Donald Trump off target in rejecting NAFTA

MONTREAL, July 14, 2016 /PRNewswire/ - The Republican candidate for the presidency of the United States, Donald Trump, has repeatedly tried to convince the American population of the need to renegotiate, or even to withdraw from, the North American Free Trade Agreement (NAFTA). Yet as reiterated in a Viewpoint published today by the Montreal Economic Institute (MEI), an influential Canadian free-market think tank, this deal has had numerous benefits for the United States, Canada, and Mexico.

Indeed, since the entry into force of NAFTA in 1994, productivity has increased across North America. Customs duties reductions led to increases in trade with the other two countries of 11% in Canada, 41% in the United States, and 118% in Mexico, for the period between 1993 and 2011.

American trade with Canada and Mexico increased from US$481 billion in 1993 to over US$1.1 trillion in 2015.

"There is no doubt that the liberalisation of trade leads to lasting benefits. A very large majority of economists agree on this point," says Mathieu Bédard, author of the publication and Economist at the MEI. "Countries that open up their borders to trade experience sustainable growth and prosperity."

While Donald Trump claims that Americans "don't make anything anymore," implying that NAFTA is to blame, the American manufacturing sector has increased production by 58% since the deal came into effect.

Nor has Mexico been left behind, NAFTA having contributed to the overall performance of its economy. Among other things, the agreement reduced the price of many consumption goods by half in just a few years, which has helped improve the still precarious living conditions of many Mexicans. The World Bank estimated in 2004 that NAFTA had lifted 3 million Mexicans above the poverty line.

"It is surprising to see a certain segment of the left agree with Donald Trump on the issue of free trade, whereas its positive effects in terms of reducing global poverty are obvious," points out the economist.

"NAFTA is a success, and if Donald Trump wants to renegotiate this agreement to obtain 'a better deal' for the United States, he will instead have to make sure to liberalize trade even further," he concludes.

The Viewpoint entitled "NAFTA: Donald Trump's Criticisms Are Unfounded" was prepared by Mathieu Bédard, Economist at the MEI. This publication is available on our website.

The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

SOURCE Montreal Economic Institute