Economic Snapshot | Trade

NAFTA’s Legacy: Growing U.S. Trade Deficits Cost 682,900 Jobs

Former President Bill Clinton claimed that NAFTA would create an “export boom to Mexico” that would create 200,000 jobs in two years and a million jobs in five years, “many more jobs than will be lost” due to rising imports.  The economic logic behind his argument was clear:  Trade creates new jobs in exporting industries and destroys jobs when imports replace the output of domestic firms.   Fast forward 20 years and it’s clear that things didn’t work out as Clinton promised.  NAFTA led to a flood of outsourcing and foreign direct investment in Mexico.  U.S. imports from Mexico grew much more rapidly than exports, leading to growing trade deficits, as shown in the Figure.  Jobs making cars, electronics, and apparel  and other goods moved to Mexico, and job losses piled up in the United States, especially in the Midwest where those products used to be made.  By 2010, trade deficits with Mexico had eliminated 682,900 good U.S. jobs, most (60.8 percent) in manufacturing.

Claims by the U.S. Chamber of Commerce that NAFTA “trade” has created millions of jobs are based on disingenuous accounting, which counts only jobs gained by exports but ignores jobs lost due to growing imports.  The U.S. economy has grown in the past 20 years despite NAFTA, not because of it.  Worse yet, production workers’ wages have suffered in the United States.  Likewise, workers in Mexico have not seen wage growth.  Job losses and wage stagnation are NAFTA’s real legacy.

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