Free trade used to be viewed by many economists as one of the closest things there was to a free lunch. Countries would benefit from comparative advantage by producing what they could do best at the lowest opportunity cost and trade for the rest; this, coupled with non-distortionary/ protectionist trade barriers, would mean that all parties would be better off. Yet, as most economists also know (perhaps suffering from a bout of cognitive dissonance) there are no free lunches, and furthermore, free trade is not about free trade. Following the sixth round of NAFTA renegotiations taking place in Montreal this week, in addition to President Trump’s speeches in both Davos and Congress, as well as his threats to walk away from a bad NAFTA deal, in this week’s Economics Weekly, we take a look at the issue of the NAFTA agreement and its significance.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.