The North American Free Trade Agreement (Nafta) Congressional Research Service

Critics of NAFTA often focus on the U.S. trade balance with Mexico. While the United States enjoys a slight advantage in services trade by exporting $30.8 billion in 2015 while importing $21.6 billion, the trade balance with the country is generally negative, due to a yawning deficit of $58.8 billion in merchandise trade in 2016. This represents a surplus of $1.7 billion in 1993 (in 1993, the deficit was $36.1 billion). Led by the automotive industry, the largest export category, Mexican producers have a trade surplus of $58.8 billion for goods with the United States. Before NAFTA, there was a deficit. They also contributed to the growth of a small educated middle class: Mexico had about nine engineering graduates per 10,000 people in 2015, compared to seven in the United States. Not only are none of these other countries a member of NAFTA, but none have a free trade agreement with the United States. This represents a nominal increase of $1 trillion in trilateral trade of 258.5% since 1993, the actual increase – thus adjusted for inflation – of 125.2%.

On the other hand, Canada has long sold the United States 99% or more of its total oil exports: it did so even before the two countries concluded a free trade agreement in 1988. In other words, NAFTA does not appear to have done much to open up the U.S. market to Canadian crude oil. It was very open — Canadians were producing more. NAFTA shows the classic dilemma of free trade: diffuse benefits with concentrated costs. While the economy as a whole may have recovered slightly, some sectors and communities have experienced profound disruptions. A southeastern city loses hundreds of jobs when a textile factory closes, but hundreds of thousands of people find their clothes slightly cheaper. Depending on how you quantify it, the overall economic benefit is probably greater, but not very noticeable at the individual level; the overall economic loss is small in the grand scheme of things, but devastating for those it directly affects. For more information on NAFTA and related trade issues such as TPA, please contact Mr. Angeles Villarreal ([crumpled email address]), Ian Fergusson ([e-mail rubbed]) or the authors of the following products. NAFTA is often held responsible for things that could not be its fault. In 1999, the Christian Science Monitor wrote about a town in Arkansas that it would “collapse, like so many NAFTA ghost towns that have lost jobs in the needle trade and in production in places like Sri Lanka or Honduras.” Sri Lanka and Honduras are not parties to the agreement.

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