By: Akhil Kapur
August 12, 1992- NAFTA is negotiated
We’re in the thick of the 2016 U.S. presidential election, and you’ve probably heard a lot of contentious terms being thrown around: illegal immigration, affordable healthcare, access to education and Wall Street regulation. However, no topic has been more convoluted than the North American Free Trade Agreement (NAFTA).
A trade agreement signed by Canada, Mexico and the United States, NAFTA was first negotiated on August 12, 1992. It was a trilateral rules-based deal intended to remove the barriers, regulations and tariffs complicating North American trade. Additionally, NAFTA set out to integrate Mexico into the highly-developed, high-wage economies of the United States and Canada. Theoretically, a more developed Mexican economy meant a more stable North America with less illegal immigration from Mexico to the United States.
Originally, NAFTA enjoyed bipartisan backing. It entered negotiations during the Republican President George H.W. Bush’s tenure and was passed through Congress and implemented under the Democratic President Bill Clinton.
Pro-NAFTA politicians frequently quote figures indicating that the deal has positively impacted the U.S. GDP, adding up to 80 billion USD to the economy with billions more added each year. While some critics argue that NAFTA’s costs are highly concentrated in specific industries, like auto manufacturing, it’s undeniable that certain benefits are more broadly distributed among the American people. NAFTA supporters estimate that some 14 million jobs rely on trade with Canada and Mexico, while the nearly 200,000 export-related jobs were created as a direct result of the agreement.
But many skeptics say that pro-NAFTA arguments are founded upon a flawed narrative and twisted figures. The grim reality is that many U.S. firms use NAFTA’s investor protections to relocate their production to Mexico and take advantage of the low wages and weak environmental standards there. Over 340 million USD in investor compensation has been extracted from NAFTA governments via these “investor-state” challenges. Not only NAFTA caused an increase in the trade deficit with Canada, but it also turned the small surplus the U.S. had with Mexico into a massive deficit. By 2012, the combined trade deficit with both countries was a staggering 181 billion USD. The Economic Policy Institute (EPI) estimated that the NAFTA deficit had eliminated about 1,000,000 American jobs by 2004.
The disastrous real world effects of NAFTA have prompted many candidates, especially anti-establishment candidates like Republican nominee Donald Trump and ex-Democratic Party candidate Bernie Sanders, to prioritize trade reform in their platforms this election season. Even Democratic nominee Hillary Clinton (whose husband, former President Bill Clinton, was crucial to the deal’s inception) has softened her hardline support for the agreement by promising renegotiations that will better benefit everyday American people.
Akhil Kapur is a communications intern for the EastWest Institute. He is a rising senior at New York University majoring in media, culture and communications and concentrating in global and transcultural communications. He tweets @ak4293.