Economic Snapshot | Trade and Globalization

Trade deficit with Mexico has resulted in 682,900 U.S. jobs lost or displaced

With the proposed free trade agreements (FTAs) with South Korea, Colombia and Panama up for final consideration by Congress and the President, it is worth reflecting on the effects of U.S.-Mexico trade under the 1993 North American Free Trade Agreement. In 1993, the Clinton administration claimed that NAFTA would “create an additional 200,000 high-wage jobs related to exports to Mexico by 1995.” Trade both adds to and subtracts from the demand for workers. The growth of exports supports domestic employment but the growth of imports displaces domestic jobs.

In 1993, before NAFTA, the U.S. had a small, job-supporting trade surplus with Mexico. By 2010, the U.S. had a trade deficit with Mexico that displaced 682,900 jobs, with jobs lost or displaced in every state, as shown on the map. Exports to Mexico supported nearly 800,000 U.S. jobs in 2010, but imports displaced 1.5 million jobs for a net loss of nearly 700,000 jobs. Jobs displaced by growing imports from Mexico far exceeded any jobs gained through increased exports.

Jobs are a key issue in the current debate. Proponents of the three FTAs on the table have claimed that they will create tens or hundreds of thousands of U.S. export jobs. Counting export jobs while ignoring imports is like trying to run a business while ignoring expenses—it’s a sure-fire recipe for bankruptcy. EPI has estimated that 214,000 net U.S. jobs will be lost or displaced (counting both export jobs gained and import jobs displaced) in the first seven years under the proposed FTAs with South Korea and Colombia. It’s important to consider both sides of the ledger when evaluating proposed FTAs.

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