Essay on The Impact of NAFTA on the U.S. Textile Industry

If the government enacted a special tax on imported clothing making the selling price equal to the selling price of clothing made in the United States, shoppers would see imported items with much higher prices in discount stores. If the prices of clothing made in sweatshops and in the United States were comparative, shoppers would consider the trade-offs and opt to buy clothing made in the United States for higher quality, loyalty to United States workers, and the health of our economy (Mankiw, 2011, p. 4). Wal-Mart and “big-box” stores that sell so many imported clothing items would see a decrease in sales. Shoppers would choose to buy clothing at stores that sell clothing made in the United States. These stores would see an increase in sales.

Nonetheless, many analysts agree that NAFTA has made a mark. U.S.-Mexico trade continues to grow, and NAFTA and the promises it brings have lessened the impact of the Mexican recession and quickened its recovery. Healthy, growing bilateral trade, they say, depends on healthy, growing economies, and Mexico’s recovery and continuing economic liberalization should fuel that trend.

Esquel, one of the leading cotton-shirt-manufacturers in the world came from China and it supplies lots of clothing brand such as Banana Republic, Tommy Hilfiger, Hugo Boss, Brooks Brothers, Abercrombie and Fitch, Nike, Nordstrom and Lands’ End, in addition to private companies (Plunkett Research, Ltd.). However, due to the high demand of the US apparel stores for Chinese products, the low cost, which was the main reason why raw materials are being purchased from China, have increased. China’s competition is huge, with Vietnam, the Philippines, Malaysia and Sri Lanka also producing material at cheap prices (Plunkett Research, Ltd.). The US apparel stores can instead purchase from these other Asian countries. It is hard to determine the exact number of suppliers in this industry; but, in general, majority of them are in Asian countries that can provide low-cost raw materials to US-based apparel stores. Therefore, the US apparel stores may acquire higher net profi

After a lengthy negotiation of over 3 years, Canada, the United States, and Mexico reached an agreement on trilateral trade ― the North American Free Trade Agreement. Commonly referred to as NAFTA, it came into effect on the first day of 1994. Covering 450 million of population and reaching $17 trillion in combined GDP, NAFTA proudly ranks the first among the world’s free trade agreements (USTR). It is usually seen as a remarkable success for the countless benefits it brings to its members. Some of NAFTA’s main advantages are promoting closer relationships, eliminating trade barriers, and increasing market opportunities. However, as the first proposer of NAFTA, the United States has indeed benefited the most from it in several different

The North American Free Trade Agreement, commonly known as the NAFTA, is a trade agreement between the United States, Canada and Mexico launched to enable North America to become more competitive in the global marketplace (Amadeo, 2011). The NAFTA is regarded as “one of the most successful trade agreements in history” for its impact on increases in agricultural trade and investment among the three contracting nations (North American Free Trade Agreement, 2011). Supporters and opponents of the NAFTA have argued the effects of the agreement on participating nations since its inception; yet, close examination proves that NAFTA has had a relatively positive impact on the economies of the United States, Canada, and Mexico.

Since the North American Free Trade Agreement’s (NAFTA) inception, an abundance of controversy and disagreements have surrounded it. For example, in the 2008 election, both Barrack Obama and Hillary Clinton wanted to renegotiate or get out of NAFTA. Similarly, the 2016 election featured Donald Trump campaigning for the renegotiation of NAFTA. He even stated in a recent presidential debate, “…[NAFTA] was one of the worst things to ever happen to the manufacturing industry” (Bloomberg, 2016). Are these important political figures justified in their statements and campaign goals? This essay will explore the background of NAFTA as well as both its the positive and negative effects in order to determine whether NAFTA has had a net positive

NAFTA, the North American Free Trade Agreement, has been getting a lot of not so favorable, and sometimes, controversial headlines in recent years. Some critics blame it for the current labor shortages in the United

The North American Free Trade Agreement promised millions of new jobs across North America and Mexico but failed to deliver the results. The trade agreement actually impoverished millions of Americans and Mexicans while big corporations flourished from

By 1997, three years after the ratification of NAFTA, 47% of Canadian manufacturing plants that existed in 1988, which accounted for 28% of the jobs in the economy, had closed. To add on, 350,000 manufacturing jobs from 2002 -2008, were lost due to industrial plants moving to Mexico. This drastic drop in factory/plant numbers can be attributed to the fact that companies put their bottom line first - moving facilities to Mexico because Mexican minimum wage is only $5.10 compared to a minimum wage of $11.00 in Ontario. As a further incentive to relocate south, because of NAFTA, corporations don’t have to pay tariffs on products shipped back to domestic markets. Therefore, it is evident that NAFTA has resulted in many industrial firms/plants moving to Mexico for cheaper labour, and the impact of such actions has cost thousands of Canadians their jobs.

