The Truth About NAFTA and the US Economy

Richard Dayoub, March 19, 2018


The North American Free Trade Agreement (NAFTA), is 24 years old.  Economists and NAFTA negotiators representing the Commerce Department have been working closely with their counterparts in Canada and Mexico in an effort to update and revise the current agreement.  Much has changed in these past 24 years so it is reasonable to expect significant changes to NAFTA to reflect not only what has changed in the way the world conducts business, but trying to incorporate some new policies that will address the near term future of world trade.  Whether you're a fan of free trade, adamantly opposed or still undecided, take a few minutes and click on the following link I've provided which will give you a more realistic view of what NAFTA has meant to the North America and the United States in particular.

As you review the presentation slides, pay special attention to the number of States whose economies are heavily reliant on trade with Canada and especially Mexico.  Most Americans believe that trade with Mexico and Canada is "one way", meaning that we are only importing Mexican products.  Actually, we export to both countries and in many cases, we export more than we import.  Adding to the complexity of the trade agreement is a significant issue you may have heard discussed:  country of origin.  The term refers to the country in which the product was manufactured.  It sounds simple enough.  If it was manufactured in Mexico, then the country of origin is Mexico, right?  Not so fast.  While some products are that simple to identify, the overwhelming majority are not.  Here are just a few examples.  Automobiles and home appliances:  They each have thousands of parts.  One part for a car will cross the border of Mexico or Canada several times as that part is modified to fit into the car or refrigerator or television.  The finished product of that part will have little resemblance to its original production once it is complete.  That part will have portions that are manufactured in the U.S., or Canada or Mexico making it very difficult to establish rules that are fair in determining the "country of origin".  This article could easily be much longer focusing on all of the criticle elements of the negotiations.  I would be happy to discuss your concerns and answer your questions if you wish to contact me through this website.  Also, take a few minutes to read my blog on the Trans Pacific Partnership and why it is important to the United States. 

By the way, and for the record, I am a staunch supporter of NAFTA.