Renee Will is a doctoral student in the economic geography program at the State University of New York at Buffalo. Her research interests include geographic patterns of foreign direct investment, international trade, and industrial organization.
Alan MacPherson is a professor of geography at the State University of New York at Buffalo and director of the Canada-United States Trade Center. His research interests include industry studies (manufacturing and services), notably export development, import competition, and technological change.
Will, MacPherson /EECONOMY OF WESTERN NEW YORK 01
The Impact of the North American Free Trade Agreement on the Economy of Western New York
Renee Will Alan MacPherson State University of New York at Buffalo
This article examines the economic impact of the North American Free Trade Agree- ment (NAFTA) on western New York (WNY). A variety of theoretical perspectives are reviewed, notably impact assessment. Evidence from a survey of local industrial firms suggests that NAFTA has not played an especially important role in the various upswings and downswings that have affected the WNY area in the 1990s. In contrast to a number of inquiries that have appeared in the recent literature, the authors find little evidence to support the view that WNY has been negatively affected by NAFTA. Instead, the authors’evidence suggests that NAFTA has had a positive impact in terms of new export development, job creation, input sourcing, and sales growth. The article concludes with a brief discussion of the empirical and theoretical difficulties that con- front researchers who wish to explore the effects of trade agreements upon regional economies.
As the North American Free Trade Agreement (NAFTA) enters its 7th year, academic and policy debate continues regarding the long-term economic and social implications of the accord (Gould, 1998; Hanson, 1998; McKinney, 1999). In the United States, for example, some critics have argued that NAFTA has established ideal conditions for large-scale capital out-migration to Mexico, in large part because of that nation’s low unit costs and lax environmental standards (for a recent over- view, see Husted & Logsdon, 1997). Similar concerns have been raised by Canadian critics (Drache, 1993; Merritt, 1996), such that by now, opposition to NAFTA is noticeably stronger in the United States and Canada than in Mexico.
Part of this dissent flows from a lack of faith in the geographic and economic logic that under- pins traditional trade theory (Pasquero, 1999). For example, few markets operate on the basis of perfect competition; factors of production have become increasingly mobile at the international level; and from a neoclassical perspective, free trade with factor mobility ultimately implies inter- national cost convergence (leaving some countries richer or poorer than before). Recent opposition to NAFTA has also been feeding from empirical work on subnational events, including local plant closures, company relocations, and other types of negative effects (e.g., environmental degrada- tion, trade diversion, etc.). This article seeks to contribute to the NAFTA debate by offering a regional case-example that considers the import, export, and investment impacts of the 1994 accord. Our case-example is western New York (WNY), a stagnant but trade-sensitive region that lies on the eastern edge of the U.S. Rustbelt. Although we do not pretend that WNY is representa- tive of other U.S. regions (stagnant, declining, or otherwise), some of our results may be of interest to policy practitioners who reside in similar types of places.
Set against this backdrop, our article is organized as follows: First, we provide a research con- text that summarizes the main theoretical positions that have been taken by trade economists. Here,
ECONOMIC DEVELOPMENT QUARTERLY, Vol. 15 No. 4, November 2001 340-349 © 2001 Sage Publications