Of course, not everyone gains from trade. Added competition clearly hurts import-competing firms and their workers. In this regard, trade is like technical progress. Both improve an economy's overall efficiency by shifting resources to more productive uses, but short-run adjustment costs can be high, especially for the unskilled. However, trying to thwart technical change or impede trade are expensive ways to help these individuals.
Trade increases incomes even if trade accounts are in deficit and no new jobs are created.
The considerations just outlined led to the extension of the U.S.-Canada Free Trade Agreement of 1989 to include Mexico starting January 1, 1994. Its impact has been neither disastrous nor negligible, even though its early years coincided with peso devaluation, a sharp drop in Mexican living standards, and the reversal of a U.S. trade surplus with Mexico to a sizable deficit. This outcome should surprise no one. The pact was expected to raise Mexican output by 2 to 3 percent within two decades. For the United States, the predicted output gains were a fraction of 1 percent.