II. The Five-Year Impact of NAFTA on the United States Economy

U. S. Exports

Prior to NAFTA's actual implementation in 1994,3 the U. S. Federal Reserve Bank of Chicago estimated the agreement would produce "output gains" for all three nations, increasing U. S. gross domestic product (GDP) by 0.24 percent, Mexican GDP by 0.11 percent, and Canada's GDP by 3.26 percent4.

Actual results, however, have far exceeded that prediction. A 1997 study by the Heritage Foundation gave NAFTA an "A" and dubbed it a "remarkable success" in all areas of measurement, from job creation to increased exports to export-led economic growth. The study noted that U. S. exports to Mexico grew by 37 percent from 1993 to 1996, reaching a record $57 billion.5

As President Clinton reported during his May 1997 trip to Mexico, by the end of 1997 the historically "Third-World" country would buy more American products than any country except Canada, surpassing even Japan, which has an economy 15 times larger than Canada. In fact, during NAFTA's first three years, 39 of the 50 states increased their exports to Mexico, with 44 seeing a rise from 1995 to 1996.6 Over the same period, U. S. exports to Canada rose by 33 percent.

Overall, since 1993, U. S. exports to Canada increased by over 50 percent and exports to Mexico nearly doubled.7 In total, those increases reflect an added $93 billion in American exports (see Chart 1, below).8

A $56 billion increase in U. S. exports, or more than 50 percent, to Canada, and a more than $37 billion increase, or nearly double, to Mexico in just five years constitutes a significant jump in exports. In fact, this jump far exceeds most estimates NAFTA supporters used during debate over the agreement to bolster their contention that it would be a significant boon to U. S. trade. And it certainly belies the doomsday scenarios put forward by NAFTA's detractors. Such figures have led U. S. Trade Representative Charlene Barshefsky to insist, "There is no economic argument against NAFTA."9


NAFTA's Effects on U. S. Job Creation

 There is also the issue of jobs, about which estimates and studies vary widely. Shortly after NAFTA was signed, the office of the U. S. Trade Representative announced that NAFTA had created 122,000 U. S. jobs as a result of trade with Mexico, plus 189,000 due to Canada, totaling 311,000 jobs in all.10 On the other hand, a study by a coalition of labor union and environmental groups led by the Economic Policy Institute, contended that NAFTA had cost 420,000 American jobs.11 By mid-1997, the U. S. Department of Labor certified 116,516 job losses.

Additionally, a well-publicized study of the job creation and loss issue conducted by UCLA's North American Integration and Development Center in 1997 found that the United States had gained 11,000 jobs because of NAFTA, lost 38,000 jobs to Mexican and Canadian competition, and gained 49,000 jobs as a result of heightened U. S. exports to those nations. The latter study led some analysts to conclude that when it comes to NAFTA's job impact, the trade agreement is somewhat of a "wash."13

Which figure is accurate? Job losses and gains are difficult or impossible to measure because of the vast number of jobs that change hands, become available, or disappear in as short a of time as a single day. Because of this, it is easy to locate figures that bolster many conflicting conclusions. For example, the Office of the U. S. Trade Representative argues that U. S. exports to Mexico "support" 2.3 million American jobs. The Dallas Morning News cites figures that point to a gain of 688,000 new U. S. jobs five years after NAFTA. Some NAFTA supporters say the agreement has created as many as 12 million new U. S. jobs and credit NAFTA with a role in dropping the overall unemployment rate from 7.5 to 4.9 percent since 1994.14

Whether any of this is true or not is impossible to tell. Therefore, some skepticism regarding estimates of NAFTA-related job loss or creation is warranted. The authors avoid making estimates or devising their own formulas, instead citing only the claims made by others.


NAFTA's Effects on the State Level

Studies projecting NAFTA's state-level effects are scarce, which is not unusual for trade studies.15 One of the few conducted was done by the Pittsburgh-based Allegheny Institute for Public Policy. The study, which focused on NAFTA's three-year effect on Pennsylvania,16 found that the state's exports to Mexico and Canada reached record levels following the first full year of NAFTA's implementation, increasing by 31 percent and 11 percent, respectively.17 Of 30 Pennsylvania industries that do business with Mexico, 20 experienced export gains to Mexico in the first year of NAFTA, while 26 of 32 industries trading with Canada also saw increases. This led to an expansion of $616 million in Pennsylvania exports just after the first year. Among the key beneficiaries were capital-goods industries and the environmental-technology sector. None of the leading sectors in the state experienced notable drops in exports to either nation.

Because of NAFTA, Pennsylvania-based companies like Heinz; Chester Environmental; Amp, Inc.; Mine Safety Appliances; and many more were able to expand their exports. For example, prior to NAFTA, Heinz had no sales in Mexico. By 1996, it had sold Mexico $3 to $5 million worth of U. S. products.