February 27,2008

Grassley: NAFTA Opt-out Sentiment Misses Huge Benefits to U.S. Exporters

M E M O R A N D U M


Sen. Chuck Grassley, ranking member of the Committee on Finance, with jurisdiction overinternational trade, today made the following comment on whether the United States should opt outof the North American Free Trade Agreement (NAFTA).

“In terms of the economics of our trading relationships, I don’t understand what SenatorClinton and Senator Obama hope to gain by opting the United States out of the North American FreeTrade Agreement.

“Before NAFTA, the playing field was tilted against U.S. exporters. The United Statesapplied an average overall tariff of about 2 percent on imports from Mexico, while the Mexicansapplied an average tariff of about 12 percent on U.S. exports. That’s 6 to 1 against, on average. Andover half of Mexico’s exports entered the United States duty-free. With NAFTA, we leveled theplaying field by steadily bringing tariffs down to zero on both sides of the border.

“NAFTA is often used as a scapegoat. But without it, Mexico still would benefit from muchlower tariffs on exports to the United States than vice versa. And we’d still have the advances we’veseen over the past 15 years in international supply chain management and logistics. The fact is,companies have become more comfortable taking on the risks associated with sourcing products andinputs from overseas. I doubt a 2 percent average tariff would change that much. NAFTA gives theUnited States market access that U.S. exporters have enjoyed and continue to enjoy. U.S. exportsto Mexico have increased about 2.5 times since NAFTA entered into force. Those exports supporta lot of good-paying jobs here in the United States. I wonder what the candidates would have to sayabout the potential loss of those jobs if the United States opted out of NAFTA.”