NOTE: NAFTA = North American Free Trade Agreement. Percentage columns may not add up to 100% due to rounding.
Will, MacPherson / ECONOMY OF WESTERN NEW YORK
Impact of NAFTA on Western New York Jobs, Total Sales, and Exports
On this note, Table 1 presents a descriptive summary of the overall impact results. At first blush, the numbers suggest that NAFTA has not been particularly important to local firms in that few have been positively affected (fewer still have been negatively affected). Because no significant differ- ences between the two size groups of respondents were found across any of the variables shown in our tables (chi-square tests), all subsequent discussion is focused on the total sample. In terms of employment, Table 1 shows that only 8 respondents (11% of the sample) felt that NAFTA had con- tributed positively to job creation compared to 5 firms on the negative side (7% of the sample). Fully 68% (n = 48) of the survey firms belong to the zero impact category, whereas 9 firms (13%) indicated that NAFTA’s employment impact was impossible to tell.
A more encouraging picture emerged in terms of sales and export effects, in that 16 firms indi- cated a positive impact on sales (22% of the sample), whereas 17 firms indicated a positive impact on exports (24% of the sample). Across all of the impact classes, however, it should be noted that negative effects were confined to less than 10% of the sample. For instance, 5 firms indicated a neg- ative impact on jobs (7% of the sample), 6 indicated a negative impact on sales (9% of the sample), and 3 reported a negative impact on exports (4% of the sample). In terms of frequency counts, then, respondents indicating a positive impact outnumbered their negative counterparts by a consider- able margin.
On the employment front, Table 2 shows that all of the firms that reported new job creation under NAFTA also indicated a positive export effect (n = 8). Yet, of the 17 firms that reported a pos- itive export impact overall, 1 stated that jobs had actually been lost (an import competition effect in this case), whereas 8 noted that jobs had either remained constant or that the impact of NAFTA on employment was impossible to tell. In short, it would appear that expanded export activity created new jobs among only half of the firms that indicated positive export effects. Although we cannot estimate the export elasticity of employment with these data, we suspect that it must be low.
With regard to import competition, only 18 firms (26% of the sample) implicated NAFTA with a negative impact (see Table 3). Canada was cited as the source of increased competition in 12 cases, compared to 10 cases for Mexico. Curiously, however, only 2 of these import-competing firms also implicated NAFTA with a negative employment or sales effect. Various cross-tabulations (not shown here) suggest that import competition under NAFTA has created negative consequences other than those considered in this article. (We shall return to this point later.)
Of the 70 firms in the database, only 11 (16% of the sample) noted that NAFTA had created opportunities for cheaper input sourcing (see Table 4). These opportunities were closely divided between Canada (7 cases) and Mexico (8 cases). Of the firms that indicated a positive effect on this variable, 2 also indicated a negative effect on total employment. This particular relationship was ultimately traced to international outsourcing in that certain types of routine tasks (formerly con- ducted in-house) had been transferred to producers in Mexico. Thus, a positive effect at one level (i.e., cheaper input sourcing via imports) can in some cases translate into a negative effect at another level (i.e., local job losses as a result of international subcontracting).
The impact of NAFTA on export expansion is presented in Table 5. These data show that 17 firms identified a positive export effect. Again, the export effect was closely divided between Can- ada (15 cases) and Mexico (12 cases). Significantly, the 8 firms that cited NAFTA as being a posi- tive factor in recent employment expansion (see Table 1) are located within the first cell of Table 5