Visualizing NAFTA's Mixed Track Record Since 1994

Tyler Durden's picture

On January 1, 1994, the North American Free Trade Agreement (NAFTA) officially came into effect, virtually eliminating all tariffs and trade restrictions between the United States, Canada, and Mexico. As Visual Capitalist's Jeff Desjardins reminds readers:

Bill Clinton, who lobbied extensively to get the deal done, said it would encourage other nations to work towards a broader world-trade pact. “NAFTA means jobs. American jobs, and good-paying American jobs,” said Clinton, as he signed the document, “If I didn’t believe that, I wouldn’t support this agreement.”

 

Ross Perot had a contrary perspective. Lobbying heavily against the agreement, he noted that if it was ratified, Americans would hear a giant “sucking sound” as jobs went south of the border to Mexico.

IT’S A COMPLICATED WORLD

Fast forward 20 years, and NAFTA is a hot-button issue again. Donald Trump has said he is working on “renegotiating” the agreement, and many Americans are sympathetic to this course of action.

However, coming to a decisive viewpoint on NAFTA’s success or failure can be difficult to achieve. Over two decades, the economic and political landscape has changed. China has risen and created a surplus of cheap labor, technology has changed massively, and central banks have kept the spigots on with QE and ultra-low interest rates. Deciphering what results have been the direct cause of NAFTA – and what is simply the result of a fast-changing world – is not quite straightforward.

In today’s chart, we break down a variety of metrics on the U.S., Canada, and Mexico to give a “before” and “after” story. The result is a mixed bag, but it will at least paint a picture of how the nations have fared comparatively since the agreement came into effect in 1994.

Courtesy of: Visual Capitalist

 

NAFTA: A MIXED TRACK RECORD

On the plus side, NAFTA created the world’s largest free trade area of 450 million people, where trade between the three members quadrupled from $297 billion to $1.14 trillion during the period of 1993-2015.

Further, the agreement likely had the effect of lowering prices for consumers, especially for food, automobiles, clothing, and electronics. It also reduced U.S. reliance on oil from OPEC. In 1994, the United States got 59% of its oil imports from OPEC, but that number is reduced to 44% today as trade with Canada has ramped up. Canada is now the #1 source of foreign oil in the United States.

NAFTA has also unequivocally led to the movement of auto jobs. While the amount of autos manufactured in North America has increased from 12.5 million (1990) to 18.1 million (2016), the share of that production has shifted.

Mexico now produces 20% of all vehicles in North America – and U.S./Canadian shares have shifted down accordingly over the years. The ultimate result is the destruction of hundreds of thousands of jobs in both Michigan and Ontario, Canada.

As a final note, we also looked at comparing macroeconomic indicators from 1980-1993 (“Pre-NAFTA”) with those from 1994-2016 (“Post-NAFTA”).

For the U.S. in particular, here’s what has changed:

This is not intended to be a comprehensive analysis, but it gives a snapshot of what has changed since NAFTA was ratified.

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Ghordius's picture

the article had me at "It's a complicated world"

seriously, folks? I am a complete ignoramus about anything that has to do about NAFTA

and I have no frigging intention of getting into it. it's Other People's Business

but the financial guys that I sometimes have to work with tell me that it is "my" business, too. I asked why, and they answered that there are plenty of multinationals based - at least nominally -  in the EU countries that have set up "shop" in Mexico, for example, in order to produce things that then are shipped to the US, all neatly inside the NAFTA zone, for US consumers, with Mexican labour, powered with "EU" technology and financed mostly outside the EU or the US

so... yes, my symphaty goes to those in the US that want to change something. even on a nationalistic base

but it is a complicated world. simple solutions... might not have the intended consequences. it depends on many things, chiefly on the fact that we are kind of back to the world of the 19th Century, where capital (particularly technology know-how) is very mobile and nearly countryless, and labour, particularly skilled labour, too

if you think through it, if key capital and key labour aren't "national", aren't bound to a territory, the last thing that is is land

a libertarian writer of novels from the US, Heinlein, considered this problem in the 50's, and came to the conclusion that the nation state ought to tax only one thing: land. can't say I am able to agree or disagree

in fact, if Heinlein might be still alive, today, I would not be surprised if he would suggest that it's the consumer that has to be taxed. at least, that's the direction I sense from the GOP, at the moment. we'll see

greetings from europe, G

veeger's picture

WHY  dont you figure out how` to s2hip the shit you nee via the pelaideains to eu

bloofer's picture

I'm not familiar with Heinlein's political views, but I would guess he got the "land tax" idea from Henry George.

