Assessing NAFTA

I urge you to read Dani Rodrik’s excellent analysis of the impact of NAFTA. Rather than trying to except it (I encourage you to read it in full), I’ll try to summarize it:

  • The welfare gain to the U. S. of NAFTA was .08% (yes, eight hundreds of a percent, eight parts in 10,000)
  • Much of the gains were not efficiency gains but a benefit to terms-of-trade improvement, i.e. income transfers from Canada or Mexico
  • The localized harm in the United States was quite severe

My conclusions from that are that justice demands that, when enacting these multi-lateral “free trade” agreements, much, much more attention be paid to keeping those injured by the deal whole and that doing that will not pay for itself.

5 comments… add one
  • Gray Shambler Link

    Thank You,
    American Teamster Trucker

  • CuriousOnlooker Link

    One point, are there any studies that separate the impact of Nafta due to trade with Canada vs trade with Mexico?

    It’s entirely conceivable that trade with Canada was beneficial and trade with Mexico was not and it just happened to cancel out.

    Not all types of free trade are equal and there’s reason to believe that trade with Canada has not had the same deleterious impacts that causing all this unrest. Certainly there has not been a great cry about Canada although the Canadians are terrified.

  • Andy Link


    That must be wrong because almost all economists believe that free trade is always beneficial and NAFTA is free trade.

    Also, does this analysis consider all the guns Mexico imports from us?

  • steve Link

    Andy- More specifically, libertarians believe that even if the trade is only free on one side, both parties benefit. Read Boudreaux. He believes we should do away with nay and all restrictions on our side regardless of what anyone else does. Of course, when I look at what libertarians suggest, there ideas always seem to work out well for the wealthy and not so much everyone else.


  • michael reynolds Link

    He also writes:

    Brad De Long has written a lengthy essay that defends NAFTA (and other trade deals) from the charge that they are responsible for the loss of manufacturing jobs in the U.S. I agree with much that he says – in particular with the points that the decline in manufacturing employment has been a long-term process that predates NAFTA and the China shock and that it is driven mainly by the secular trend of labor-saving technological progress. There is no way you can hold NAFTA responsible for employment de-industrialization in the U.S. or expect that a “better” deal with Mexico will bring those jobs back.

    Aside from pointing out that Mr. DeLong and Mr. Rodrik apparently agree with me on the effect of robots, it leaves me wondering what might have happened sans NAFTA. Was automation advanced or retarded by NAFTA? Neither? A little of both? And if the greater job-killer is automation, shouldn’t that factor into talk of new trade deals and trade policy? Shouldn’t we maybe not be obsessing over Mexicans and start thinking beyond the next quarter to what sort of world we’ll have if automation continues its relentless advance?

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