Industry Trade Effects Related to NAFTA (CRS Report for Congress)
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| Release Date |
Revised Oct. 30, 2003 |
| Report Number |
RL31386 |
| Report Type |
Report |
| Authors |
M. Angeles Villarreal, Resources, Science and Industry Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
The North American Free Trade Agreement (NAFTA), signed by President George Bush on
December 17, 1992, has been in effect since January 1994. After eight years of implementation, the
full effects of NAFTA on the U.S. economy are still unclear. There are numerous indications that
NAFTA has achieved many of the trade and economic benefits that proponents claimed it would
bring, although there have been adjustment costs. However, there is not enough evidence to quantify
the impacts on specific U.S. industries. Some studies show that the agreement has had an overall
positive effect on the U.S. economy, but that some industries have experienced losses. As the United
States considers further free trade initiatives with Latin American countries, the effects of NAFTA
may provide policymakers some indication of how these initiatives might affect U.S. industries and
the overall U.S. economy.
Most of the trade effects related to NAFTA are due to changes in U.S. trade and investment
patterns with Mexico. At the time of NAFTA implementation, the U.S.-Canada Free Trade
Agreement already had been in effect for five years and some industries in the United States and
Canada were already highly integrated. Since NAFTA, the automotive, textile, and apparel
industries have experienced some of the more significant changes in trade flows, which may also
have affected U.S. employment in these industries. U.S. trade with Mexico has increased
considerably more than U.S. trade with other countries, and Mexico has become a more significant
trading partner with the United States since NAFTA implementation. Consequently, Mexico's share
of total U.S. trade has increased while that of other countries has decreased. Some data on U.S.
imports suggest that Mexico may be supplying the U.S. market with goods that may have otherwise
been supplied by Asian countries.
Not all changes in trade patterns since 1994, however, can be attributed to NAFTA because
trade was also affected by other unrelated economic factors such as economic growth in the United
States and Mexico, and currency fluctuations. Also, trade-related job gains and losses since NAFTA
may have accelerated trends that were ongoing prior to NAFTA and may not be totally attributable
to the trade agreement.
To address concerns about worker dislocations related to NAFTA, Congress included two
employment adjustment assistance programs in the implementing legislation: the NAFTA
Transitional Adjustment Assistance (NAFTA-TAA) Program and the U.S. Community Adjustment
and Investment Program (USCAIP). The NAFTA-TAA program is now part of a new consolidated
Trade Adjustment Assistance (TAA) program passed under the Trade Act of 2002 ( P.L. 107-210 ).
The NAFTA-TAA program provides assistance, such as employment services and training, to
workers who have lost their jobs because of increased import competition or by production shifts.
The USCAIP provides assistance to communities with significant job losses due to changes in trade
patterns with Canada or Mexico. While the programs have been successful in providing assistance
to communities who have had significant job losses, the overall effectiveness of the programs has
been limited. This report will be updated as events warrant.
