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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

November 7, 2013 at 10:54 AM

NAFTA at 20, a mixed blessing

Twenty years ago next month, President Bill Clinton signed the North American Free Trade Agreement (NAFTA) into law. A new analysis from the Brookings Institution shows that metro Seattle ranks 19th in total North American trade, 19th in trade with Canada and 20th in trade with Mexico.

Even so, the $7.17 billion in trade with North American partners accounts for only 18.6 percent of Seattle’s total global trade, so diverse are our international connections. Our share of advanced industry trade was 58.7 percent of all exports and imports. That compares with 47 percent for the United States.

The study, which mostly uses 2010 numbers, ranks the 100 largest American metropolitan areas, along with 59 Mexican and 33 Canadian metros. It offers a useful interactive tool that shows trade flows and can be customized by metro.

It especially shows how supply chains and manufacturing networks are now trans-national and continental in scope.

“The world is emerging as a network of cities that link together through trade and learn from each other about how best to urbanize,” Bruce Katz, Brookings vice president, co-director of the Metropolitan Policy Program, and co-director of the Global Cities Initiative, said in a prepared statement. “Nowhere is that more clear than in North America, given the integrated nature of the U.S., Mexican, and Canadian economies.”

The United States trades as much with its two North American neighbors than it does with Japan, South Korea and the BRICS combined, although that is not true for Seattle. The report says:

Firms now locate different stages of production in each country to maximize cost efficiency and product quality, and as a result the three countries now co-produce high-value manufactured goods for North America and the rest of the world.

But what about the “giant sucking sound” of jobs that Texas industrialist Ross Perot warned about in opposing NAFTA?

A definitive answer is difficult to find. The Economic Policy Institute estimated in 2011 that the trade deficit with Mexico killed or displaced nearly 700,000 jobs. On the other hand, American job creation was strong through the 1990s, including in export-related industries.

NAFTA didn’t live up to its billing, where virtually every American worker would be a winner and it would stop the problem of illegal immigration by creating a First World economy in Mexico.

In fact, numerous factories providing well-paying jobs for Americans relocated to Mexico, and those blue-collar jobs were lost for good. NAFTA destabilized Mexico, indirectly with the 1994 “peso crisis” and directly by ravaging the country’s once-protected small-scale agriculture sector. Illegal immigration skyrocketed.

NAFTA is not a “free trade agreement.” Like other such agreements since then, it is managed trade, about reducing barriers for companies and investors. It has produced successes, as the Brookings report shows. But it has not been the universal good for workers that was promised (and I know, because I was interviewing George H.W. Bush and Clinton administration officials and writing about it; as a columnist, I supported NAFTA).

I’ll write more about this as we come up to the anniversary. Seems like yesterday.

And Don’t Miss: Twenty important concepts I wasn’t taught in business school | The Monkey Trap

Today’s Econ Haiku:

Trans fats, bad for us

So is unchecked climate change

The Kochs won’t go lean

0 Comments | More in Trade | Topics: Canada, Mexico, NAFTA

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