Since 1996, employment and manufacturing output have largely recovered in Canada. This indicates that some of the lost jobs and production have been re-grated into high-end manufacturing. What is positive is that tariff reductions have increased labour productivity (the amount of production produced per hour worked) by an increased annual rate of 2.1% for the most affected sectors and 0.6% for the manufacturing industry as a whole, Trefler estimates. Tariff reductions have increased “total factor productivity,” a measure that takes both capital and labour into account, an increased annual rate of 1% for the most affected industries and 0.2% for manufacturing as a whole. Trefler`s figures are due to a mix of plant sales (closures, openings, acquisitions) and increasing technical efficiency within the facilities. This is not because the facilities are larger or the market share is transferred to companies with already high productivity. In 1994, with the North American Free Trade Agreement (NAFTA), the United States, Mexico and Canada created the world`s largest free trade region that generated economic growth and helped improve the standard of living of people in the three member countries. By strengthening trade and investment rules, this agreement has proven to be a solid foundation for building Canada`s prosperity and has provided a valuable example of the benefits of trade liberalization for the rest of the world. The new Canada-U.S.-Mexico agreement will strengthen Canada`s strong economic ties with the United States and Mexico. “Current debates on free trade cannot be understood without understanding this conflict” between the costs and benefits of trade liberalization, notes Daniel Trefler in The Long and Short of the Canada-US Free Trade Agreement (NBER Working Paper No. 8293). “This paper,” he writes, “does not provide the sphere of money that stands for or against free trade.” The central principle of the international economy is that free trade improves economic well-being.
But the fact is that we have only one time to let the general public know, to an audience that is caught up in the weariness of free trade. Estva, he writes, offers a unique window into the impact of trade liberalization, as it is an exceptionally clean trade measure, which is not grouped into a broader set of national economic policies or market reforms. The highly organized opposition to NAFTA has focused on the fear that the removal of trade barriers will encourage U.S. companies to get carried away and settle in Mexico to use cheap labour. This concern increased in the early years of the 2000s, when the economy experienced a recession and the subsequent recovery turned out to be a “recovery in unemployment”. Opposition to NAFTA was also strong among environmental groups, who said that the anti-pollution elements in the treaty were woefully inadequate.