Negative Consequences Of Foreign Direct Investment

Last but not least, NAFTA has given United States access to much needed cheap resources. As a huge manufacturing country, the U.S. is always in demand of natural resources. Canada and Mexico, on the other hand, are resource-rich countries and over 12% of their exports is petroleum products (The Observatory of Economic Complexity). NAFTA has lowered the tariffs thus giving Americans more access to its neighbours’ oil reserves. Futhermore, when signing NAFTA, Canada agreed that they will not reduce oil exports to the U.S. even during shortage, unless Canada cuts its own supplies. That is, the percentage of oil exports to the U.S. cannot be changed. The United States therefore receives less impacts from fluctuating world oil price, and is guaranteed a steady supply of oil for its industries. In addition to that, NAFTA makes it possible for the U.S. to take advantage of the large educated work force in Mexico. American businesses set up factories along Mexican boundary and employ local workers to assemble products from imported U.S. components, the final products are then exported back to the U.S. Known as maquiladora, these factories have the worst working condition in North America (Mexican Rural Development Research Reports). The workers have no human rights or health

Impact of NAFTA on Mexico’s manufacturing industry – Effect on Productivity, Wages rates, Incomes, and Investments in FDI

"In 1994, both countries [Mexico and the United States] signed the North American Free Trade Agreement (NAFTA) which has increased their mutual trade and foreign direct investment. Between 1994 And 2005, the US-Mexico foreign direct investment flows increased substantially from 16,968 billion to $71,423 billion. By 2007, the Mexican commercial relationship with the U.S. almost tripled from $297 billion to $930 billion." [2] This mutual increase in business inherently has had an attendant growth in "the number of foreign enterprises who have situated in each country." [2] With this increase in international business and trade comes cultural shifts and increased globalization and differences in managerial functions.

When NAFTA was created, no one really understood the impact that the measure would have on the world economy. Drilling down, NAFTA impacts put Mexican farmers out of business due to the “government-subsidized U.S. Farm products.” (Source: https://www.thebalance.com/disadvantages-of-nafta-3306273) As described in the New York Times, exports from the US to Mexico of “corn and other staples” that were subsidized on average of $20,000 per year by the US Government, resulted in “small farmers finding themselves unable to make a living. Some two million have been forced to leave their farms since Nafta.” (Sources: http://www.nytimes.com/roomfordebate/2013/11/24/what-weve-learned-from-nafta/under-nafta-mexico-suffered-and-the-united-states-felt-its-pain

The article, “Displaced People: NAFTA’s Most Important Product”, written by David Bacon for North American Congress on Latin America, discusses how economic crises have caused Mexicans to be displaced. The North American Free Trade Agreement (NAFTA) has caused the price of crops in Mexico to lower so much that there are no economic benefits from planting them. There are around 500,000 indigenous Mexicans from the state of Oaxaca now living in the United States as farmworkers. The article states that between 2000 and 2005, the countryside in Mexico has lost a million and a half jobs. This causes indigenous Mexicans who relied on planting crops to make money to migrate to the United States. Families that cannot migrate to the United States and are now jobless will go hungry as they search for buyers to buy the crops they grow. While the crops they grow continue to lose money value, the price of the food that they need to survive keeps increasing. After Mexico adopted NAFTA, the price of tortillas has more than doubled and companies continue to monopolize tortilla production. Poor Mexicans are left with no ability to make money and

the Mexican agricultural industry had to compete with the far more industrialized US farm industry. Even though the amount of exported products tripled since the institution of NAFTA [according to the economist], most of those exports were maize. The United States was producing a greater amount of grain products and importing them cheaply into Mexico. The amount of American imports overwhelmed the Mexican market and forced them to sell to America and Canada. The theory the United States held was NAFTA would decrease the amount of Mexican immigration. However, this hurt the Mexican economy enough until around 2008 to force millions of Mexicans into the United States, doubling the Mexican-born population to twelve million in 2013 (Sergei, M. 2014).

FDI appears when a commonly expanding or growing company is investing to a foreign country. FDI consists of the acquisition or creation of assets (e.g. firm equity, land, houses, oil-drilling rigs and etc.) undertaken by foreigners. Initial investment or ownership of the foreign equity has to be more than 10% but does not need to be a 100%. Anything less than 10% of the ownership will be called portfolio investment. Company which invests in foreign markets become a multinational enterprise (MNE).

