Ballooning Trade Deficit Under the NAFTA-WTO Model
Prior to the establishment of Fast Track and the trade agreements it enabled, the United States had balanced trade; since then, the U.S. trade deficit has exploded. The pre-Fast Track period (before 1973) was one of balanced U.S. trade and rising living standards for most Americans. In fact, in 1973, the United States had a slight trade surplus, as it did in nearly every year between World War II and 1975. But in every year since Fast Track was first implemented in 1975, the United States has run a trade deficit. And since establishment of NAFTA and the WTO in the mid-1990s, the U.S. trade deficit jumped exponentially from under $100 billion to over $700 billion — over 5 percent of national income. The establishment of the extraordinary Fast Track trade procedure coincided with President Nixon's decision to abandon managed exchange rates – the so-called gold standard – which had helped ensure balanced trade over time. In the new economy that would emerge from these policy shifts, companies that produce abroad (or produce nothing at all, in the case of finance) would replace domestic employment and rising wages as the driving force of economic policy. From Federal Reserve officials to Nobel Laureates, there is nearly unanimous agreement among economists that this huge trade deficit is unsustainable: unless the United States implements policies to shrink it, the U.S. and global economies are exposed to risk of crisis, shock and instability.
For more information on economic outcomes under NAFTA- and WTO-style trade agreements, please refer to the featured resources below.