STANFORD – Economic news is grim all around the world. This year’s output growth has been disappointing, and the International Monetary Fund expects only a slight improvement in 2015. Europe may be sliding back into recession, with even the once-robust German economy teetering on the brink. China is downshifting, and Brazil, Russia, and India are struggling to avoid a stall.
So it is a pity that three important opportunities for growth from trade liberalization – the World Trade Organization’s Doha Development Round, the Trans-Pacific Partnership (TPP) in the Asia-Pacific region, and the Transatlantic Trade and Investment Partnership (TTIP) between the United States and Europe – are being neglected. If designed properly, all three have the potential to spur global growth. Through the reduction of tariffs and non-tariff barriers, the protection of intellectual property, and the harmonization of regulations, hundreds of billions of dollars of output – and millions of better-paying jobs – could be generated.
This is the lesson of the North American Free Trade Agreement (NAFTA), which celebrates its 20th birthday this year. In NAFTA at 20, a book that I edited, policymakers and scholars explain how the landmark trade treaty exemplifies the benefits of trade liberalization – and why political leaders should pursue it.
The elimination of tariffs among Canada, Mexico, and the US was innovative, risky, and controversial. NAFTA became a lightning rod for complaints about globalization, capitalism, and the decline of organized labor. Many claimed that the treaty would depress wages, destroy jobs, and ravage the agricultural industry in the US. Instead, NAFTA boosted all three signatories’ economies and became the template for hundreds of subsequent free-trade agreements.