A Free Trade Area with Mexico: Will U.S. Workers Lose?

The United States is immediately facing decisions on extending the current free trade area with Canada to Mexico and quite possibly to other Latin American countries. This article attempts to assess the economic basis, if any, for the objections that organized labor has raised to a free trade area with Mexico and other countries in the hemisphere. It is intended as a challenge to economists who support labor's position. Economic analyses undertaken to date conclude that a North American Free Trade Area (NAFTA) is in labor's interest generally, although not necessarily in the interests of workers in some import-sensitive industries. Labor's proponents are unconvinced, but they have failed to provide theoretical or empirical analyses that support their position. While a variety of scenarios have been considered by economists analyzing a NAFTA, the consensus on employment impact converges on an estimate of a net increase of more than 60,000 U.S. jobs. Most studies also estimate small positive impacts on U.S. total wages and substantially expanded Mexican employment.