The results are in. The North American Free Trade Agreement (Nafta) is working well for America. In the first half of 1994, U.S. exports to Mexico were up nearly 17% over 1993's record numbers; exports to Canada are up 10%. By comparison, on a global basis U.S. exports are projected to grow this year by 6%.

At the current rate, U.S. exports to Mexico will total almost $49 billion this year, a vast improvement over 1993. Thus, Mexico will likely replace Japan as the second largest market for U.S. goods, after Canada.

Ross Perot's "giant sucking sound" of U.S. jobs moving to Mexico hasn't materialized -- and won't. On the contrary. In this year alone, Nafta could support 100,000 new jobs in the United States. Not bad for a trade agreement.

Nafta has contributed significantly to the success that U.S. manufacturers have recently encountered in Mexico. For example, in the first five months of 1994, the U.S. automobile industry exported 12,380 passenger vehicles to Mexico, a large improvement over the 3,630 units shipped during the same period last year. In fact, Chrysler, Ford and GM are expecting to export a combined 55,000 to 60,000 cars and trucks to Mexico by the end of the year.

In the first quarter of 1994, numerous other industry exports were up considerably from the same period last year. These include:

  • Transportation equipment: Up 29.8%
  • Electrical and electronic equipment: Up 15.6%
  • Industrial machinery and computer equipment: Up 14.1%
  • Fabricated metal products: Up 31.5%
  • Rubber and plastics: Up 33.6%
  • Stone, clay and glass products: Up 34.2%
  • Printing and publishing: Up 22.9%
  • Forestry products: Up 27.9%

Manufacturing is not alone. U.S. agricultural exports to Mexico also rose tremendously. From January to June 1994, the following commodity exports showed sizable growth compared to the same period last year:

  • Corn (feed grain): Up 471%
  • Beef and veal: Up 54%
  • Pork: Up 45%
  • Poultry and poultry products: Up 28%
  • Fresh fruits: Up 78%
  • Vegetables: Up 25%

Its no surprise to see these early gains. The benefits of free trade already have been proven through a variety of pacts through out the world. In 1983, New Zealand and Australia implemented an accord liberalizing trade between them. For the three years preceding the accord, Australian exports to New Zealand grew at an average of 10% each year. After implementation, through fiscal year 1985, exports rose 18% annually. New Zealand's exports to Australia also increased as trade barriers declined.

Between 1959 - 1969, trade within the European Community, now referred to as the European Union, rose by 347%. In contrast, trade outside the bloc rose by only 130%. In this same period, U.S. global trade rose by 124%, while Canadian global trade rose by 130%.

The value of Spain’s bilateral trade with Portugal increased over 79% the first year the two joined (1986). During the first ten years of Britain’s membership in the European Community (1973 - 1983), its exports to the other member states grew by 28% per year, while its imports increased by 24%. Trade with the rest of the world during this time period went up 19% per year.

Free trade detractors cling to the false beliefs that the United States cannot compete in an increasingly competitive global economy. In an attempt to protect the United States, they suggest isolating ourselves from the rest of the world by erecting barriers to trade. They have forgotten the disastrous lessons of the past. The Smoot-Hawley Bill, signed by President Hoover on June 17, 1930, raised tariffs on imports. Our trading partners retaliated and raised their barriers on our goods. Export markets dried up. The result was a steep decline in international trade, which significantly contributed to a U.S. unemployment rate of 25% in 1930 and a severe depression.

As one becomes familiar with the global trends of the 90s, the strengths and weaknesses of the United States, and the opportunities in North America, it becomes evident that global free trade is clearly in our best interests.

The Congressional decision to ratify Nafta did not simply concern a trade agreement among the United States, Canada and Mexico. Rather, it was a decision on the direction of America, defining our perceived strengths and weaknesses, our level of confidence and courage, and a determination on how we, as a nation, will conduct ourselves in the new post-Cold War era. The world was closely watching this vote. Ratification of Nafta signaled that the United States is ready for the challenges of the Twenty-First Century. A "no" vote, however, would have been perceived as a retreat by the United States into policies of isolationism and protectionism. European and East Asian nations would have been more likely to turn inward. Most importantly, well-paying American jobs would have been lost.

A primary economic goal of the United States is to maintain a high and rising standard of living. In order to achieve this, the United States must continuously increase productivity, create high-wage jobs, successfully compete in the dynamic global economy, invest in people and in the industries of the future -- and not in the industries of the past. It's no surprise that high-technology industries dominate the list of fastest growing American industries. And it is essential that these producers have access to growing international markets. Nafta achieves this.

Industries of yesterday will perish whether or not they are insulated from international competition. Clinging to the past and its outdated methods will unequivocally lead to our demise. In order to succeed in the twenty-first century we must welcome -- not resist -- change. Nafta addresses this reality. Nafta is not part of the problem... it's part of the solution.

This article appeared in The Exporter, September 1994.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, and the latest economic trends. He's also founder of both the ManzellaReport.com and Manzella Trade Communications, Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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