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Why Renegotiating NAFTA Could Disrupt Supply Chains
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Why Renegotiating NAFTA Could Disrupt Supply Chains

Mary Amiti, Caroline Freund and Tyler Bodine-Smith
Federal Reserve Bank of New York, 2017
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Editorial Rating

8

Qualities

  • Analytical
  • Overview

Recommendation

Opponents of the North American Free Trade Agreement (NAFTA) decry the high trade deficit the United States has with Mexico, arguing for stricter “rules of origin” that would limit firms’ access to zero tariff rates under the accord. But as economists Mary Amiti, Caroline Freund and Tyler Bodine-Smith explain, more stringent rules could lessen bilateral trade, hurt global supply chains and raise prices for consumers. getAbstract recommends this timely, informed study – accessible to both the economist and lay reader – for its dissection of a geopolitically relevant topic.

Take-Aways

  • The North American Free Trade Agreement (NAFTA) facilitates commerce among the United States, Mexico and Canada through the removal of tariffs.
  • “Rules of origin” ensure that each country involved in a final product’s creation adds substantial value.
  • Some 40% of Mexican imports to the United States and 75% of American exports to Mexico are in the form of intermediate production parts that flow back and forth through integrated supply chains.

About the Authors

Mary Amiti and Tyler Bodine-Smith are economists at the Federal Reserve Bank of New York. Caroline Freund is an economist with the Peterson Institute for International Economics.

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