NAFTA Turns 20

The article linked in the title of this post is a review of how NAFTA came to be, and the effects of it over the past 20 years.  The North American Free Trade Agreement (NAFTA) was created to remove trade restrictions between Canada, Mexico, and the U.S.  Although this agreement seems very reasonable to us now, there were some opponents to its creation. These opponents of NAFTA argued that the U.S. would lose many jobs to Mexico as companies sought lower production costs there.  Those that supported the agreement suggested that it would create large economic gains for America. It was also said to lower the income disparity while creating thousands of jobs in the region.

So how well did NAFTA work?  It is hard to say exactly what the true impact was because of availability of data and the theoretical process of generating results from economic models.  However, the paper gave some numbers on increases in exports, what is traded, and how much of it.  With the enforcement of NAFTA, U.S. exports to Mexico have increased by 444% while exports to Canada have increased by a modest 200%.  The top import items from NAFTA partners include crude oil, cars, and car parts.  Approximately $100 billion worth of crude oil alone was traded between the partners in 2013.  The U.S. is the number one buyer of Canadian goods and supplier of imports.  The trade with Mexico has increased so much more than Canada due to NAFTA because the U.S. was already trading nearly duty free with Canada since 1989.  Although our trade with Mexico has increased, the U.S. has lost nearly 20% of its trade market-share of Mexican imports to China. 

The final point the paper made is how to improve our free trade agreement.  One idea is to emphasize the trade of intermediate goods and supply chains.  This pertains to improvements in border infrastructure in order to improve efficiency of cross-border trade.  The main concern here is the Mexican border, and the excessive time that it can take for Mexican businesses to transport goods into the U.S.  The other idea deals with regulatory cooperation in the areas of trade, transportation, economic growth, and security.  They have already made efforts towards this by starting a series of meetings known as the North American Leaders Summits.  Although communications have increased on these topics, success has been limited due to the absence of binding agreements.  So how do you think the North American Free Trade Agreement could be improved?