NAFTA Is Really Not a Big Deal

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.


How big an impact did NAFTA have on the US economy? Back when it was being debated, there were several fairly extravagant studies floating around, and to this day nobody has forgotten about them. Practically every discussion of NAFTA begins with something like “advocates of NAFTA made at the outset some wildly optimistic claims about what NAFTA was going to achieve.” For example, here’s Dani Rodrik:

Remember first that many advocates of NAFTA made at the outset some wildly optimistic claims about what NAFTA was going to achieve….A recently published academic study by Lorenzo Caliendo and Fernando Parro uses all the bells-and-whistles of modern trade theory to produce the estimate that these overall gains amount to a “welfare” gain of 0.08% for the U.S.

Brad DeLong pushes back against this here, but I want to show you something which should convince you that NAFTA’s impact on the US—whether good or bad—is inevitably tiny. The chart on the right shows total US GDP: about $19 trillion. The next bar shows total US trade—both imports and exports—with Canada and Mexico. It’s about $1 trillion. Finally, the third bar shows how much of the increase in this trade since 1993 is due to NAFTA. Most estimates put it at 20 percent or less of the total.

In other words, NAFTA’s gross trade effects, at most, are about 1 percent of GDP. And since many of the positive and negative follow-on effects of that trade cancel out, the net effect on the American economy has to be a fraction of a percent. It’s just not a huge deal. It hasn’t accounted for very many jobs lost or gained. It hasn’t accounted for a big change in GDP. It hasn’t accounted for a significant change in price levels. Making it the centerpiece of any kind of trade story is just absurd. It’s a good hobbyhorse for populist demagoguery of trade deals, and it’s a good hobbyhorse for populist demagoguery of Mexico. But that’s about it.

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. It's our first time asking for an outpouring of support since screams of FAKE NEWS and so much of what Trump stood for made everything we do so visceral. Like most newsrooms, we face incredibly hard budget realities, and it's unnerving needing to raise big money when traffic is down.

So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate