Not So Fast On NAFTA

Last Updated Apr 1, 2008 9:42 AM EDT

When the North American Free Trade Agreement was signed by President Bill Clinton in 1993, it was seen by some as a landmark document promoting free and equal trade between three powerful neighbors: the United States, Mexico, and Canada.

Today, NAFTA seems to have become a symbol for all that's wrong with international trade, epitomized by the siphoning off of Americans jobs to other countries. Democrat presidential hopefuls Hillary Clinton and Barack Obama both call for significant renegotiations of the treaty to more heavily favor US interests.

NAFTA is a major issue for any business that does business with, competes against, or hires workers from these countries, so everyone involved in commerce needs to ask, has NAFTA really been all that bad?

In the opinion of Harvard University's Robert Lawrence, an expert in international trade and finance, NAFTA has not only been a plus for the countries involved but has probably helped the US ward off worse economic woes. Says Lawrence:

In fact, trade's role in America's current economic difficulties is deeply misunderstood. While the candidates keep talking about jobs going overseas, the irony is that over the past year, trade is helping to stave off the recession. Since early 2007, the US trade deficit has actually narrowed by $50bn as exports have increased more rapidly than imports.
In a recent op-ed originally published in The Guardian Unlimited, Lawrence writes that while some tinkering to the treaty is advisable, a major reopening of its terms would show other trade partners that the US does not stand by its agreements. The US economy needs needs to mend relations with allies, not create more turmoil, he says.

Has NAFTA helped or hindered your business? What would you do with the agreement?

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.