brushhog's picture

Well the problem with that is, the poor, put-upon individual cannot escape the system without owning land. So you basically trap everybody into the system by heavily taxing land. And of course, eventually only large mulit-national corporations will be able to afford land. In effect, heavily taxing land would literally pull the ground right out from under the people and hand it to the mega-wealthy. I can see no faster route to slavery.

silvercity's picture

Since governments can create money they do not need to tax anyone. Taxing is for wealth re-distrubution so that the connected people can be the recipeants of the taxes. To a simple person like myself it is called theft.

silvercity's picture

Saying " it's complicated" is code for " you are too stupid to have a say about such things. Leave it to us experts". Actually most things are very simple, but only if you desire a solution to a problem. If you see a problem but conclude a solution is too complicated, it is because you do not want to expend the energy to effect a/the solution. Solution being simple does not mean solution is easy.

veeger's picture

nafta has helped you how` ?

marathonman's picture

Cheaper jalapenos and avacados?

spag's picture

oh bugger, US unemployment rate went down post NAFTA. but nevermind eh, Trump! Trump! Trump. Trump will fix everything, I'm personally waiting for him to come around and fix my blocked drain.

AVmaster's picture

We don't make fun of your "queen" or prime minister do we?

 

So Bugger Off...

froze25's picture

When NAFTA went into effect you had the baby boomers entering peek earnings years. All our numbers were set to go up simply for demographic reasons.

JonNadler's picture

am i missing it, I don't see the biggest point of all, the trade deficit we had with Mexico after NAFTA. And the overall lost of manufacturing jobs not just in Michigan?

Cthonic's picture

Methodology for employment rate sampling changed during the course of the Clinton administration. http://archives.financialservices.house.gov/hearing110/hr0717082.shtml

veeger's picture

well as far as i can tell.....the bulldozer track-pads that use to come from canada now` come from mexico....

Ghordius's picture

well, that "Made in <insert country here>" was already a bit of a problem in the 19th Century

I was recently in an airport in the ME, and bought a small camel (a teddy bear shaped like a camel) for my youngest niece

on the label, something in the tune of "Designed in Canada, Company in the UK, Marketing in Australia, Made in Indonesia"

note, in this: the designing skills were Canadian, the financing and entrepreneurial effort was British, the marketing skills were Australian, the labour was Indonesian, and as I researched I found out that the company is mainly funded by a French bank consortium through bonds sold in Germany

it's a frigging small camel as tall as two hands, sold in a Middle East airport. a product of globalization as much as the T-shirt I am wearing

I called him "Ahmed the wandering camel", then, like my T-shirt, he really got around the world before he got in the arms of a child

BritBob's picture

Bit like the EU with one big exception -

 Fair to say that the majority of the people in Britain were happy to join an economic union with free trade, but not a political union. Who wants to be ruled by Brussels?

The UK will opt for a hard Brexit especially when one country (or part of a country in Belgium) can stall negotiations for so long. Spain could act in a similar fashion over Gibraltar and has the cheek to maintain its Gibraltar sovereignty claim. Claim?

Gibraltar - Some Relevant International Law: https://www.academia.edu/10575180/Gibraltar_-_Some_Relevant_Internationa...

So it looks like a quick hasta luego !

Ghordius's picture

if you say "bit like the EU" then I would expect you explain... why

as a reminder, it was a British national initiative to have a "Single Market" and broader free trade area in something that continental countries wanted to have as a political exercise, particularly in sharing the costs of regulatory agencies, sharing the costs of a common agricultural policy, etc. etc.

TRM's picture

It's just britbob, a spambot, earning his pay from his mi5/6 paymasters. I'm surprised he didn't work in the falklands.

lester1's picture

Coming from a manufacturing family, I can tell you NAFTA has been an absolute failure. We have witnessed millions of good paying jobs vanish in the past 23 years, many of them going to Mehico when they could have stayed in the US. We have lost trillions of dollars and our standard of living has been in decline.

 

For example, Colgate toothpaste, Oreo cookies, and many car parts are made in Mexico. Why? Cheap labor! That's it.

 

Every country on earth has protectionism, except for us because  we have had globalist sellouts leading the country, who care only for CEOs and the bottom line of corporations. Bush, Clinton, and Obama don't care about American middle class workers. Hopefully this changes with President Trump. I'm rooting for him!

