New U.S. study shows some positive effects from free trade deals

By David Lawder

WASHINGTON (Reuters) – U.S. free trade agreements since 1984 have had an overall positive effect on trade balances, reducing U.S. trade deficits or boosting surpluses with partner countries by $87.5 billion in 2015, a new government study showed on Wednesday.

The study by the U.S. International Trade Commission at the request of Congress found that the trade deals, including the controversial North American Free Trade Agreement (NAFTA) and pacts with Central American countries and South Korea, boosted net U.S. employment by 159,300 jobs in 2012 over levels that would have occurred without them.

They caused real wages to be slightly higher, by 0.3 percent, that same year. The trade deals also provided only a slight boost to economic output of less than one percent.

The agreements significantly improved the U.S. position in bilateral goods trade with FTA partners, boosting surpluses or reducing deficits by $4.4 billion per country per year on average, said the ITC, the body that passes judgment on U.S. anti-dumping and anti-subsidy trade cases.

This added up to a total favorable U.S. trade position of $87.5 billion for 2015 over estimates without the trade deals.

It noted that U.S. pork exports to Colombia, for example, had risen 300 percent since a free-trade deal took effect in 2011.

The study, mandated by last year’s “fast-track” trade authority legislation that paved the way for a 12-country Pacific free trade deal, could provide some ammunition for pro-trade lawmakers to push back against a rising tide of anti-trade sentiment, particularly from the presidential campaign trail.

Presumptive Republican nominee Donald Trump on Tuesday vowed to force Canada and Mexico to renegotiate the NAFTA free trade deal or scrap it as part of his plan to protect and restore American jobs.

But the ITC study found that the benefits of free trade pacts were somewhat uneven, with export and employment gains not shared by all sectors.

While the study characterized the overall effect of NAFTA as positive, it said movement of production to Mexico was a factor in the decline in overall U.S. automobile and parts production and employment. For instance, employment declined from a peak of 1.3 million workers in 2000, to 877,000 in 2014 after massive restructurings and increased market share of Asian automakers.

But the study also said that NAFTA had helped to make the U.S. auto industry more globally competitive, helping to boost U.S. vehicle exports to non-NAFTA countries from $10.7 billion in 1997 to $54.9 billion in 2014.

Representative Sander Levin of Michigan, the top Democrat on the influential House Ways and Means Committee, criticized the study for failing to measure the worker dislocations caused by trade deals and increased imports.

“The ITC claims a small increase in GDP based on traditional economic models,” said Levin, who opposes the Trans-Pacific Partnership trade deal. “The ITC fails to address the costs associated with workers losing their jobs or factories leaving communities as a result of trade agreements. Those transition costs are largely ignored in this report.”

(Reporting By David Lawder; Editing by Shri Navaratnam)