Outside In | The Canada-US trade negotiation deadline has been blown, so what’s next in this high-stakes stand-off?
Negotiations between Canada and the US on how to update the 24 year old Nafta trade accord will resume Wednesday, but it is not clear that the two sides are on track for a deal, writes David Dodwell
Does anyone remember Ross Perot, the Texan billionaire who, while running for President on an independent ticket in 1992, predicted “a giant sucking sound of jobs going south” if the North American Free Trade Agreement (Nafta) came into force?
Two years later, Nafta was signed, radically reducing tariffs between the US, Mexico and Canada. Ross Perot did not become US President. And 26 years later, who heard the sucking sound? Best academic estimates suggest a net 120,000 manufacturing jobs were lost to the US economy – about 0.1 per cent of US jobs. But Nafta trade amounts to US$1.2 trillion, and accounts for an estimated 14 million US jobs.
In a 2015 report, the US Congressional Research Service summarised multiple studies on Nafta: “In reality, Nafta did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters. The net overall effect of Nafta on the US economy appears to have been relatively modest.”
Brad DeLong, economics professor at Berkeley was more specific in a 2017 paper: “The North American auto industry reacted to Nafta by rationalising itself – moving those parts of it that could be effectively performed by relatively low-skill workers to Mexico, and thus gaining a cost advantage vis-à-vis European and Japanese producers.
“In the context of all the forces and disruptions affecting the US economy and the US distribution of income and wealth over the past half-century, Nafta was and is simply not a very big deal.”