Twenty years ago today the North American Free Trade Agreement was put in to action. Ideally “the world’s largest free trade area” should be reason to celebrate——finally a large scale example of free trade in the real world!——but unfortunately there’s less to celebrate than one might hope.
From the photo of the North American Free Trade Agreement binder one can see that it was not a simple deal. Thousands of pages and sections by battling lawyers filled this tome spelling out all the details and conditions of controlled trade opening. Each paragraph, sentence, and word was worth thousands, if not millions, of dollars of lobbying to shape this agreement.
Time and again libertarians need to stress that free trade is something to be declared, not negotiated. Hong Kong derived success by simply declaring unilateral free trade. It didn’t matter whether other nations reciprocated or not.
Consider Frederic Bastiat’s great scenario, the city downstream versus the city upstream. If one way trade barriers were some kind of advantage, then cities upstream and on mountaintops would have prospered and the nations downstream nearest the ocean would have languished because of all that “easy access.” The reality of life is just the opposite. The natural flow of a river gives ease of commerce for those downstream and “protective” obstacles upstream and on mountaintops that cripple their enterprise.
Nations of the world would be better off by declaring unilateral free trade, but the powerful special interest lobbies of politicians stand in the way. NAFTA was filled with these obstacles, as boulders on the road, but one has to conclude that the trend of gradual reduction of barriers has been in the direction of more openness. This has been much to the benefit and general prosperity of the people of North America.