Mike Walden: Impact of NAFTA’s Termination

 

Today’s program looks at the economic impact of a possible termination of NAFTA.  Mike, NAFTA, which stands for the North American Free Trade Agreement, is currently being renegotiated by the treaty’s partners – the United States, Mexico, and Canada.  If agreement on a revised treaty can’t be made, it is possible the treaty will be ended.  What would be the economic impact of NAFTA’s demise on North Carolina?

Mike:  Summary Answer

  1. Most economists agree NAFTA, and the later treaty GATT, contributed to the downsizing of one of largest employers – at one time – in the state: textiles and apparel
  2. In particular, apparel jobs – which were labor intensive – went to countries with lower cost labor
  3. But the economies of the three countries have changed since 1994
  4. NC has a large vehicle parts industry – and many of the parts are sent to Mexico for assembly – so this industry would be hurt by NAFTA’s end
  5. Ironically, so would textiles – the production of raw fiber – NC textiles are exported to Mexico for production into clothing – so our textile industry would be hurt
  6. Other losers – livestock and food production
  7. Winners – electronics, chemicals, and machinery
  8. So mixed bag – total impact on NC economy slight: less than 1% of GDP