What Year Did The North American Free Trade Agreement Take Effect

Nevertheless, NAFTA has been a recurring objective in the broader free trade debate. President Donald J. Trump says it undermines U.S. jobs and manufacturing, and in December 2019, his administration finalized an updated version of the pact with Canada and Mexico, now known as the U.S.-Mexico-Canada Agreement (USMCA). The USMCA received broad support from all parties on Capitol Hill and came into force on July 1, 2020. This represents a nominal increase of $1 trillion in trilateral trade of 258.5% since 1993, the actual increase – thus adjusted for inflation – of 125.2%. But other economists, including Gary Clyde Hufbauer and Cathleen Cimino-Isaacs of the Peterson Institute for International Economics (PIIE), have pointed out that increased trade is paying off the U.S. economy. Some jobs are lost because of imports, others are created and consumers benefit greatly from lower prices and often improved product quality.

Your 2014 PIIE study on the impact of NAFTA revealed a net loss of about 15,000 jobs per year as a result of the pact – but gains of about $450,000 for each job lost, in the form of higher productivity and lower consumer prices. Given that people with lower incomes spend more of their income on clothing and other products cheaper to import than within the country, they would probably suffer the most from a towards protectionism – like many of them through trade liberalization. According to a 2015 study by Pablo Fajgelbaum and Amit K. Khandelwal, the average real income loss due to the complete closure of trade would be 4% for the top 10% of the American population, but 69% for the poorest 10%. NAFTA has long been a political objective. In 2008, then-Presidential candidate Barack Obama responded to widespread trade skepticism within the Democratic base by promising to renegotiate NAFTA to incorporate stricter labor and environmental standards. The Obama administration tried to address NAFTA issues during the Trans-Pacific Partnership negotiations, a massive trade agreement with 11 other countries, including Canada and Mexico. The TPP was deeply unpopular – Hillary Clinton ultimately opposed the deal during her 2016 presidential bid – and President Trump withdrew the United States from the TPP in one of his first official acts. It is difficult to find a direct link between NAFTA and overall employment trends.

The Economic Policy Institute, partially funded by trade unions, estimated that in 2013, 682,900 net jobs were supplanted by the U.S. trade deficit with Mexico. In a 2015 report, the Congressional Research Service (CRS) said NAFTA „has not caused the huge job losses that critics fear.“ On the other hand, it allowed that „in some sectors, trade-related effects may have been greater, particularly in sectors that have been more exposed to the removal of tariff and non-tariff barriers, such as textiles, clothing, automobiles and agriculture.“ In the end, NAFTA created the framework for trade in North American countries.