Three’s a Crowd in NAFTA: Canada

Brad Delong, one of the creators of NAFTA is busy defending the failed agreement, basically defending Mexican economic growth. However, he never once mentions Canada, which signed onto the agreement.

And I only say “failed” because NAFTA has been great for Mexico only; albeit only about $2000 U.S. in GDP per capita over the course of 20 years. NAFTA was also supposed to increase trade between the U.S. and Canada. How’s that look?

US canada nafta

This is the same chart that Delong uses, only with Canada in the mix. There is no discernible difference in trade between the U.S. and Canada before or after NAFTA – using Delong’s measures.

Delong says that labor wasn’t the real issue. Then why didn’t boatloads of U.S. companies move manufacturing to Canada, especially given the exchange rate on the Loonie? I suspect it has something to do with the “variable” cost of labor, and that Canada has much stronger labor laws than the U.S. (along with higher unionization rates).

NAFTA failed not just because of labor loss in the U.S., or because just Mexico has benefited. I say NAFTA failed because it was supposed to raise the economic tide for everyone; Mexico, Canada and the U.S. And (what’s worse) is that it was supposed to do so by removing regulatory barriers for U.S. based companies.

If Delong was as concerned with the U.S. economy as he seems to be with the Mexican economy, there might actually be a trade deal that benefited everyone; including Canada.

This entry was posted in Labor, Macroeconomics, Public Policy. Bookmark the permalink.

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