Republican senator from Arizona cites growth in U.S.-Mexico trade after NAFTA

President Donald Trump has been consistent in criticizing NAFTA -- the North American Free Trade Agreement -- as being a bad deal for America. But not everyone in his own party agrees.

Sen. Jeff Flake, R-Ariz., has delivered a series of strong statements in support of the trade pact between the United States, Mexico and Canada. In a speech on the floor of the U.S. Senate, Flake said NAFTA’s economic benefits can’t be ignored, adding that in 2016 Arizona’s trade with Mexico exceeded $15 billion.

"Trade deals like NAFTA make inputs for U.S. manufacturing cheaper than they would otherwise be," Flake said April 27. "Cheaper inputs mean lower production costs for U.S.-based businesses, which in turn allows these companies to expand production and reduce prices."

And while NAFTA could be modernized, it has helped both the United States and Mexico, Flake said.

Flake shared similar thoughts on Twitter: "Before NAFTA, trade between the US and Mexico was around $50 billion. Now it stands at more than $500 billion. What's not to like?"

We wondered if Flake’s numbers were correct and how much of that growth can be attributed to NAFTA, as his message suggested. We found that his data is largely accurate, but experts say NAFTA does not deserve all of the credit for the trade increase.

Trade before and after NAFTA

Trump consistently has criticized NAFTA, saying that the United States has not been treated fairly by trade partners Canada and Mexico. He has promised to renegotiate the agreement to better suit the United States.

NAFTA initially was negotiated by Republican President George H.W. Bush, who agreed to the trade pact in December 1992 about a month before leaving office. It was then up to Democratic President Bill Clinton to round up support and get it passed through Congress. Clinton signed the bill implementing NAFTA in December 1993.

NAFTA went into effect Jan. 1, 1994.

Flake’s statement that trade between Mexico and the United States was around $50 billion before NAFTA stems from Census data, his press office said.

We found that in 1993, the year before NAFTA became effective, there was a trade flow of about $81.5 billion in goods with Mexico (exports $41.6 billion, imports $39.9 billion).

That’s a little higher than Flake said. Flake’s office said that he looked at data around 1988-1989, "using a general time frame" before and after NAFTA to make the comparison.

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In 1988, trade between the United States and Mexico totaled about $43.9 billion. In 1989, it was $52.1 billion.

The other figure in the Arizona senator’s claim said trade between the two nations now stands at more than $500 billion. That checks out. In 2016, trade was about $525 billion (exports $231 billion, imports $294 billion).

NAFTA’s impact

Flake hinted that growth in trade was linked to NAFTA. His office did not respond to requests to elaborate on this point.

Economists and trade experts told us that while NAFTA can be attributed for some of the increase, there are other factors at play, such as inflation and GDP growth. And there is a lot of debate on NAFTA’s overall economic impact and on the number of jobs that as a result of it have been lost or created.

Most of the increase in trade volume between Mexico and the United States is due to NAFTA, said Gerardo Esquivel Hernandez, an economist and professor at El Colegio de Mexico. But part of the dollar increase is also explained by increases in prices and economic activity in both the United States and Mexico, he said.

NAFTA facilitated U.S.-Mexico trade growth by lowering tariffs, creating a framework to protect foreign investment, and essentially locking in a series of market-oriented reforms that Mexico made in the 1980s and early 1990s, said Christopher Wilson, deputy director of the Mexico Institute at the Wilson Center.

"For nearly 25 years, NAFTA has been the foundation upon which massive trade growth has occurred," Wilson said.

But other factors have also contributed, he said.

"The most important are geography and growth of the U.S. and Mexican economies," Wilson said. "Unless significant policy barriers prevent it, the most natural thing is for trade to grow between neighboring countries that are each experiencing GDP growth."

The trade balance is also worth highlighting as it "has a much more direct impact on the economy than the total volume of trade," said Robert Scott, a senior economist and director of trade and manufacturing policy research at the left-leaning Economic Policy Institute.

Scott said that for about a decade before NAFTA, the United States had a "roughly balanced" trade with Mexico. But it has turned into a deficit after NAFTA, reaching $63.2 billion in 2016.

Our ruling

Flake tweeted, "Before NAFTA, trade between the US and Mexico was around $50 billion. Now it stands at more than $500 billion."

Flake is close on the numbers. NAFTA went into effect in 1994. The year before that, trade between the United States and Mexico was about $81.5 billion, according to Census figures. Flake’s office said he looked at other years, 1988 and 1989, in which trade was closer to $50 billion. Data for 2016 show about $525 billion in trade between the two countries.

Economists and trade experts told us that NAFTA has played an important role in trade growth, but several other factors must also be taken into consideration.

With those caveats, we rate this claim Mostly True.

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2017-04-28 18:05:55 UTC

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Mostly True

"Before NAFTA, trade between the US and Mexico was around $50 billion. Now it stands at more than $500 billion."

Jeff Flake

Senator

in a tweet

Thursday, April 27, 2017

2017-04-27

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