Back in the early ’90s, many predicted that the Japanese would soon own most of America’s real estate, that Billy Ray Cyrus would be a permanent superstar and that if Congress passed NAFTA it would result in a great sucking sound of jobs siphoned off to Mexico.

We know the first two predictions were dead wrong. But did the North American Free Trade Agreement result in a big loss of jobs?

A new study by the Public Policy Institute of California has the answer: Nope.

The study looked strictly at jobs lost to Mexico beginning in 1994, when NAFTA began, to 2002. It concluded that 425,000 U.S. workers were displaced during that span because of factories that moved to Mexico or because of new Mexican imports. That sounds like a lot of jobs, but on a yearly basis, only about two workers in 5,000 lost their jobs to Mexico as a result of NAFTA.

California, despite its border with Mexico, fared even better. About 28,000 lost their jobs to Mexico during that span. But on a yearly basis, only about one in every 5,000 California workers lost his or her job to Mexico.

The study’s author, Howard J. Shatz, wrote that “trade has little effect on the number of jobs because the overall job level is set by labor supply conditions, labor market rules and monetary and fiscal policy.”

This is not to say that NAFTA was totally benign. When plants moved to Mexico, some towns lost their biggest employer. Manufacturing took a hit, particularly the low-wage end. Furthermore, NAFTA may have held down wages for some who kept their jobs, the study points out.

Those were the costs of NAFTA. The study did not look at the benefits.

Several studies, at least a couple that crossed my desk in recent years, concluded that the benefits have been real but also fairly modest. Some import- and export-related jobs and businesses have been created. Consumers have gotten some additional goods and at less cost. Mexico has benefited somewhat, which is good for the United States.

While NAFTA has been beneficial, it has not been a tremendous economic locomotive that measurably improved our lives, as some early ’90s NAFTA proponents predicted. Does that imply that NAFTA has been a dud, one that was not worth the fight? No, not at all. Loosening trade barriers is good. We can buy more stuff at lower prices. We can sell more of our stuff to Mexico. Although the benefits from NAFTA have been small, they are benefits nonetheless, and on balance they surely outweigh the costs. The march of economic progress is one made by small, steady steps.

Still, the study is a good reminder that those who predicted in the early ’90s that NAFTA would be a disaster were wrong, just as wrong as those who predicted an economic bonanza.

In fact, dire predictions usually are wrong. We now know the Japanese did not buy up the United States but made a hasty retreat in the mid-90s, selling much of their real estate back to us at a fire-sale discount. And we now know that NAFTA produced some economic benefits with the loss of jobs that created, at most, a slurp of a straw, not any great sucking sound. And Billy Ray? He’s in Nashville, Tenn., still striving for a comeback and living, perhaps, with an achy breaky heart because he failed to live up to predictions.

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Charles Crumpley is editor of the Business Journal. He can be reached at

[email protected]

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