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Debunking USTR’s Absurd Assertion that the U.S. Has a Trade Surplus with NAFTA Countries

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The office of the U.S. Trade Representative (USTR) has begun claiming that the United States has a trade surplus with its North American Free Trade Agreement (NAFTA) partners Mexico and Canada.

The official U.S. government trade data provided by the U.S. International Trade Commission (USITC) show that, in fact, the 2013 U.S. goods trade balance with the NAFTA countries was a deficit of $177.2 billion. The combined U.S. goods and services trade deficit with Mexico and Canada rose (in real, inflationadjusted terms) from $9.7 billion in 1993 to $132.3 billion in 2013. This NAFTA deficit increase of $122.5 billion, or 1258 percent, represents hundreds of thousands of lost U.S. jobs.

This is the opposite of the outcome promised by NAFTA supporters, who claimed NAFTA would create U.S. jobs by improving what was a relatively small pre-NAFTA combined deficit with Mexico and Canada. Now many NAFTA boosters say that one cannot measure the outcomes of NAFTA according to the trade balance. However, the premise that NAFTA would improve our trade balance was the bedrock
basis for NAFTA proponents’ job-gain predictions. Many of the same government and industry sources made the same claims to sell the 2011 U.S.-Korea Free Trade Agreement (FTA). But in the pact’s first two years, average annual U.S. goods exports to Korea dropped 5 percent below the pre-FTA level, while imports rose, causing the U.S. trade deficit with Korea to swell 50 percent.

USTR and other NAFTA defenders often try to dismiss the NAFTA deficit by claiming that it mainly represents trade in oil and other fossil fuels. First, the share of the U.S. NAFTA goods trade deficit that is comprised of fossil fuels (oil, gas and coal) has declined under NAFTA, from 82 percent in 1993 to 54 percent in 2013, as we have faced a surge of imported manufactured and agricultural goods.

Second, even if one removes all of these fossil fuel categories from the balance, the remaining 2013 NAFTA goods trade deficit was $80.9 billion. The combined NAFTA goods and services deficit in 2013 minus fossil fuels was $36 billion. So, on what basis is USTR making such a peculiar claim of a NAFTA trade surplus?