The North American Free Trade Agreement did not play a prominent role in the recent election campaign, especially in view of the Democratic presidential primaries four years ago. Yet NAFTA did take some licks, arguments hurled about lost jobs and declining incomes.
No question, trade can be disruptive, even painful, though just one factor in a complex economy. The telling measure is whether the agreement boosts the economy overall. That long has been the rule for expanded trade, and now comes a study from the National Bureau of Economic Research, by Lorenzo Caliendo of Yale and Fernando Parro of the Federal Reserve (http://www.nber.org/papers/w18508), shedding light on how NAFTA fits the productive pattern.
As expected, the trade agreement worked to increase considerably trade among the three parties, Canada, Mexico and the United States, all enjoying significant increases in exports. What happened to wages? The study finds that all three have benefited from increases, albeit slight. Wages climbed 0.17 percent in this country, 0.96 percent in Canada and 1.3 percent in Mexico.
The higher result in Mexico reflects more than anything the greater role its partners play in its economy. Whatever the variations, the report reveals that the trade agreement hardly has been detrimental overall. That is how expanded trade works, neither the boon some proponents claim nor the curse described by critics. All three countries have come out ahead.