NAFTA: Myths versus Facts

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The NAFTA debate is no longer about the agreement itself, or about Mexico, but about competing domestic political agendas and irreconcilable world views. Appeals are made not to economic interest but to nationalistic fears. On one side, there are scare-mongering claims about Mexican instability; on the other, crude appeals to the most xenophobic strains of American populism. Critics exaggerate the risks of more rapid economic integration while minimizing its rewards; advocates, no more responsibly, do just the opposite. On both sides, the agreement's true purpose-and its likely effects-have been distorted and obscured.

What the North American Free Trade Agreement actually does, in a dense thicket of lawyerly prose, ridden with caveats and codicils, is to set the ground rules by which cross-border trade would be liberalized. Within ten years nearly all restrictions on manufacturing trade and most cross-border investment constraints would be removed. After 15 years the last tariffs and quotas on agricultural goods would disappear.

In concept, then, NAFTA is both simple and-from an American standpoint-seemingly unobjectionable. Mexico agrees to do almost everything of an economic nature that the United States ever wanted it to do-lift import barriers, stabilize its currency, scale back state industry, deregulate private business and allow more extensive foreign investment. In return it gets reciprocal access to the American market, plus the steady influx of outside capital that the imprimatur of a trade treaty with Washington would virtually guarantee.

One of the first myths about NAFTA is that the money that the treaty would "add" to Mexico would be "subtracted" from the American economy. Actually, that would rarely be the case, for the simple reason that little of this money would otherwise be invested in the United States. Yet much of the political opposition to NAFTA stems from just this sort of distorted, fixed-pie picture of how the economy works. If jobs are being created by American employers in Mexico, the logic goes, then they must be jobs that have been taken from Americans in Detroit, Cleveland or Minneapolis. If Mexico raises its standard of living, then it must be because the United States has grown poorer.