This year marks the twentieth anniversary of the North American Free Trade Agreement (NAFTA) signed in 1993. This agreement extended the earlier liberalization of trade between the U.S. and Canada to include Mexico. At the time, opponents feared that there would be an enormous “sucking sound” as jobs were pulled from America to our neighbor to the South.
In truth, while some industries have been disrupted, such as cut flowers, the treaty has been a positive economic game changer. It has set the standard for other U.S. free trade agreements.
NAFTA’s provisions breaking down barriers to the flow of goods, services, and capital between the U.S. and Mexico, while also protecting intellectual property rights, have given a particular boost to border cities, such as San Diego and Tijuana. Employment has expanded in manufacturing, transportation, health care, retailing, and various business services. Enhanced competition has raised productivity and wages. Investment funds are flowing in both directions across the border. Consumers have more choice and more lower priced goods.
NAFTA is not a panacea as we still need to address immigration, border infrastructure, and drug-related violence, but it has been a major step forward.