The Benefits of NAFTA on U.S. Trade

Americans export and import over $3.8 trillion of products a year with their trading partners around the world. The positive economic benefits of trading are well documented in every industry. Consumers have more choices at lower prices while producers are able to specialize on their comparative advantages to make products better and cheaper. Low prices mean low inflation which translates in accommodative monetary policy. With low interest rates, consumers and businesses are able to borrow at lower costs. Overall, open trade promotes economic growth.

 The North American Free Trade Agreement (NAFTA), a trilateral trade bloc, is no exception. U.S. exports to Canada and Mexico accounted for 33% of U.S. total exports (averaging nearly $517 billion a year) while U.S. imports from Canada and Mexico accounted for 27% of U.S. total imports (averaging over $606 billion a year). NAFTA provides American consumers with more choices at lower prices as Americans export and import goods of the same industry. For example, the U.S. motor vehicle industry is among the top five export industries to Canada and Mexico and is also among the top five import industries from Canada and Mexico, accounting for 42% of U.S. total motor vehicle exports and 49% of U.S. total motor vehicle imports, respectively. The motor vehicle part industry and oil and gas industry are examples of producers specializing in their comparative advantages along the supply chain within NAFTA. Americans export auto parts and import auto vehicles from Canada and Mexico (77% of U.S. total exports of auto parts); similarly, Americans import raw oil and gas and export petroleum and coal products to Canada and Mexico (30% of U.S. exports of total petroleum and coal products).

 The trading patterns confirm NAFTA benefits both American consumers and producers. NAFTA is vital to the U.S. economy and American consumers. NAFTA drives U.S. trade and economic growth.

Nam Pham is Managing Partner at ndp | analytics.