NAFTA, global trade deliver crucial health benefits to vast majority

NAFTA, global trade deliver crucial health benefits to vast majority
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North American Free Trade Agreement (NAFTA) negotiators met in Mexico City recently, hoping to keep alive a deal that has set the terms for trade between Canada, Mexico and the United States since the mid 1990s.

Opponents of free trade will be praying for failure. For them, NAFTA is not only the economic enemy of working people, but also damaging to their health.

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An internal memo circulated in October by White House National Trade Council Director Peter Navarro blamed manufacturing decline — and by extension NAFTA — for a catalogue of health problems, from rises in infertility to more early deaths. 

 

Navarro’s broadside follows decades of argument by academics that free trade damages health by promoting economic insecurity and inequality, worsening pollution and even by making unhealthy foods more available.

This is seductive but misguided. In reality, the end of NAFTA and a reduction in free trade would do real damage to health. 

Most opponents of NAFTA focus on localised negative impacts, but few look at the bigger picture. Notably, there is a new and growing economic literature looking at the relationship between free trade and health. There is near consensus that fewer trade barriers means healthier populations.

While all countries become healthier from an increased openness to trade, most studies find the benefits to be even greater for lower-income countries.

The picture is the same for specific free trade agreements (FTAs), including NAFTA. Geneva Network analysed 13 FTAs concluded by the United States and European Union since 1994. We found that these deals in fact had positive impacts on health outcomes in partner countries. 

If NAFTA were to unravel, health would be hit in a number of ways.

Economic growth clearly helps health, as it provides greater sums for individuals and governments to spend on healthcare. Countries with good health are likely to have a more productive work force and hence grow faster. 

NAFTA has delivered productivity growth and cheaper consumer prices in all three countries, with the latter particularly benefiting low-income people.

Since the deal was ratified in 1994, all three countries have improved health across a basket of measures — life expectancy, likelihood to live to 65, and so on. Mexico’s health has improved rapidly, almost closing the gap with Canada and the United States.

A NAFTA collapse would mean a loss of around one million low-skilled jobs in Mexico, 125,000 in Canada and 256,000 in the United States, according to Impact Econ, an economic consultancy. Health products such as generic medicines, medical devices and food would be among many goods to rise in price. This would all hit health, particularly for the poorest. 

But the impact of free trade on health goes beyond increased economic growth. The opening of international borders since the Second World War has been instrumental in disseminating health-related technologies.

Drugs, vaccines and medical devices are now available in all corners of the world, often for no more than a few cents — a remarkable achievement. While trade will obviously continue in the absence of NAFTA, new barriers could disrupt their flow across North America.

Pre-NAFTA, Mexico imposed tariffs of up to 15 percent on medicines imported from the United States and Canada. Thanks to NAFTA, these tariffs were abolished, removing a regressive tax on the sick. A more competitive Mexico has allowed its pharmaceutical industry to emerge as a regional leader, with many Americans depending on its cheap, high-quality generic medicines. 

With NAFTA gone, Mexico could well reinstate the 15-percent tariff, still applied to medicine imports from outside the bloc, raising the price of newer medicines imported from the United States. Mexico is grappling with new health challenges that come with a longer living population, such as increasing rates of cancer. 

Further health complications would come from disruption to the medical device industry. Under NAFTA, the industry has developed an international supply chain responsible for driving down the price of everything from pacemakers to knee pins.

President Trump’s promise to impose tariffs on Mexican imports in an attempt to revive United States manufacturing will achieve little except making these things more expensive.

Above all, free trade is about the global spread of health-related technologies, without which we would never have achieved the remarkable health successes of the last 50 years. Abandoning NAFTA would be a big step backward. 

Philip Stevens is director of Geneva Network, a U.K.-based research organisation focusing on trade, innovation and health policy. Nilanjan Banik is a professor of economics at Bennett University in India