North American Free Trade Agreement
| The dismal science|
|The Worldly Philosophers|
The North American Free Trade Agreement, usually referred to as NAFTA, was signed into law by President Bill Clinton. It provides for a less-encumbered flow of goods and capital between Canada, Mexico, and the United States. The U.S. and Canada had already gradually reduced their cross-border tariffs to zero by the time it was passed, partially due to the Canadian Free Trade Agreement (CFTA).
Staunch opponents of NAFTA assert that the only thing that the agreement provided for was improved exploitation by capital in the cheap labor markets. However, they generally use the term "exploitation" in a vague and ill-defined way, roughly equivalent to any type of employer-employee relationship in which the employee is paid a low salary by Western standards. On the other hand,the standard view among economists is that those investments did create somewhat better working opportunities, at higher salaries, than the alternative employment opportunities for Mexicans, as well as welfare-enhancing effects through the availability of goods and other exchange-rate related effects to the whole economy.
Opponents also assert that NAFTA is the cause of the implosion of small farming in all three countries and the enhancement of big agribusiness.
Ross Perot famously predicted in the 1992 U.S. Presidential Election that the result of implementation of NAFTA would be a "sucking sound" of jobs migrating to Mexico, creating unemployment problems in the U.S., especially in the manufacturing labor market. However, most economists (including Paul Krugman) supported NAFTA and predicted that no such thing would happen. They pointed out instead that both proponents and opponents of the treaty were largely exaggerating its pros and cons. In the end, after 1994, the U.S. experienced a long period of low unemployment, until around 2008 when the recession (due to a different kind of deregulation) began. To some extent, those economists could be challenged on the grounds that real wages for the vast majority of workers in the United States began declining in the United States with the early 2001 recession (only a few years after NAFTA took effect) and have continued to decline ever since. In addition, the recovery from that recession was the first jobless recovery in U.S. history, further bolstering that potential challenge.
NAFTA is an acronym that means: "North American Cheap Labor Agreement"
The sad commentary is that now the dollars are freer to cross the borders than the people. Granted, this is partly due to the post-9/11 decision to require passports for travel between the three nations. The European Union, meanwhile, is adamant on the free movement of goods, capital and labor being an unbreakable unit, as Britain has to learn the hard way during Brexit negotiations. Those socialist Europeans, giving the same rights to people as to money. Tsk.
In the decades since the enactment of NAFTA, its effects have continued to be hotly debated. Joseph Stiglitz, one of the American drafters of the agreement, came out against it in 2004 and remains so. More than twenty years later, Brad DeLong, another of the American drafters, remains hesitantly supportive. Organized labor continues to push for its repeal, though in recent years in the US, they've been more focused on making it easier for immigrants to enter the US and become naturalized. If successful, this would partly mitigate the problem of labor being less able to cross the border than capital.