Nafta May Have Saved Many Autoworkers’ Jobs

The North American Free Trade Agreement, in effect for more than two decades, likely saved the US auto industry. “Even in the narrowest sense – to protect jobs in car assembly plants – a wall of tariffs against America’s southern neighbor would probably do more harm than good,” suggests Eduardo Porter for the New York Times based on research by Gordon Hanson, an economist at the University of California, San Diego. Blaming NAFTA is over-simplification and overlooks multiple factors: devaluation of the peso that increased Mexican exports, reduced subsidies for agriculture, demographic imbalances and technological advancements. “In the final analysis, Nafta might have saved hundreds of thousands of jobs,” Porter concludes, explaining how auto assemblers in Mexico rely on US parts and suppliers. “By offering a low-wage platform, Mexican plants increased the scale of production in North America, allowing domestic and foreign automakers to amortize their large fixed costs.” Regional integration gives the Americas a competitive edge against Asia’s industries with low labor costs. – YaleGlobal