Benefits and Costs of NAFTA Essay

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Benefits and Costs of NAFTA
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As long as NAFTA has been in existence, there has been controversy over its benefits and costs. Since NAFTA is viewed as a neoliberal trade and investment agreement, supporters and critics alike are able to expand its validity to a grander scale when dealing with the question of whether free trade itself is beneficial or harmful. During the life of NAFTA, many valid arguments for and against free trade have been brought to the forefront.

Many economists argue neoliberal trade is superior due to allocational efficiency benefits.

?By lowering trade barriers, the agreement has expanded trade in all three countries. This has led to increased employment, more choices for
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This implies that the other country would then be relatively less inefficient at the other industry and should therefore concentrate its efforts in this industry. Even through this process of trade determined by comparative advantages, total world efficiency and productivity is increased.

If a particular industry is protected against foreign competitors through government policies such as quotas and tariffs, other domestic industries will suffer as an inevitable side effect. ??the costs of protectionism spill over into other industries? (Blinder 118). An example of this would be the U.S. steel prices compared to those of Korean steel. If U.S. steel is protected, the cost to domestic consumers increases and downstream industries suffer since they are paying more than the international competitive price. For example, the U.S. automotive industry would now pay the higher price for steel and subsequently must also charge higher prices. In the end, jobs are lost in these component industries.

??trade restrictions allow high-cost producers, who would otherwise succumb to competition, to survive? (Blinder 118). If an infant industry has government protectionism to care for its otherwise uncompetitive costs, it will most likely not develop an incentive to become competitive. As
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