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The effects of NAFTA on US trade, jobs, and investment, 1993–2013

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  • Robert E. Scott

    (Economic Policy Institute, Washington, D.C., USA)

Abstract

Between 1993 and 2013, the US trade deficit with Mexico and Canada increased from $17.0 to $177.2 billion, displacing 851 700 US jobs. All of the net jobs displaced were due to growing trade deficits with Mexico. The number of US jobs displaced by trade deficits with Canada declined slightly between 1993 and 2013. Prominent economists and US government officials predicted that the North American Free Trade Agreement (NAFTA) would lead to growing trade surpluses with Mexico and that hundreds of thousands of jobs would be gained. The evidence shows that the predicted surpluses in the wake of NAFTA's enactment in 1994 did not materialize. Growing trade deficits and job displacement, especially between the United States and Mexico, were the result of a surge in outsourcing of production by US and other foreign investors. The rise in outsourcing was fueled, in turn, by a surge in foreign direct investment into Mexico, which increased by more than 150 percent in the post-NAFTA period.

Suggested Citation

  • Robert E. Scott, 2014. "The effects of NAFTA on US trade, jobs, and investment, 1993–2013," Review of Keynesian Economics, Edward Elgar Publishing, vol. 2(4), pages 429-441, October.
  • Handle: RePEc:elg:rokejn:v:2:y:2014:i:4:p429-441
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    References listed on IDEAS

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    1. Robert A. Blecker, 2003. "The North American Economies After NAFTA : A Critical Appraisal," International Journal of Political Economy, Taylor & Francis Journals, vol. 33(3), pages 5-27.
    2. Jesus Felipe & Matias Vernengo, 2002. "Demystifying the Principles of Comparative Advantage : Implications for Developing Countries," International Journal of Political Economy, Taylor & Francis Journals, vol. 32(4), pages 49-75.
    3. Krugman, Paul R, 1993. "What Do Undergrads Need to Know about Trade?," American Economic Review, American Economic Association, vol. 83(2), pages 23-26, May.
    4. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
    5. Eugene Beaulieu, 2000. "The Canada-U.S. Free Trade Agreement and labour market adjustment in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 540-563, May.
    6. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    7. Hassan Bougrine & Mario Seccareccia, 2004. "Alternative exchange rate arrangements and effective demand: an important missing analysis in the debate over greater North American monetary integration," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 26(4), pages 655-677.
    8. Mario Seccareccia, 2013. "Budgetary Deficits and Overhanging Public Debt: Obstacles or Instruments to Full Employment? A Kaleckian/Institutionalist Perspective," Journal of Economic Issues, Taylor & Francis Journals, vol. 47(2), pages 437-444.
    9. Reinhard Schumacher, 2013. "Deconstructing the Theory of Comparative Advantage," World Economic Review, World Economics Association, vol. 2013(2), pages 1-83, February.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Fast Track to Lost Jobs and Lower Wages
      by Robert E. Scott in Huffington Post Business on 2015-04-12 15:47:44
    2. Renegotiating NAFTA is putting lipstick on a pig
      by Robert E. Scott in Working Economics on 2017-08-21 20:29:10

    Citations

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    Cited by:

    1. Blecker, Robert A. & Moreno Brid, Juan Carlos & Salat, Isabel, 2017. "Trumping the NAFTA renegotiation An alternative policy framework for Mexican-United States cooperation and economic convergence," Sede Subregional de la CEPAL en México (Estudios e Investigaciones) 42579, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

    More about this item

    Keywords

    North American Free Trade Agreement (NAFTA); employment; manufacturing; US economy; Mexican economy; Canadian economy; regional economic integration;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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