NAFTA and the Auto Industry: Boon or Bane?

The recent successful completion of the North American Free Trade (NAFTA) talks raise serious questions about the potential economic, social and political ramifications of an agreement that may result in the world' s largest and potentially most prosperous common market. Among the industries that are likely to be affected, few are of greater concern to the Mid\vest than the auto industry. One critical question is how the pact may alter trade flows of automotive products and consequently the location of jobs in North America. This Chicago Fed Letter summarizes the auto related agreements on this issue and finds that the major impact of NAFTA, especially in the Midwest, may be simply to accelerate a process that most likely would take place regardless of the treaty. However, the question may become whether the U.S. chooses to export goods or jobs.