NAFTA turns 20 years old

As the North American Free Trade Agreement (NAFTA) turned 20 this month, the effects of the agreement appear to still be strong. October 2013 saw the first month on record where U.S. trade with Canada and Mexico topped $100bn. October also saw a record high of the total value of cargo moved by surface transportation modes (truck, rail, and pipeline) between the three NAFTA countries, as it climbed to an all-time high $85.4bn for the month. Pipeline transport between the U.S. and Canada also saw strong growth at 23.7% year-over-year.

Trucking continues to be the dominant mode of transportation for U.S. trade with both Canada and Mexico accounting for more than half of the value transported between the U.S. and its neighbors. However, the cross-border trucking has been a point of contention recently, particularly with Mexico. It was not until 2011 that Mexican truckers were first allowed to cross into the United States, and that was done under the regulations of a three-year pilot program. Many Mexican truck companies did not even sign up for the program due to the rigorous checks required and out of speculation that the program might end after its trial period. It is unclear how Mexican truckers will fare in the coming year should the program end.

NAFTA has not been without its opponents throughout its tenure. While it has increased trade among the three major North American countries, critics have cited the loss of jobs to other countries and a lack of investment in overseas communities. Even the transportation realm has seen negative effects – a 2008 study by the Federal Highway Administration found that NAFTA has caused increases in traffic congestion in key areas.

However, while the benefits of NAFTA have not been as far-reaching as proponents originally anticipated, and consequences of NAFTA may remain controversial in the political arena as the issues of employment and expectation arise, it seems that the three North American countries are now bound by the agreement. Each country can list the other two nations as a top ten trading partner, and some will also argue that a more unified North America will help combat the rise of China in the economic realm. NAFTA has clearly had a benefit on the growth of the North American region when it comes to trade, but as we reflect on its 20th anniversary, continued growth will be even more crucial.

(For additional information on monthly NAFTA trade, please see Ti Dashboard charts, Trade: NAFTA Surface Exports and Trade: NAFTA Surface Imports)