General Titus's picture

I will always remember when pat Buchanan was visiting the Timberland, & other shoe factories in New Hampshire during the 1996 primaries and warning that they would all leave if the Globalist Corporate owned Bush/Clinton/CFR NAFTA was passed.  I also remember the fake polls saying Buchanan would come in 5th or 6th in New Hampshire, which he won.  I'm glad many people have finally caught on to the Globalist/Corporate owned MSM being liars with a true agenda against the middle & working class

http://www.theamericanconservative.com/

cashtoash's picture

"Every country on earth has protectionism, except for us..."  every country on earth has lower wages too, could that have something to do with higher costs?  Only in America minor repairs to a small appliance [ e.g. lawnmower, heater etc] cost more than the price of new item...and guess where that new item came from?

Mr. Crisp's picture

Wal-Mart became America's biggest employer after NAFTA.

 

General Titus's picture

Ross Perot was created to split the Anti-NAFTA (the great Pat Buchanan)vote and get the Bushes "brother from another mother" & fellow Globalist CFR Golden Boy Billy Boy Clinton in

Last of the Middle Class's picture

You know, every real businessman, from Ross Perot to Trump who has taken a look at NAFTA says it's shit. And frankly, I just don't see the US thriving after a few years of it. Tell me again how the government should run commerce and trade, much less healthcare.

BurningFuld's picture

The government is there to enforce the rules that the large corporations come up with, which are specically designed to extract as much money as possible from your sorry ass. Get it!

yogibear's picture

NAFTA benefited Mexico. Same as CAFTA was going to do for central america. The globalist are deceitful.

Same way the globalist hide the H1B and overseas outsourcing initiative. 

NAFTA and CAFTA were always known to transfer jobs from the big bad USA.

The US was far too rich as far as many globalist were concerned.  

It was the globalist's way to spread the wealth and increase profits their by increasing profits through cheaper labor.

lester1's picture

-$50 billion dollar a year trade deficit with Mexico just in the past 10 years..

 

$500,000,000,000,000 American dollars basically given to Mexico.

 

Anyone else see how fucked up that is ??

anachronism's picture

You have at least 3 too many zeroes. But I agree with your point.

BurningFuld's picture

The agreement does say FREE trade. It doesn't say FAIR trade.

BigWillyStyle87's picture
BigWillyStyle87 (not verified) Mar 29, 2017 6:41 AM

I like how in the unemployment section at the very bottom they forgot to apply the same standard to both times. Had the standards used pre nafta been applied to post nafta we would be well over 10%. 

brushhog's picture

I'm tired of hearing about these "low prices" that free trade is bringing us. In the net, those prices are NOT lower, they are higher. If you used to make 45k a year at your manufacturing or manufacturing industry support job and your expenses were 15k, then 1/3 of your salary was put toward your expenses. If you lost that job and are one of the 65% of Americans who are unemployed or underemployed, then you are now working 2 or 3 part time jobs with no benefits. So prices are a little cheaper, maybe 12k but your income has dropped in real terms to something like 32k.

So the "cost" is actually HIGHER. There is no benefit to slightly lower prices for some goods when your income and opportunities have crashed through the floor. It gets alot worse than this, because the government and central banks have tried to prop up the jobless economy by jacking-up real estate in an attempt to create a "wealth effect". That means, for the unemployed or under-employed person ( which make up the vast MAJORITY of Americans ), buying and owning a home has gotten further and further out of reach.

So this bullshit line about "cheaper prices" has to stop. It's utter, utter nonsense. For the vast majority of Americans, the NET cost of living has gone straight UP with "free trade" ( which isnt even really free trade, but thats another rant ). If you have to work harder and longer to buy the same goods, then the cost of those goods has gone up, regardless of the number thats on the price tag.

General Titus's picture

Pat Buchanan warned that the Bush/Clinton/CFR NAFTA would enable US Corporations to evade US Environmental, Quality Control, Labor, & Human Rights laws (all of which claim to be what the Bolshevik/Democrats are for) and taxes, enabling the corporations to greatly increase their profits at the expense of the environment, buyer, worker, and taxpayer.

JustPastPeacefield's picture

Low prices? Okay, now add in the welfare costs as that sucking sound becomes a mighty roar. 

