ECONOMIC INTEGRATION AND INDUSTRY LOCATION: INTRODUCTION

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In the United States, the popular press portrayed the debate over the North American Free Trade Agreement (NAFTA) as a conflict of capital versus labor. The logic was that U.S. corporations favored NAFTA, since it would lower their costs of serving the North American market relative to competitors in Japan and Europe, and that labor opposed the agreement, since it would bid down U.S. wages by putting U.S. workers in competition with low-wage Mexican labor. While business groups did favor NAFTA and labor unions opposed it, the politics of free trade are more complex than its characterization in the media implies.

Geography also played a role in the politics of NAFTA, which suggests that voters expected the effects of freeing trade in North America to vary across regions within the United States. NAFTA was perceived to be mainly about increasing trade with Mexico, since the United States had completed a free trade agreement with Canada in 1989. U.S. congressional representatives from districts on the border with Mexico voted overwhelmingly to support NAFTA, while those from districts on the border with Canada voted overwhelmingly against it. More generally, politicians from southern and western states were much more likely to support the agreement than were their counterparts in the northeast and midwest. U.S. politicians seemed to feel that NAFTA would benefit regions close to Mexico and harm regions distant from Mexico.Why should support for free trade agreements have a geographic component? Recent theoretical work in international trade provides a conceptual framework to understand how trade reform alters relative regional economic fortunes within a country’s borders. credit