Is it happy #23 for NAFTA?

The North American Free Trade Agreement (NAFTA) was signed into law December 8, 1993 by President Clinton.  

It virtually eliminated all tariffs and trade restrictions among Mexico, Canada, and the U.S.  It passed because President Clinton got the GOP to finish the agreement President Bush had started.  It also passed because it was an agreement rather than a treaty – i.e., no 67 votes!

Twenty-three years later, and NAFTA is good and bad.  It depends on whom you ask.

My sense is that most business people like it on both sides of the border.  That's what I hear!

At the same time, workers are not fond of it, here and south of the border.  I hear that, too!

President-Elect Trump called it a terrible agreement.  Frankly, a lot of people in Mexico agree with him, especially the small businesses that have been overwhelmed by the large U.S. chain stores or restaurants.

I remember living in Mexico in the 1980s and seeing a lot of homemade products made by artisans or small businesses.  Today, a large metropolitan area in Mexico looks like one in the U.S. – i.e., McDonalds, Office Depot, and Walmart.

So where are we 23 years later?

Marilyn Geewax made this point a while back:

Over the years, polls have suggested most Americans don't much like NAFTA, and unions remain sharply critical. But economists generally say Clinton's prediction came closer to hitting the mark than Perot's.

"I'd say NAFTA was an overwhelming success," said Sara Johnson, an economist with IHS Global Insight, a forecasting firm. "There are strong, two-way trade flows now."

Since NAFTA took effect, trade among the three countries has more than tripled. And while millions of U.S. manufacturing jobs have melted away over the last two decades, economists attribute most of those losses to new technologies and Asian competition, not NAFTA.

In fact, if not for NAFTA, even more jobs would have disappeared from this continent, Johnson argues. "Better to have jobs in Mexico than China" because Mexicans buy more of our services and goods, she said.

Still, NAFTA has failed to deliver as many benefits as its most ardent supporters had expected, leaving the trade agreement with a relatively muted impact, according the non-partisan Congressional Research Service.

"NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters. The net overall effect of NAFTA on the U.S. economy appears to have been relatively modest," CRS concluded.

Still, it may be too soon to accurately assess the full impact of NAFTA. The deal's real legacy may emerge in coming years as more trade pacts get written and take effect. For good or ill, NAFTA has become a guide for shaping how countries conduct business with each other in the 21st century.

Down in Mexico, Ian Grillo reminds us that it's NAFTA, not the wall, that has a lot of Mexicans talking:

Nafta is not, however, universally beloved in Mexico, and the presidential candidates’ anti-trade talk has reignited criticism of the treaty, with some opponents claiming, among other things, that it devastates Mexican agriculture by flooding the country with cheap American corn. In August, tens of thousands of small farmers gathered in Mexico City with demands that included the redrafting of Nafta — a move that Mexico’s economy secretary, Ildefonso Guajardo, has warned could open a “Pandora’s box.” Indeed, the prospect of a revised Nafta has pundits weighing in with calls to put everything from energy to immigration into a new draft.

My sense is that a review of NAFTA would serve Mexico, Canada, and the U.S. rather well.  In other words, it would allow each country to air out some grievances.

At the same time, we may realize that corporate tax reform and a more sensible regulatory environment will provide the biggest benefits for manufacturing rather than discarding NAFTA.

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