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Good Neighbors

Author: Shannon K. O'Neil, Senior Fellow for Latin America Studies
February 18, 2014
ForeignPolicy.com

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On Feb. 19, President Obama heads to Mexico to meet with President Enrique Peña Nieto and Canadian Prime Minister Stephen Harper at the North American Leaders' Summit. The three leaders will undoubtedly look back at the last 20 years, recognizing the mostly positive changes that the North American Free Trade Agreement (NAFTA) and other cross-border ties have brought to the three nations. But the more important element of the meeting is a question: Will the leaders look forward in a serious way, setting the neighborhood agenda for the next 20 years and grabbing the opportunity to promote a truly North American future?

The most fundamental building block of that future is and will continue to be trade. Today, each of these nations is among the others' largest trading partners, with intra-regional trade reaching more than $1 trillion a year. Some 14 million U.S. jobs depend on its neighbors -- 5 million more than in pre-NAFTA days. These jobs pay, on average, some 18 percent more than those catering to just U.S. consumers -- what economists call the "nontradeable" sectors, according to a Department of Commerce study. This and other international trade have also benefited American households through the wider variety of goods available at lower prices.

To be sure, some jobs have left. But studies show that even more have been created, and that these jobs have come precisely from those companies that embrace global production. A study by Harvard Business School and University of Michigan professors, using confidential data collected by the commerce department, estimates that, for every 10 jobs that multinationals create abroad, they create on average two new jobs in America.

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