Mainstream studies of the North American Free Trade Agreement (NAFTA) conclude that this agreement will benefit the typical resident of Canada, Mexico and the U.S. This paper argues that these optimistic conclusions depend critically upon dubious assumptions about NAFTA's effects on international investment flows - assumptions that ensure the conclusion that U.S. workers will not be hurt by a relocation of productive capital. NAFTA is in fact likely to have a considerable impact on direct foreign investment flows, and so the failure to specify the investment process adequately leads to a serious misassessment of NAFTA's effects.
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