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The Myth About NAFTA and Jobs

Why the Free Trade Deal Does Not Hurt Employment

United Auto Workers union member works on a Chevrolet Volt electric vehicle at General Motors Detroit-Hamtramck assembly plant in Hamtramck, Michigan, July 27, 2011. Rebecca Cook / Reuters

The administration of Donald Trump seems committed to weakening, if not ending, the North American Free Trade Agreement (NAFTA), citing the decline in the auto industry as an example of the deal’s supposed failure. As U.S. Secretary of Commerce Wilbur Ross noted in The Washington Post, the percentage of auto imports from Mexico that used inputs from the United States had actually dropped post-NAFTA, and therefore, he argued, the free-trade agreement is broken. The Trump administration has now proposed raising the “rules of origin” for vehicles under NAFTA from 62.5 to 85 percent. In other words, at least 85 percent of a car must be made in a NAFTA country for that car to qualify as duty-free.

This argument prompted no small debate about Ross’ methodology and data selection, but putting that aside, there are three fundamental reasons why Secretary Ross’ thesis is simply bad for the economy.

First, a focus

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