Nafta 20 Years After: Neither Miracle nor Disaster

Bill Clinton made the North American Free Trade Agreement a cornerstone of his 1992 presidential campaign, saying it would help level the playing field for U.S. businesses trying to sell their products abroad. Candidate Ross Perot predicted Nafta would result in “a giant sucking sound going south”—the sound of American manufacturing jobs and factories being funneled into Mexico.

Nafta went into effect on Jan. 1, 1994, which now gives us 20 years’ worth of data on economic growth, trade volume, and employment to figure out who was right. The bottom line? Nafta has been neither as good as Clinton promised nor as bad as Perot warned.

Let’s start with the most basic measure of economic growth: gross domestic product. Since 1993, the year before Nafta was enacted, U.S. GDP has grown about 63 percent, while Canadian and Mexican GDP have grown 66 percent and 65 percent, respectively, according to data compiled by the Organization for Economic Cooperation and Development. Those tightly clustered growth rates are significantly better than the industrialized nations of the Organization for Economic Cooperation and Development as a whole; their composite GDP has grown about 53 percent since Nafta.