With all the talk about international trade in the 2016 presidential campaign by candidates in both major political parties, a story at CNS News on Wednesday, August 31, caught our attention.
First, though, a bit of background. NAFTA -- the North American Free Trade Agreement -- is defined this way at Investopedia:
"A regulation implemented January 1, 1994 in Mexico, Canada and the United States to eliminate most tariffs on trade between these nations. The three countries phased out numerous tariffs, (with a particular focus on those related to agriculture, textiles and automobiles), between the agreement’s implementation and January 1, 2008. NAFTA’s purpose is to encourage economic activity between the United States, Mexico and Canada."
Investopedia goes on to exaplain:
"About one-fourth of U.S. imports, (especially crude oil, machinery, gold, vehicles, fresh produce, livestock and processed foods), comes from Canada and Mexico, which are the United States’ second- and third-largest suppliers of imported goods. In addition, about one-third of U.S. exports, particularly machinery, vehicle parts, mineral fuel and oil, and plastics are destined for Canada and Mexico.
"The Clinton administration, which signed the law that was developed under the George H. W. Bush administration, believed NAFTA would create 200,000 American jobs within two years and 1 million within five years because exports played a major role in U.S. economic growth. They anticipated a dramatic increase in U.S. imports to Mexico under the lower tariffs. Critics, however, were concerned that NAFTA would move U.S. jobs to Mexico. While the United States, Canada and Mexico have all experienced economic growth, higher wages and increased trade with each other since NAFTA’s implementation, experts disagree on how much NAFTA contributed to these gains, if at all.
"NAFTA was supplemented by the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC). These side agreements were intended to prevent businesses from relocating to take advantage of lower wages, more lenient laws about worker health and safety, and less strict environmental laws.
"NAFTA did not eliminate regulatory requirements on companies wishing to trade internationally, such as rule of origin regulations and paperwork requirements that determine whether a good can be traded under NAFTA. The free trade agreement also contains administrative, civil and criminal penalties for businesses that violate any of the three countries’ laws or customs procedures."
Click-on the Investopedia link to watch a video, slightly over 1 minute, about NAFTA.
Encyclopedia Britannica adds that NAFTA was a "controversial trade pack, which "was inspired by the success of the European Economic Community (1957–93) in eliminating tariffs in order to stimulate trade among its members. Proponents argued that establishing a free-trade area in North America would bring prosperity through increased trade and production, resulting in the creation of millions of well-paying jobs in all participating countries.
For additional background information about NAFTA and other United States trade agreements, visit the Office of the United States Trade Representative.
Let's start with the numbers. According to Terry Jeffrey, CNS News' editor-in-chief:
"In 1993, the last year before the North American Free Trade Agreement went into effect, the United States ran a $1,663,300,000 merchandise trade surplus with Mexico, according to the trade data published by the U.S. Census Bureau.
"In 2015, the last full year on record, the U.S. ran a merchandise trade deficit with Mexico of $60,662,800,000.
"In 1994, the first year NAFTA was in effect, the U.S. ran a merchandise trade surplus with Mexico of $1,349,800,000—down from the $1,663,300,000 surplus of 1993.
"1994 is now the last year the United States ran a merchandise trade surplus with Mexico.
"In 1995, the second year under NAFTA, the U.S. ran a merchandise trade deficit of $15,808,300,000 with Mexico.
"So far, the largest merchandise trade deficit the United States has run with Mexico was in 2007 when it hit $74,795,800,000. (The last recession started in December of that year and ended in June 2009).
"In the first half of this year (January through June), the U.S. has run a trade deficit with Mexico of $31,571,300,000.
"While the U.S. trade in goods with Mexico has expanded greatly since NAFTA took effect, U.S. imports from Mexico have grown faster than U.S. exports to that country.
"In 1993, the year the U.S. ran a $1,663,300,000 merchandise trade surplus with Mexico, the U.S. imported $39,917,500,000 from there, and exported $41,580,800,000.
"In 2015, when the U.S. ran a merchandise trade deficit of $60,662,800,000 with Mexico, the U.S. imported $296,407,900,000 and exported $235,745,100,000."
The chart below shows that while "U.S. trade with Mexico has expanded, imports have grown faster than exports."
Mr. Terry also reports the trade deficit with Canada.
Finally, he reports NAFTA's legislative history:
"The North American Free Trade Agreement created a free-trade zone between the United States, Canada and Mexico. It was signed by President George H.W. Bush in December 1992—after he had been defeated in the November 1992 presidential election by Bill Clinton. The House and Senate approved the agreement in 1993 under a fast-track procedure that required majority votes in both houses—rather than the two-thirds majority needed in the Senate to ratify a treaty.
"The legislation approving NAFTA passed the House on a 234-200 vote and it passed the Senate on a 61 to 38 vote. President Bill Clinton signed it in December 1993."
An early version of the story reported that the 234-200 vote in the House included 43 Republicans and 156 Democrats voting against it. The 61-38 Senate vote had 10 Republicans and 28 Democrats voting against it.
The Council on Foreign Relations provides a "backgrounder" -- updated July 26, 2016 -- about "NAFTA's economic impact."
For a brief discussion of international trade, visit this Wikipedia entry, and CNBC reported yesterday, "The U.S. trade deficit fell more than expected in July as exports rose to their highest level in 10 months, offering further evidence that economic growth picked up early in the third quarter."
Not happy with NAFTA? Think nations of the world are taking advantage of the United States in foreign trade? Then take a few minutes and tell your members of Congress that United States trade policies need to ensure free trade as well as fair trade. Contact information is available at the Library of Congress' Congress.gov. Taxpayers living in Virginia's Arlington County can contact:
- Senator Mark Warner (D) -- write to him or call (202) 224-2023
- Senator Tim Kaine (D) -- write to him or call (202) 224-4024
- Representative Don Beyer (D) -- write to him or call (202) 225-4376
Ask for a written response. And tell them ACTA sent you.