According to President Donald Trump, Mexico is “beating the US badly on trade” and a big part of the reason is Nafta. In truth, however, the real question is not why Mexico has benefited so much from Nafta, but rather why the economic benefits have been so small.

Of course, as President Trump likes to point out, it is certainly the case that Mexico’s trade surplus with the US has ballooned under Nafta. When the treaty came into force in 1994, Mexico actually ran a small annual trade deficit with the US of $1.3bn. But by 2015, this had shifted to a surplus of $67bn. What’s more, while the US runs a surplus in services and also earns significant sums on its investments in Mexico, these are more than offset by the outflow of remittances from Mexicans working north of the border. All told, Mexico’s current account surplus with the US was around $75bn in 2015. Read more