America Should Love Nafta For Stealthily Aiding Sales Abroad

Weak exports may mask gains of American business abroad after Nafta

A fixture of Donald Trump's stump speech is that Nafta is wrecking America's economy. But here's the thing: The two-decade-old trade agreement between the U.S., Canada and Mexico may be good for American business.

American companies are still doing brisk business abroad, just by building up sales through large foreign plants instead of the traditional model of exporting across national borders. Foreign affiliates of American companies generate annual sales of $6 trillion, including $600 billion in Canada and $200 billion in Mexico, Bank of Canada Governor Stephen Poloz said in a Sept. 26 lecture

There's more. Growing flows of intermediate goods used to make finished products suggest Nafta has led to deeper trade ties. For example, 70 percent of U.S. imports from Mexico are products such as auto parts being moved between different production sites of a single company, Poloz said. 

The former head of Canada’s trade finance bank addressed an audience at Western Washington University about an hour before Democratic nominee Hillary Clinton and her Republican challenger Trump sparred in the first presidential last week over why America was losing good jobs. It's an issue that we'll likely hear about again, and again, at the next debates on Oct. 9 and Oct. 19 in the lead-up to the Nov. 8 vote.

In Poloz's own country, where there are also fears about losing competitiveness to Mexico and China, companies earned about $390 billion in 2013 from their foreign affiliates, rivaling international exports of $438 billion.

“In effect, there is almost as large a Canadian economy operating in foreign countries as there is in the domestic export sector, creating jobs and GDP both domestically and abroad,” said Poloz.

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