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NAFTA Advocates Continue to Make Misleading Claims

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A protestor at Peace Arch Park opposes the U.S.-led Trans Pacific Partnership agreement (TPP), which has been called "NAFTA on steroids." (Photo: flickr/cc/Caelie_Frampton)  

In an effort to defend NAFTA and promote similar agreements, the Peterson Institute for International Economics (PIIE) - Washington's most influential think tank on international economic policy - had a full day of events yesterday. The program highlighted one of their recent publications [pdf], which seeks "not to rehash old claims that may have been overstated but to clear the air so that the benefits and challenges of trade can be examined in an objective light." In spite of this disclaimer, the authors grossly overstated the benefits of NAFTA for Mexico, and put forward a number of misleading claims, including a particularly egregious bait-and-switch used to justify a rant against the economic policies of the "Andean-3" aka Bolivia, Ecuador and Venezuela. It is a good example of how ideology can trump facts when it comes to commercial agreements made in Washington.

Earlier this year, CEPR published a paper giving an overview of the Mexican economy in the NAFTA era ("Did NAFTA Help Mexico? An Assessment After 20 Years"), so I will focus here on the claims made about Mexico by the PIIE economists. In terms of their bottom line for Mexico, the authors' findings concur with our conclusions. They say that "Mexican growth in the NAFTA era has been disappointing." But they also argue that without NAFTA Mexico's economy would be $170 billion smaller. In other words, they attribute half of Mexico's (per capita) growth rate to trade in goods and services stimulated by NAFTA (see table below.) Given Mexico's population (about 118 million), this amounts to a payoff of $1,441 per person, or about $4 per day. In a country where over 27 percent of the population lives on less than $4 a day - in rural areas it is over 48 percent of the population - this would be very significant. In reality, results such as these are produced by economic models that are highly sensitive to parameters which the researchers themselves determine, so it is easy to end up with results that corroborate one's worldview.  


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