Not a Zero-Sum Game - Ludwig von Mises Institute

words in the U.S. Constitution established free trade among the
states of the Union, NAFTA weighs in at over 2,000 pages, 900
of which are tariff rates. (Under true free trade, there is one tar-
iff rate-0 percent.) The agreement does have trade-liberalizing
features, to be sure. Consisting of a 10 percent reduction in tar-
iffs to be phased in over 15 years, however, they are all but buried
under the profusion of controls NAFTA also establishes.
In the first place, the benefits from those tariff reductions are jeop-
ardized by the agreement's snap-back provisions. Those permit
pre-NAFTA tariff levels to be restored against imported items
which cause or threaten serious injury to domestic industry.5 In
other words, NAFTA supports free trade as long as it does not pro-
mote international competition which is too hot for favored domes-
tic firms to handle. In addition, NAFTA's rules of origin are designed
to divert trade fiom the worldk most efficient suppliers to North
America 5 most efficient suppliers. This hobbles the international
division of labor instead of expanding it, as true free trade does.
The importance of NAFTA clauses that keep out foreign goods
came to light as U.S. clothing manufacturers railed against the
import of wool suits from our NAFTA partner Canada. The suits
in question were made from third-country wool not covered by
NAFTA rules of origin. Since Canadian tariffs on foreign wool
were lower than U.S. tariffs (10 percent vs. 34 percent),6 Canadi-
an suits sold for less and soon claimed a large share of the U.S.
market. The fact that the entire discussion of this issue centered
on closing this loophole in NAFTA rather than on lowering the
5. James M. Sheehan, "NAFTA-Free Trade in Name Only," The Wall Street Journal,
September 9, 1993.
6. Christopher J. Chippelo, "Fight Looms over Canada's Suit Exports," The Wall Street
Journal, August 7, 1996, p. A2.