NAFTA Myths and Realities

Contrary to some politicians’ recent comments, the United States is benefiting from trade and from the North American Free Trade Agreement (NAFTA) in extraordinary ways, and no one more than the country’s manufacturers:

Exports

According to the U.S. Department of Commerce, 35% of U.S. exports go to Canada and Mexico, and manufactured goods account for more than 75% of the country’s exports.  U.S. exports to Canada and Mexico have nearly tripled since 1994, when NAFTA came into force.

Jobs

The NAFTA market is especially important for U.S. manufacturers.  According to the Bureau of Labor Statistics, a total of 13.9 million Americans are employed in manufacturing.  These workers produced $870 billion worth of exports in 2007.  Canadians and Mexicans bought about $330 billion of U.S. manufacturing output every year.

Income

The NAFTA market brings export revenue of $24,000 for each and every factory worker.  Compare this to the salary of the average manufacturing worker — about $37,000.  How could manufacturers make their payroll without their huge and growing sales to Canada and Mexico?  The short answer is: they couldn’t.

Too often, arguments over trade miss the simple fact that “free trade” agreements like NAFTA are all about fair trade.  Many people don’t know that the U.S. market is already wide open to imports; our average duty on imports is about 2%.  But countries such as Colombia and Korea impose an average tariff on U.S. manufactured goods of 14 and 11%, respectively — similar to Mexico before NAFTA.

That’s just not fair.  That’s like starting a basketball game down ten points from the tip off.  Luckily, the pending trade agreements with these two countries would put U.S. trade relations with these countries on a fairer, mutually beneficial footing. 

To underscore NAFTA’s benefits is not to dismiss the troubles manufacturers face; they are serious, and they have serious causes that federal and state officials must address.  But saying no to trade deals is the wrong prescription for American manufacturing workers.