom line is this: NAFTA has caused hardship for some Americans in certain sectors, but it's made for a more stable and integrated Mexican political system - and that's a real good thing for the world."