Did NAFTA Cause a "Giant Sucking Sound"?

The North American Free Trade Agreement (NAFTA) passed Congress amidst contentious debate in 1993. Detractors argued that it would produce an exodus of jobs while proponents argued that it would create jobs. We examine the economic effects of NAFTA. The evidence indicates that while the employment effects have been small, NAFTA has caused an explosion of trade. This increase in exports and imports has multiplied gains from trade. In addition NAFTA helped Mexico recover quickly from the 1994-1995 peso crisis and provided a political anchor for Mexico's attempts to privatize, deregulate, and liberalize. The resulting growth and stability in Mexico have benefitted the U.S., which shares a 2,000 mile border with Mexico.