January 1, 2014 marked the 20th anniversary of the North American Free Trade Agreement (NAFTA) entering into force.
When NAFTA was introduced, President Clinton and others claimed that NAFTA would make it easier for the US to import cheaper goods from Mexico, while at the same time increasing exports of American-made products to Mexico and Canada.
The Agreement was touted as having the potential to make the economies of the US, Mexico and Canada grow, while at the same time reducing illegal immigration into the US.
Looking back on the actual effects of NAFTA after 20 years, it appears to have met some of its goals, while other problems it was designed to solve still exist.
As with any issue that has been as politicized as NAFTA, there is wide disagreement on how successful it has been during its first two decades in existence. Even though NAFTA was championed by President Clinton, it has always been associated with conservative political interests, and most of the praise for the Agreement seems to come from conservative analysts.
Perceived benefits of NAFTA
Here are some of the most common things that are praised about NAFTA:
- NAFTA has more than tripled trade among the US, Mexico and Canada, with the total trade value at more than $1 trillion. Canada is the leading market for US exports, while Mexico ranks second. Overall, Canada and Mexico account for about a third of all US exports.
- Perhaps the most significant advantage for the US has been a rise in the export of services. Exports of services to Canada and Mexico tripled from $27 billion in 1993 to $82 billion in 2011, resulting in a trade surplus of roughly $30 billion.
- Agricultural exports to Mexico rose sharply following NAFTA becoming law, roughly tripling in the first dozen years it was in place. Some studies indicate that as much as 10 percent of the acreage on US farms is planted for export to Canada and Mexico.
- Trade with Canada and Mexico supports nearly 14 million US jobs. And, according to the US Chamber of Commerce, nearly 5 million of these jobs are the result of the increased trade generated by NAFTA.
NAFTA’s critics counter
Not all analysts, however, see the effects of NAFTA as positive. The following are some of the more common criticisms of NAFTA:
- While US companies that provide services to NAFTA partners are doing very well and running a surplus, the “goods trade deficit” reached $95 billion in 2010.
- Some critics note that once NAFTA opened the Mexican agricultural sector, highly-subsidized corn from US corporations flooded the market, causing millions of Mexican farmers to lose their livelihood and migrate illegally to the US.
- Other changes in Mexican law allowed the mass importation of US companies into Mexico, which allegedly decimated thousands of Mexican small businesses. Critics of NAFTA claim that these changes have contributed to an increase in illegal immigration to the US. Critics list effects of a labor surplus in the US, an increase in hiring of undocumented immigrants for lower pay, and increased outsourcing of jobs to Mexico.
- Some critics claim that the US has lost 700,000 jobs to Mexican competitors, especially in states such as Michigan, Indiana, Kentucky, Ohio and Tennessee, where a large number of manufacturing jobs have disappeared.
- The increase in imported food has strained already overworked US food inspectors, which may translate into a potential increased risk of food-borne illnesses for US consumers.
Unsurprisingly, increased integration of US, Canadian and Mexican economies has also led to an increased need for international service of process between the countries. All three are members of the Hague Service Convention, which sets guidelines for serving process across borders.
So, while it is clear that NAFTA has had positive effects for at least some parts of the US, it is also equally clear that many questions about its long-term effectiveness remain unanswered.
Additionally, opinion polls show that Americans are divided as to whether NAFTA remains a good idea and whether the US should continue to support the Agreement. There are no signs from the Obama administration, however, to indicate that the US will be taking any steps away from NAFTA in the near future.