Obama's pledge to--if elected President--rewrite the rules of trade set
out in the North American Free Trade Agreement (NAFTA) caters to a
protectionist agenda set on protecting special interests, not promoting
America's prosperity. The argument that NAFTA has brought nothing but
woe to the U.S. economy and America's workers is based on anecdotes and
distorted data--and has gone far toward helping to misshape public
perceptions about NAFTA's real impact. Unfortunately for good
policymaking, the ongoing practice of bashing NAFTA on the campaign
trail may result in real changes made to an agreement that has done far
more good than harm to America's economy.
aside, NAFTA and other free trade agreements (FTA) the U.S. has in
place have spurred competition and economic growth. In fact, without
the lower barriers to trade that these agreements and the more than six
decades of multilateral trade liberalization has brought to bear on the
world's markets, America's ability to weather the current economic
storm would be much less. While it is certainly the case that these
agreements can always be improved, that does not mean they are
broken--although reopening them may indeed bring about that result.
Instead, a new Administration and Congress keen on promoting America's
economic well-being should support the efforts already underway to
improve the implementation of the agreements.
The Positive Benefits of FTAs
of the beginning of 2008, the U.S. has 11 FTAs with 17 countries.
Congress has approved FTAs with the following nations: Israel; Canada
and Mexico (NAFTA); Jordan; Singapore; Chile; Australia; Morocco; the
Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras and
Nicaragua (DR-CAFTA); Bahrain; Oman; and, most recently, Peru.
agreements with Oman and Peru have not yet been fully implemented, the
U.S. has already seen impressive results from its bilateral trade
deals. For instance, in 2007, the FTAs currently in force accounted for
more than $1 trillion in two-way merchandise trade, which is about 35
percent of U.S. trade worldwide. Along with the economic benefits of the agreements, the FTAs have also
strengthened political relationships between the U.S. and its strategic
allies around the globe.
to popular opinion, since its inception NAFTA has generated significant
gains for the U.S. Together, Canada and Mexico constitute America's
largest trade partner, accounting for about 83 percent of all
merchandise trade between the U.S. and our FTA partners and 29 percent
of all U.S. merchandise trade in 2007. Each day NAFTA countries conduct
roughly $2.2 billion in trilateral trade.  This trade supports U.S. jobs, bolsters productivity, and promotes
investment. Since 1994, U.S. GDP grew more than 50 percent in the first
13 years of the agreement, and the economy created a net 26 million new
fact, economy-wide, the estimated net number of jobs displaced each
year by international trade is estimated to be no more than a
relatively small 3 percent of the workforce. Far more important to the changing composition of America's workforce
have been improvements in technology and shifts in consumer
preferences. The combined impact of innovation and reduced barriers to
trade has served to help the economy, not harm it. Up until the current
economic slowdown, America experienced an average unemployment rate of
5.1 percent--2 percent less than the average unemployment rate
experienced over the decade preceding the implementation of NAFTA.
Today, more than 57 million Americans are employed by firms that engage
in international trade--roughly 40 percent of all non-farm jobs.
The Cost of Renegotiating Treaties
the data does not support the popular opinion that freer trade results
in a competitive environment that is unfair to U.S. workers and
companies, the call for renegotiating trade agreements has been taken
up by protectionists, most of Congress, and one presidential candidate.
While such tactics may make for good politics, they would result in
very bad policy. Should the U.S. demand to reopen NAFTA or other FTAs
as a means to pull back from previous market access commitments, then
it is fair to expect that America's trade partners will retaliate with
protectionist demands of their own.
Such actions would result in
a real contraction in the level of two-way trade at a time when the
U.S. and other countries are relying on trade to mitigate the cost of
the current economic slowdown. Firms that can no longer find a domestic
consumer can export instead--provided countries do not react to hard
economic times with protectionist policies. When all sales
opportunities dry up or are denied, companies go out of business, jobs
are lost, and the chance for economic recovery is postponed. Rather
than burden already struggling firms with extra barriers to trade,
governments need to keep the wheels of trade greased.
Free Trade Agreements Promote U.S. Interests
trade agreements do not need to be renegotiated to make them better.
Because it is clear that economies evolve over time, NAFTA and the
other FTAs have working groups and formal committees designed to
continuously ensure that the rules of trade defined in the agreements
work effectively for all parties. For instance, the newly established
"Pathways to Prosperity in the Americas" initiative is designed to
function as a regional forum for making trade free and fair.
the U.S. pursues freer trade through multilateral negotiations or via
bilateral agreements, the result is fair and beneficial for America.
Similar to the objectives sought after by U.S. negotiators in the WTO,
U.S. FTAs go beyond winning lower tariffs on American agriculture,
manufacturing, and services exports. FTAs include provisions that
safeguard investors from discrimination, increase regulatory
transparency, combat corruptive practices, and protect and enforce
intellectual property rights. The U.S. trade representative negotiates
agreements that include transparent dispute resolution and arbitration
mechanisms to guarantee that the agreements are upheld, along with the
rights of U.S. firms and consumers.
U.S. FTAs generally
strengthen the transparent and efficient flow of goods, services, and
investments between member countries. FTAs open markets, protect
investors, and increase economic opportunity and prosperity. In short,
FTAs serve to promote U.S. interests, not weaken them or place an
unfair burden on Americans.
 Daniel Griswold, "Trading Up: How Expanding Trade Has Delivered Better Jobs and Higher Living Standards for American Workers," Trade Policy Analysis No. 36, Cato Institute, October 25, 2007, at www.freetrade.org/node/782
(October 24, 2008). Similar results were derived on 2003 jobs
statistics in Erica L. Groshen, Bart Hobijn, and Margaret M. McConnell,
"U.S. Jobs Gained and Lost through Trade: A Net Measure," Federal
Reserve Bank of New York, August 2005, at www.ny.frb.org/research/current_issues/ci11-8/ci11-8.html (October 22, 2008).
 U.S. Trade Representative, "NAFTA--Myth vs. Facts."