ok, ok - i should clarify that last point about not trading with countries that have an absolute advantage, as it seems like i'm ignoring an opportunity cost. but, i actually addressed that in my bit about mercantilism.

if you're the king of portugal, you need to make such decisions as you're trading with the queen of england. things are a little different in a modern nation state, which doesn't have that kind of centralized economic decision making.

the idea of an opportunity cost allows for a second-best answer as an optimal use of resources. so, if one country is better at doing both things, but so much better at doing one thing that everybody loses out if it does both, then it should focus it's resources on the thing it does the best and let the other country do the other thing.

the reality in nafta is that you can't even derive a thing of the sort, because mexico has that absolute advantage in labour costs and more than sufficient amounts of labour to produce anything at all. the caveat in the argument for a comparative advantage doesn't hold, and isn't going to hold in any situation where the dominant input is labour due to it being kept artificially low. it blows up the whole theory. no, we don't have to make these choices about offsetting things: we can just produce everything in mexico and exploit that absolute advantage. if you do the math with the opportunity costs, that is what you will see.

if mexico had a smaller labour force, as one example, that wouldn't work. another reason it wouldn't work is if there were restrictions on foreign investment. then, you can bring in the theory of comparative advantage. but, these are precisely the things that nafta is designed to abolish - because the purpose was to establish the absolute advantage.

and, yes, you can make the same points about china - and about how a similar trade agreement with china would turn the continent into a captured market of the chinese empire. it would be quite similar to what the british did to the indians. why did the rich country of india become impoverished? imperialism is an answer, but the economic mechanism was that it was turned into a market and not allowed or able to produce anything. in that way, the wealth flowed out but did not come back in.

if mexico has an absolute advantage in production due to artificially low labour costs, and no restrictions on utilizing it, there is no comparative advantage in trading with them - and you should indeed not do so because what you will get is that race to the bottom to undercut the mexican police force, and the inevitable eventual impoverishment of everybody except mexican producers, who end up just sucking all the wealth out.

there was a time, recently, when the wealthiest person in the world was a mexican capitalist. that is nafta at work.

but, i want to be a little bit careful: let's remember that it is largely american companies moving into mexico to take advantage of the absolute advantage in labour costs. these things are most profitable when scaled.