In 1994, the North American Free Trade Agreement was signed between the United States, Canada, and Mexico. Briefly explain why NAFTA was significant and how it has affected the United States and other countries.
What will be an ideal response?
(a) The NAFTA gradually eliminated tariff barriers between the United States, Canada, and Mexico.
(b) Trade between the United States and Mexico amounted to $583.6 billion in 2015. In that year, the value of goods and services U.S. firms sold in Mexico came to $267.2 billion (Office of the U.S. Trade Representative, 2016). Only Canada and China buy more U.S.-made goods. Although the United States-Mexico trade has cost some U.S. jobs, it has also stimulated the expansion of others.
(c) Assessing the impact of NAFTA on employment in the United States poses several methodological problems, but the consensus among economists is that the overall effects have been modest. Some studies show no net effect, while others indicate a net gain of a bit under a million U.S. jobs (O'Neil, 2013, p. 96).
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