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An Anti Nafta Argument You Haven't Heard

For months, a media juggernaut has rolled over anyone who challenged the North American Free Trade Agreement (NAFTA). That's because economists have won the day by repeating their graduate school lessons like a mantra: History shows that free trade is good, so NAFTA will benefit the U.S. economy. Those who say otherwise are dismissed as ignorant or irresponsible.

But the argument overlooks the treaty's biggest impact, which won't be on trade but on investment, mainly by U.S. companies in Mexico. Most studies rely on the 19th century theory of free trade, which assumes capital doesn't cross borders. Result: The studies miss the drain of U.S. investment dollars--which began several years ago in anticipation of the pact's becoming law.