The year 1994 marked the beginning of the era of globalization. For a short time after the end of the Cold War, it was unclear what would be the driving theme of the next period in history. Then it emerged: borderlessness. The theme of the new era would be the free movement of goods, people, and capital. In a few short months on either side of January 1, 1994, the European Union was formed; the Marrakesh agreement was signed, creating the World Trade Organization; the Channel Tunnel opened; and the North Atlantic Free Trade Agreement came into effect.
Hubris was present from the beginning. During the negotiations over NAFTA, union leader Richard Trumka, then of the United Mine Workers of America, later president of the AFL-CIO, asked a Clinton administration official whether he was worried about the effect of free trade on American blue-collar workers. The official said yes, but eventually “wages would start to go up again, and things would even out around the world.” Trumka asked him how long this would take. The official answered, “About three to five generations.”
We are now one generation into this process, thirty years from the start of NAFTA, so we are at a good point to ask: Are things evening out? Is the new equilibrium we were promised any closer, and it is better than the one we had before?
Mexican consumers were supposed to buy our products. Instead, they buy from Asia. Illegal immigration was supposed to go down. Mexico would “export goods, not people,” as the slogan went. Instead, the number of illegal immigrants in the U.S. today is at least three times what it was in 1990 and remittances are a bigger source of revenue for Mexico than its oil industry. New, better paying jobs were supposed to replace the manufacturing jobs that went abroad. Instead, the workers of the Rust Belt were compensated with gig economy jobs in cities where they don’t live.
On the 30th anniversary of NAFTA, its opponents stand vindicated and its defenders are chastened—or at least they should be. In many corners of the left and right, free trade dogma is as strong today as it was the day NAFTA was signed. It is therefore worth looking back to see what exactly went wrong with NAFTA, what made people blind to its flaws, and why its costs proved greater than anyone predicted at the time.