Must-Read: This does not seem to me to be terribly helpful. Dani Rodrik says, apropos of NAFTA:
- "The aggregate [distributional] effects were rather small..."
- "Impacts on directly affected communities were quite severe..."
- "Overall... a 'welfare' gain of 0.08% for the U.S. That is, eight-hundredth of 1 percent!..."
- "Trade volume impacts were much larger: a doubling of U.S. imports from Mexico..."
That is all true. But in today's context it seems to me to be... a very partial truth... a somewhat truthy truth... unhelpful. In my view he should, instead, have written:
- "NAFTA did very little to change any of the wages of unskilled labor, the wages of skilled labor, the rent of land, or the profits of capital in the U.S. The aggregate [distributional] effects were rather small..."
- "Impacts on directly affected communities were quite severe." But these communities were quite small, and could have been substantially compensated--and would have been had American voters not elected Republican majorities in Congress in 1994 and thus installed Gingrich as Speaker and Dole as Majority Leader..."
- "Overall in an HOV or Ricardian model we calculate net a 'welfare' gain of 0.08% for the U.S. But we believe that there are not only "Ricardian" but substantial "Smithian" gains from trade. As a rule of thumb, each $1 of extra imports that the U.S. took in from NAFTA was paid for by products that before NAFTA had sold for some $0.75 to $0.80 cents--a good deal on average..."
- "U.S. imports from Mexico doubled from a low base: from about 1% to about 2% of GDP.
And, most important, Dani should not have allowed his readers to keep their illusion that NAFTA is responsible for any appreciable part of the decline in the manufacturing employment share:
Dani Rodrik: What Did NAFTA Really Do?: "The overall efficiency gains are quite small...