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The Flows From Nafta Won't Be Causing Any Floods


Readers Report

THE FLOWS FROM NAFTA WON'T BE CAUSING ANY FLOODS

My study assumes--not predicts, as stated in the commentary, "An anti-NAFTA argument you haven't heard" (Top of the News, Nov. 8)--that a portion of the flow of investment to Mexico from the U.S. stemming from NAFTA would reduce capital spending in the U.S. But the $2.5 billion-per-year figure cited leaves out two offsetting flows: an increase in investments into the U.S. from the rest of the world and higher savings out of profits made in Mexico. We can argue about the strength of these effects: While most mainstream modelers say they immediately offset the outflow, my work has it only being offset after five to seven years. Thus the debate among economists is: Will there be a small, transitory reduction in U.S. investment, or none at all--hardly the $12.5 billion reduction after five years that you suggest.

Some concerns about NAFTA are understandable. But to turn one's back on a way to manage the growing economic interdependence in North America because of a misplaced fear that American workers cannot compete is, dare I say, "Perotchial."

Robert McCleery

Kobe University

Kobe, Japan


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