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NAFTA at 20

NAFTA at 20

Given the intense controversy surrounding ratification of the North American Free Trade Agreement 20 years ago, it’s no surprise that debate continues today. And the arguments are not merely academic; as President Barack Obama pushes for new trade deals with European and Pacific nations, views about NAFTA loom large.

So, two decades on, what have we learned about the accord signed by the United States, Canada and Mexico to create a single market of more than 400 million people?

Most importantly, NAFTA has not been the job destroyer many feared it would be. There has been no “giant sucking sound of jobs being pulled out of this country,” as billionaire Ross Perot predicted.

NAFTA’s impact on U.S. jobs remains a matter of interpretation, but most experts agree that critics’ dire warnings missed the mark. An RBJ study of local data at the 10-year mark showed that 2,673 job losses had been certified under the NAFTA Transitional Adjustment Assistance program. Yet some of those job losses—such as Corning Inc.’s layoffs amid the telecom implosion—clearly had little to do with NAFTA.

Moreover, the NAFTA-TAA number was dwarfed by the total reduction of local manufacturing positions during the same period—some 26,500 jobs—or even the downsizing at Eastman Kodak Co., which eliminated 14,800 jobs over that decade.

More recently, a study by the Economic Policy Institute found that New York had lost 34,300 jobs from 1994 to 2010. Yet within the same time frame, the Rochester area alone lost more than 53,000 manufacturing jobs.

So if NAFTA is not the culprit, what explains these numbers? The answer: industry cycles, the lasting effects of the financial crisis and, most significantly, the impact of technological advances. Just ask Kodak.

NAFTA critics also argue that the trade pact has depressed U.S. workers’ wages. But as a recent Institute for International Economics study of NAFTA noted, “Technological change is the major force driving both relative and aver­age real wages in the United States.”

Remaining competitive globally is even more important today than it was 20 years ago. And for Rochester exporters, who saw sales to Mexico and Canada rise sharply under NAFTA, imagine how much more difficult life would be without the free trade agreement.

3/7/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email [email protected].