When NAFTA was ratified in 1994, we studied the issue and concluded it would benefit Wisconsin. Five years later, we examine our hypothesis and discover that NAFTA works.
This report examines the five-year effect of NAFTA on Wisconsin. The trade agreement went into effect on January 1, 1994. After five years of fairly consistent trade data, we can now make some definitive claims about the trade accord, particularly its effect on state exports to Canada and Mexico as well as its impact on specific industrial sectors. A number of companies throughout Wisconsin have clearly benefited from the agreement, increasing revenues as a result of heightened business activity due to NAFTA. As demonstrated by data, the vast majority of state industries have witnessed increases in exports to Canada and Mexico since the trade agreement’s implementation. Some of these increases have been slight, whereas others have jumped dramatically.
Of course, opening up trade brings both winners and losers. Free trade tends to bring benefits to industries of comparative advantage and create losses for industries of comparative disadvantage. The hope is that in the end the “winners” will outweigh the “losers,” creating an overall positive situation, or net gain, for the economy as a whole. As this report aims to show, the NAFTA winners in Wisconsin do, in fact, appear to be far outweighing the NAFTA losers. The report acknowledges the losers as well. It also notes that the losers’ claims of injury by NAFTA are not always supported by evidence. This was found to be true even for some of those companies who were certified by the government as officially “injured” either by NAFTA or “foreign competition.”
The first section of this report provides background on NAFTA, followed by a brief description of recent studies on NAFTA’s national and local effect. Following that, the report analyzes the five-year effect of NAFTA on Wisconsin. It does this by employing two primary methods of measurement. First, it examines, statistically and anecdotally, the accord’s positive and negative effect on companies and workers. The “negative” information is taken from Department of Labor statistics (both state and federal) tracking those claiming injury from the agreement, as well as interviews by the author with companies impacted by the trade accord. Second, it uses state export data showing which industries experienced rises or drops in exports to Canada and Mexico since NAFTA’s implementation, as well as the overall export numbers for Wisconsin as a whole. These state-level export data are non-anecdotal, straight for- ward, and comprehensive.