Critics claim that the North American Free Trade Agreement (NAFTA) hurt American workers. But apparently NAFTA raised U.S. wages, according to a new study.
Wages, when adjusted for inflation, rose as a result of NAFTA in the countries that signed the free-trade agreement -- the United States, Mexico, and Canada -- according to a new paper by Yale economist Lorenzo Caliendo and Federal Reserve economist Fernando Parro. NAFTA, a free trade agreement between Mexico, Canada and the U.S. inked in 1993, boosted trade between the three countries, tearing trade down barriers such as tariffs.
The deal pushed and signed by President Bill Clinton didn't come without controversy. The House and Senate passed NAFTA by close margins. Some labor leaders vocally opposed NAFTA because they worried the treaty would cost the U.S. jobs.
Despite the ruckus, the agreement seems to have done some good, according to the study. Between 1993 and 2005, NAFTA raised inflation-adjusted wages by 0.17 percent in the United States, by 0.96 percent in Canada, and by 1.30 percent in Mexico.
These findings are supported by economic theory, which posits that countries that trade with one another end up better off by specializing in what they do best.
But the case for NAFTA isn't settled. A recent report by the left-leaning Economic Policy Institute found that the treaty has cost the U.S. jobs. The U.S.' trade deficit with Mexico has cost the U.S. nearly 700,000 jobs as of 2010, according to the report.
(Hat tip: The Washington Post's Dylan Matthews.)