Since 1993, total trade between the three signatory nations has gone from $290 billion to $1.1 trillion in 2016, with foreign direct investment (FDI) in Mexico increasing by over $90 billion (“NAFTA’s Impact on the U.S. Economy,” 2016). In addition, per capita American GDP growth is estimated to have been around $400 (“NAFTA’s Impact on the U.S. Economy”). Critics, however, still have plenty of material to work with. Though American jobs created by the deal pay on average 15-20% more than jobs lost, across the border in Mexico wages have stagnated with an increase of only 400,000 new jobs (“NAFTA’S Impact on the U.S. Economy”). It is also reasonable to argue that free trade has come at the price of necessary regulation. Since companies could move operations north or south more easily, many unions lost their bargaining power and some businesses began ignoring environmental regulations (Faux, 2013). Mexican small businesses also suffered, giving rise to the claim that NAFTA could have caused more illegal immigration (Faux). As far as FDI was concerned, the U.S. and Canada benefitted significantly more than Mexico (Feils & Rahman, 2008, p. 162). Job losses in labor intensive industries like auto manufacturing were felt the most as the low wage labor became available elsewhere (“NAFTA’s Impact on the U.S. Economy”). Inevitably, these various effects created groups of winners and losers that struggled to agree on NAFTA’s true

American manufacturing jobs were lost as U.S. firms used NAFTA’s new foreign investor privileges to relocate production to Mexico to take advantage of that country’s lower wages and weaker environmental standards. U.S. job erosion worsened as a new flood of NAFTA imports swamped gains in exports, creating a massive new trade deficit that equated to an estimated net loss of one million U.S. jobs by

Although the Chinese apparel manufacturers would lose profitability due to rising cotton prices and competition from emerging countries, they stand to gain the most from the removal of U.S. quotas and tariffs. According to the author, in 2007, 95% of the 20 billion garments Americans made were purchased overseas. Due to U.S. trade barriers, China’s share of the U.S. apparel import was only 30%. Once these barriers were removed, Chinese apparel would flood the American market due to their low cost and dominance in garment manufacturing. Experts predict that China could eventually supply 85% of U.S. apparel. As they increase their market share in the

Clearly NAFTA is a highly debated topic because of the ambiguous effects it has had on the US economy. Brent Snavely questions NAFTA in his article published in the Detroit Free Press by pointing out that “the US lost more than 670,000 jobs as a direct result of NAFTA between 1993 and 2010,” he also explains that NAFTA has been blamed for the “manufacturing job losses and plant closures as the auto industry spent billions to build assembly plants and parts in Mexico,” it seems that one of the main issues is that jobs and money has been lost because of NAFTA. NAFTA “provided for liberalization of trade in agriculture, textiles, and automobile manufacturing.” On the contrary, Bruce does highlight some of NAFTA’s positive attributes such as: after NAFTA the “total goods traded with Mexico and Canada – imports and exports combined – grew from $291 billion in 1993 to $1.1 trillion in 2016 which is a 267% increase,” this increase in trade “has benefited the US economy and created jobs in other industries.” Either way, Canada and Mexico have agreed to renegotiate NAFTA, which took two years to agree upon, in order to reduce the US trade deficit in a fair way that still allows for an improved market access between the US, Canada, and Mexico and are attempting to come to a conclusion within the next seven

I think it also works to undo the notions that China was stealing away all our jobs in the apparel arena, because despite the complex protectionist measures taken, America still lost lots of jobs in the textile industry. The author points out that this is because of technology, and that when it really comes down to it, China is losing their textile jobs at a rate faster than the U.S. did (142). She also goes over some of the unintended consequences of the measures such as increased material costs as a result of the increased import barrier (142). She also suggests in this section as an alternative to erecting trade barriers, to instead compensate workers of the losing industries, known as the compensation principle (151). Lastly, with the lift of the measures and quotas by 2005, there will be a new surge in Chinese goods to America, as illustrated in figure 9.1, page 167. China’s percent increase after release from the quotas will measure some 900%.

Clearly NAFTA has led to widespread job loss, with more than 200,000 U.S. workers certified as NAFTA casualties under just one narrow government program. Since the 1970's, there has been a steady trickle of