The Free Press, Mankato, MN

January 3, 2014

Our View: NAFTA brought more good than bad

Why it matters: 20 years after the North American Free Trade Agreement, the positives outweigh the negatives

The Mankato Free Press

---- — When President Bill Clinton was pushing the North American Free Trade Agreement in the 1990s, he had many opponents on both sides of the aisle, but history has shown the unprecedented agreement provided more growth than damage to the economies involved in the deal.

Clinton’s push was unusual and a controversial position for a Democrat. Unions howled at the notion of free trade with Mexico, arguing U.S. employers would flock to the country and build plants. To be fair, some did, but there was also no wholesale loss of U.S. jobs. In fact, the 1990s were years of unprecedented economic growth.

U.S. agricultural trade boomed to Canada and Mexico under NAFTA. Agricultural products sold to Mexico quintupled in the last two decades and tripled to Canada, according to a report by the U.S. Chamber of Commerce. That’s particularly important to the Mankato region with its hundreds of acres of corn and soybeans and thousands of hogs raised.

The Chamber reports that total trade with Canada and Mexico rose to $1.2 trillion annually, a 3.5-fold increase. A study the business group commissioned shows some 5 million U.S. jobs are tied to growing trade with the two countries. Canada and Mexico are the top destinations for exports from small and medium-sized U.S. businesses, 122,000 of which exported to those countries.

Critics of the agreement will argue it fell short on promises to reduce the rate of poverty in Mexico. The poverty rate went from 52.4 percent in 1994 to as low as 42.7 percent in 2006, according to a report by the Economic Commission of Latin America. The poverty rate has since moved up again to near 52 percent.

The wage gap between U.S. and Mexican workers also has closed some, but to critics, not nearly enough. At the start of NAFTA manufacturing wages in Mexico were about 15 percent of U.S. wages. Those wages have moved up to about 18 percent.

These two broad indicators can and likely were influenced by a number of economic factors, and the small gains would seem bigger if we considered that these indicators may very well have moved in a negative direction had NAFTA not occurred.

NAFTA opened up vast markets for consumer goods from the U.S. Mexican consumers now have more choice of everything from the produce at the grocery stores to imported tennis shoes, according to a report by the Associated Press. Auto industry jobs have grown by 50 percent in Mexico and more brands of vehicles are now available.

More importantly, investors have been able to do business in Mexico and a special court-like board has helped cut through red tape and settle disputes quickly.

As the U.S. considers a new trade agreement with the NAFTA countries and a handful of Asian trading partners, lessons from NAFTA can be useful. Free trade usually means freer people as well because incomes increase and consumer choice expands.