We lost the manufacturing jobs that Clinton talked about and gained millions of low-skill Mexicans competing for the fewer jobs that were left. The Mexicans are - shall we say, overepresented, on the welfare rolls. As your job goes to Mexico, try applying for a job at McD's without speaking Spanish. English speakers need not apply.

Yeah, it's a mixed bag, right. Mista Ross was right. 

Charming to hear the Dems - those protectors of the working class - threaten to shut down the government if the Wall funding is incuded. Which is why the working class has vacated the democrat party and left it nothing but a cesspool of ethnic masturbation. And now that the fun is over, it's just a filthy mess.

The GOP might - will - fuck their opportunity up, but the Dems have gone down a filthy dead end road. And America?  

dscott8186's picture

I for one am not convinced as to the real effects of NAFTA, either positive or negative.

IF this statement is correct as reported by the WaPo:

"Trade between the three countries grew considerably. For example, U.S. total goods trade with Mexico and Canada — imports and exports combined — grew from $291 billion in 1993 to $1.1 trillion in 2016. That 267 percent increase seems like a lot, but U.S. trade with countries not in NAFTA also grew by 242 percent over that same period."

https://www.washingtonpost.com/news/monkey-cage/wp/2017/02/15/what-is-na...

In other words, trade would have grown regardless of NAFTA, question is what part of that amount over 242 % of the 267 % (i.e. 25 %) is actually due to NAFTA?  One can just as easily claim that 25% increase over world trade is merely due to the economies of cheaper transport from proximity that would have occured anyway?


"The Economic Policy Institute estimates that about 800,000 jobs were lost to Mexico between 1997 and 2013. However, a nonpartisan report by Congress published in 2015 found "NAFTA did not cause the huge job losses feared by the critics." And there's analysis that shows America has lost more jobs to machines and automation than to Mexico...

...However, the U.S. Chamber of Commerce says that about 6 million U.S. jobs depend on trade with Mexico."

http://money.cnn.com/2016/11/15/news/economy/trump-what-is-nafta/index.html

 

There is no debating that there were jobs losses to Mexico due to the loss of the 35% tariff, however, it is also true that automation sliced into manufacturing jobs at the same time in addition to movement to Mexico.  The question is how much of that automation was due to manufacturers weighing the price discrepancy between Mexico's wages versus the cost of moving the entire production line down there?

 

The bottom line here is that NAFTA was first and foremost a gift to businesses and sold as a religious sacrament to Capitalists in a world that doesn't practice free trade but cronyism for the benefit of politicians politcal re-election campaigns.  But this also ignores that NAFTA in isolation might have been good for the US as it was for Mexico IF, IF, IF the greedy Clintons hadn't have made a sweetheart deal with China on trade.  You can not gage the effect of NAFTA because the effect of the grossly mismanaged trade with China swamps any benefits or losses that might be incidental to NAFTA. Restated, any losses in employment due to NAFTA was probably due to the bad trade deal with China, because manufacturers were fighting for their lives against absurdly cheap labor advantage the Chinese manufacturers used to grab market share in the US.  IF you can't compete with US labor, then Mexican labor and automation was the only rational response to Chinese ultra low wages.

The reality is IF Walmart was NOT permitted to dump Chinese goods in the US due to the gross mismanagement of trade, then Walmart would have gone to Mexico in its business plan to grab market share based on discounting.  Then a new dynamic would have occurred, that is, we would NOT have had millions of illegal aliens jumping our borders from Mexico and saved the US taxpayer billions of dollars in entitlements due to unemployment, welfare and ObamaCare.

Ink Pusher's picture

On our end it was Brian MulPhoney(Mulroney) who billed NAFTA as a great advance.

I have always been against NAFTA because Mexico was the only winner from the word go.

Perot nailed it.

rejected's picture

I guess we're supposed to believe that 5.1pc government unemployment number?

Wonder where those 100 million jobless souls who are no longer counted?  And our exports only dropped 11pc over 26 years?

Guess those millennial's that can't find work to pay their student loans are bullshitting us.

Guess the fact that 95pc of goods sold in Walmart, Amazon, Ebay and the rest are imported, mostly from China and Mexico,  is just a fluke.

This should make the Donald's job making America great again a lot easier as there is little for him to do!

 

Dead Indiana Sky's picture

So how much would a car cost without the price-oppressing NAFTA?  

Common_Law's picture

Ross Perot could have made things alot better for all of us. I don't know if he would have, but he could have. But being the only business man since Hoover, he would have been framed for the dot com bubble bust like Hoover was for the great depression.