NAFTA IS THE WALL

Partners in Prosperity
Partners in Prosperity

My previous visit to the place of my roots in Ontario Canada was in 2009 on the occasion of my uncle’s funeral. This past December I returned again to help officiate at my mother’s memorial service. The main thoroughfare from Toronto’s international airport to my former home of Kitchener is Highway 401. It is known informally as the King’s Highway or officially as the Macdonald-Cartier Freeway. In Ontario, it stretches 514.5 miles east from Windsor (just across the border from Detroit) to the Quebec border and then on to the city of Montreal. It is one of the main trade routes traversing Ontario. What impressed me this trip on Hwy. 401 was the amount of truck traffic. It was not jus the truck traffic but the number of trucks bearing license plates from the USA. For me, it represented an increase in trade.

One of my frustrations with the recent campaign season here in the USA was the stance both major candidates took on trade. I thought the notion that international trade was good for business was widely accepted especially among Republicans. Any serious student of world history can see how trade has benefited humanity. Today (01/23/2017) President Trump signed three presidential directives. One directive was to withdraw US support for the Trans-Pacific Partnership (TPP) trade deal. The TPP is a US-led trade initiative which includes eleven other countries. Hillary Clinton was an advocate of the deal until it became politically expedient for her not to be. I disagree with President Trump’s directive concerning the TPP. Besides encouraging trade the TPP would assure the continued influence of the US in the Pacific region of the world. China is militarizing the South China sea. It’s stated purpose is defensive. I pray that this remains true but the military infrastructure being developed by China could one day block the China Sea trading routes and China could potentially hold the world hostage to its whims. The US exerts a military presence in this region and would benefit by a greater leadership role and influence there to balance China’s agenda.

If implemented the TPP would also bring stronger measures on such issues as labor rights, environmental protection, intellectual property rights, regulatory coordination, and restrictions on state-owned enterprises.

It is frustrating to think that all the people time, energy and resources that went into the formulation of the TPP could be dismissed so cavalierly by our new President.

Throughout the campaign, Donald Trump referred to the North American Free Trade Agreement (NAFTA) as the worst trade deal ever negotiated by the US. NAFTA is a trade agreement between The US, Canada, and Mexico. It was signed in 1994 and gradually implemented through 2008. I have personally watched the growing prosperity in Mexico over the years. When I first heard Trump’s condemnation of NAFTA during the campaign I decided to do some research.

Most economists I read seem to agree that NAFTA has had a modest but positive impact on US Gross Domestic Product (GDP) of less than 0.5 percent, or a total addition of up to $80 billion dollars to the US economy upon full implementation, or several billion dollars of added growth per year. That certainly did not sound modest based on my checkbook balances. Since one measure of national economic health is GDP I decided to look closer at those figures for the three nations. I compared GDP growth for the 22 years prior to NAFTA and the 22 years since NAFTA was signed.

From 1972 to 1994 the GDP of the US grew by 17% which is an average of .76% per year. From 1994 to 2016 the GDP of the US grew 67% which is an average of 3.06% per year.

From 1972 to 1994 the GDP of Canada grew by 19% which is an average of .87% per year. From 1994 to 2016 the GDP of Canada grew 68% which is an average of 3.09% per year.

From 1972 to 1994 the GDP of Mexico grew by 9% which is an average of .39% per year. From 1994 to 2016 the GDP of Mexico grew 55% which is an average of 2.52% per year.

Whatever impact NAFTA has had it does not seem to have been detrimental to the economic health of any of these nations. On the contrary, GDPs for the three parties have dramatically increased since 1994. Mexico has had the most dramatic increase in GDP. That increase indicates that there are more economic opportunities in Mexico today than there was in 1994. That means more jobs. The more jobs available in Mexico the lesser the need for Mexicans to illegally cross the border looking for work here in the US. NAFTA is the wall. Statistics indicate that the stream of illegals coming from Mexico to the US is in decline. It seems counterproductive to kill NAFTA and then spend money building a physical wall.

For more information here a links to a couple of my sources:

http://www.cfr.org/trade/naftas-economic-impact/p15790

https://knoema.com/tbocwag/gdp-by-country-1980-2015?country=Canada

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