As the North American Free Trade Agreement negotiations unfold, there is a lot of loose talk being exchanged about automobile parts going back and forth among the United States, Canada and Mexico. NAFTA supporters assert that the U.S. content in cars assembled in Canada and Mexico is particularly high and that therefore our $70 billion-plus trade deficits with our NAFTA partners are not worrisome.
That would be a great argument if it were correct. But it isn't. That argument is neither true of motor vehicles nor of manufactured goods in general.
A study to be released Friday by Anne Flatness and Chris Rasmussen of the Office of Trade and Economic Analysis within the Commerce Department proves its falsity. The study, based on Trade in Value Added data recently released by the Organization for Economic Cooperation and Development, shows that between 1995, the year after NAFTA went into effect, and 2011, U.S. content of manufactured goods imported from Canada dropped significantly — from 21 percent to 15 percent. U.S. content in goods imported from Mexico fell even more — from 26 percent to 16 percent. The data is available only until 2011, but there is no reason to think that the situation has improved since then.
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