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Abstract

The United States is immediately facing decisions on extending the current free trade area with Canada to Mexico and quite possibly to other Latin American countries. This article attempts to assess the economic basis, if any, for the objections that organized labor has raised to a free trade area with Mexico and other countries in the hemisphere. It is intended as a challenge to economists who support labor's position. Economic analyses undertaken to date conclude that a North American Free Trade Area (NAFTA) is in labor's interest generally, although not necessarily in the interests of workers in some import-sensitive industries. Labor's proponents are unconvinced, but they have failed to provide theoretical or empirical analyses that support their position. While a variety of scenarios have been considered by economists analyzing a NAFTA, the consensus on employment impact converges on an estimate of a net increase of more than 60,000 U.S. jobs. Most studies also estimate small positive impacts on U.S. total wages and substantially expanded Mexican employment.

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References

1. Free Trade between Mexico and the United States? (Washington, DC: Brookings Institution, 1984), p. 27.

2. KPMG Peat Marwick, Economic Policy Group , “The Effects of a Free Trade Agreement between the U.S. and Mexico” (Executive summary, 1991), p. 6.

3. Ibid.

4. U.S., Department of Labor, Bureau of Labor Statistics , International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing, 1975-1989, Report 794, Oct. 1990, p. 8.

with particular emphasis on the discussion of “created comparative advantage.” See also Miyohei Shinohara , Industrial Growth, Trade and Dynamic Patterns in the Japanese Economy (Tokyo: University of Tokyo Press, 1982), pp. 24-26.

6. George Borjas , Richard Freeman , and Lawrence Katz , “On the Labor Market Effects of Immigration and Trade” (NBER Working Paper no. 3761, National Bureau of Economic Research, 1991).

7. American Federation of Labor and Congress of Industrial Organizations , The Pocketbook Issues: AFL-CIO Policy Recommendations for 1992 (Washington, DC: American Federation of Labor and Congress of Industrial Organizations, 1992), pp. 25-26.

8. Ibid., p. 26.

9. The advantages of adopting the Canadian model for a NAFTA are discussed in Joseph A. Greenwald , “Dispute Settlement in a North American Free Trade Agreement,” this issue of The Annals of the American Academy of Political and Social Science.

10.

10. American Federation of Labor and Congress of Industrial Organizations , “Pocketbook Issues,” p. 25.

11.

See also U.S., International Trade Commission , The Use and Economic Impact of TSUS Items 806.30 and 807.00, (U.S. International Trade Commission Publication 2053, 1988), tabs. 7-19.

12.

12. Ibid., p. 32.

13.

Raul Hinojosa-Ojeda and Sherman Robinson , “Alternative Scenarios of U.S.-Mexico Integration: A Computable General Equilibrium Approach” (Manuscript, Division of Agricultural and Resource Economics, University of California, Berkeley, 1991).

14.

14. Refik Erzan and Alexander Yeats , “Free Trade Agreements with the United States: What's in It for Latin America?” WPS 827 (Policy Research Working Papers, World Bank, Jan. 1992).

15.

15. Gary Clyde Hufbauer and Jeffrey J. Schott , North American Free Trade: Issues and Recommendations (Washington, DC: Institute for International Economics, 1992), chap. 3, esp. pp. 51ff.

16.

16. Ibid., p. 55.

17.

17. Clyde V. Prestowitz, Jr. , and Robert B. Cohen , The New North American Order: A Win-Win Strategy for US-Mexican Trade (Washington, DC: Economic Strategy Institute and University Press of America, 1991).

A Free Trade Area with Mexico: Will U.S. Workers Lose?

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