Free Trade

Report: NAFTA Boosted Pay Across North America

So isn't it nice Obama never got around to scuttling the trade agreement?

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It's easy to forget that in 2008, Barack Obama ran on a pledge to renegotiate the North American Free Trade Agreement (NAFTA), which effectively eliminated tariffs and sharply reduced other trade barriers between the United States, Canada and Mexico.

That idea was scuttled pretty quickly, with future CEA chair Austan Goolsbee reportedly disavowing the pledge in talks with Canadian officials during the campaign, and by April of 2009, the U.S. trade representative, Ron Kirk, was telling reporters it wasn't going to happen. And a new study suggests that might be just as well.

Economists Lorenzo Caliendo of Yale and Fernando Parro of  the Federal Reserve built a trade model to analyze how the agreement changed the level of trade between the three countries and their residents' welfare levels. They find that the effects of NAFTA dwarf those of any other agreement, with greater effects than all other tariff reductions undertaken by the three countries put together.