Many Mexican workers lost their jobs when the U.S. program ended, and with the sweep of globalization moving throughout these neighboring countries, “maquiladoras were to provide an employment alternative in the manufacturing sector” for these unemployed agricultural workers (Gruben 12). Although the concept of the maquiladoras was centered on the positive idea of stimulating industrialization in Mexico and developing a mutually beneficial economic partnership with the United States, with the failures associated with NAFTA, maquiladoras are costing American manufacturing jobs while immensely decreasing the standard of living in a rapidly-polluted Mexico. Rather than creating binational economic prosperity, NAFTA has made it possible for many American manufacturers to conveniently cross the border lines into Mexico to take advantage of the plummeting labor costs, exploit defenseless workers who are unaware of their rights, and destroy Mexico’s seemingly disconnected environment, obliviously thinking that it will not be a detriment to their own as water and air pollution travels freely into the United States.

For the terms of this essay, national development will be defined as the economic growth in markets and the improvement of conditions for the nations population, in this case Mexico. The second definition that will be touched upon is the concept of human development, outlined by the UN as “the concept of development that has to do with the creation and improvement of living conditions where people can develop their full potential, can have a long and healthy life, can have access to an appropriate educational system, can develop their potential to the fullest and be productive in order to live according to their needs and interests.” The aggregate effect of the maquiladora programs on the economy of Mexico has been significant, therefore this essay will focus specifically on the maquiladoras’ contribution to development after the implementation of NAFTA in 1994 until around

Twenty years have passed since the implantation of the North American Free Trade agreement. While it has changed Mexico in some fundamental ways, the treaty never met many of its extensive promises to close Mexico 's wage gap with the United States, boost job growth, fight poverty, and protect the environment. The hope was that freer trade would bring stronger and steadier economic growth to Mexico, providing new jobs and opportunities for its growing workforce and discouraging illegal migration from Mexico. With modernizing the Mexican economy so that it would export goods, not people. Mexico’s people feel as though NAFTA’s pledge has created a loss of national independence and a narrow income gap.

On January 1, 1994, the nations of the United States, Canada, and Mexico entered into a three-way partnership to supposedly lift trade barriers and improve production in all three countries. This is called the North American Free Trade Agreement (NAFTA). However, the effect was generally ruinous for southern Mexico. Trans-national corporations from Europe, Asia, and especially North America invested heavily in closing down factories inside their nations (primarily for environmental and labor costs) and establishing new ones, almost all of which

We cannot talk about the significance of Mexico to the U.S. if we fail to talk about the North American Free Trade Agreement (NAFTA). This agreement essentially enables Canada, the U.S., and Mexico to import and export goods among each other without any taxes. The current U.S. administration is threatening to leave the agreement because they believe it has costed many manufacturing jobs. However, multiple studies have shown that the agreement had little to no effect on the loss of jobs. “A 2014 report from the Peterson Institute for International Economics said that at most 5 percent of dislocated US workers could be traced to imports from Mexico. It said over four million Americans lose their jobs each year by plant shutdowns and mass

Mexico’s economy has long depended on trade with the U.S., and those ties have only deepened since 1994 when the North American Free Trade Agreement lowered trade barriers between the two nations. Mexican exports more than quadrupled since NAFTA went into effect; they accounted for 37.5 percent of Mexico’s gross domestic product in 2015 (they make

Mexico is the top trading nation in Latin America and the ninth-largest economy in the world. No country has signed more free trade agreements – 33 in all, including the two biggest markets in the world, the US and the EU. Altogether these signatory countries make up a preferential market of over more than billion consumers. Much of the FDI in Mexico is attracted by the country’s strategic location within the North American Free Trade Agreement, which has positioned it as a springboard to the US and Canada. Other attractions are competitive production costs and a young, skilled workforce, together with political stability and an open economy.

There is a lot to be said for big retail to come to India, but we cannot simply be taken in and mimic something which is being pushed down our throats because those who make the policy appear to not have the faintest clue on how retail really works in India