Nafta Research Paper

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Total combined losses would be about US$ 99 billion a year.

Real wages would fall in all Canadian provinces and Mexican states, and in all but one of the 435 US Congressional districts.

The key to the Mexican puzzle lies in Mexico's response to crisis: a deterioration in contract enforceability and an increase in nonperforming loans.

As a result, the credit crunch in Mexico has been far deeper and far more protracted than in the typical developing country.

Automotive workers would be hardest hit in Mexico and Canada; in the United States, it would be workers in oil refineries and coke production who stand to lose most.

If tariffs increase but non-tariff trade barriers remain unchanged, annual combined economic losses would be less than US$ 5 billion.

To exemplify this, we provide a quantitative assessment of the aggregate and distributional effects of one hypothetical protectionist measure - the case of revoking the North American Free Trade Agreement (NAFTA).

Using a multi-country, multi-sector, quantitative model of global production, we show that a full revocation extending to both tariffs and non-tariff trade barriers would result in a real annual GDP loss of US$ 37 billion in Canada, US$ 22 billion in Mexico, and US$ 40 billion in the USA.

A non-technical summary of this paper is available in the September 2003 NBER Digest.

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