MEI study reveals American manufacturing has increased production by 58% since the trade deal came into effect.
MONTREAL — While Republican candidate for the presidency of the US Donald Trump has repeatedly tried to convince the American people of the need to renegotiate, or even to withdraw from, the North American Free Trade Agreement (NAFTA), a Montreal Economic Institute (MEI) report reveals the numerous benefits the deal has had for the US, Canada, and Mexico.
Since its entry into force in 1994, NAFTA has increased productivity across North America and reduced customs duties to increase trade.
American trade with Canada and Mexico increased from US$481 billion in 1993 to over US$1.1 trillion in 2015.
“There is no doubt that the liberalisation of trade leads to lasting benefits. A very large majority of economists agree on this point,” says Mathieu Bédard, author of the publication and Economist at the MEI. “Countries that open up their borders to trade experience sustainable growth and prosperity.”
While Trump claims that Americans “don’t make anything anymore,” implying that NAFTA is to blame, the American manufacturing sector has increased production by 58% since the deal came into effect.
Nor has Mexico been left behind, NAFTA having contributed to the overall performance of its economy. The agreement reduced the price of many consumption goods by half in just a few years, which has helped improve the still precarious living conditions of many Mexicans. The World Bank estimated in 2004 that NAFTA had lifted 3 million Mexicans above the poverty line.
“It is surprising to see a certain segment of the left agree with Donald Trump on the issue of free trade, whereas its positive effects in terms of reducing global poverty are obvious,” Bédard concludes.
“NAFTA is a success, and if Donald Trump wants to renegotiate this agreement to obtain ‘a better deal’ for the US, he will instead have to make sure to liberalize trade even further.”