The Negative Effects of the North American Free Trade Agreement

The North American Free Trade Agreement (NAFTA) is an international agreement between Canada, America and Mexico. This agreement took effect in January 1994 and was signed by President Bill Clinton. This agreement brought great changes in trade volumes and open new opportunities for millions of labours. Later, in January 2008 according to the schedule all duties and restrictions were eliminated. About 45,000 tariffs were eliminated in 1994 and only 3000 were left until 1999.

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

Arguably the most notable change has been in terms of lost employment for Americans. Between 1994 and 2002, 897,000 American jobs were outsourced to Mexico (Hufbauer and Schott). This was 400,000 more jobs than the highest projected estimates. This outsourcing disproportionately affects our least educated members of the workforce who hold make up 43 percent of our jobs. 53 percent of the members of this demographic have been displaced. However, the effects are harder felt in some states such as North Carolina and Arkansas where 80 percent of blue collar workers have been affected in one manner or another (Hufbauer and Schott).

NAFTA, North American Free Trade Agreement, is a treaty between the United States, Mexico, and Canada. It is very important especially to American farmers, because it allows the farmers to ship major amounts of corn, cotton, rice, and soybeans to Canada and Mexico. CEO Dwight Roberts said, “There is nothing better going on for the commodities we grow than NAFTA. We are very fortunate that we are next door to Mexico, a country of 120 million people who buy so much of our commodities. For rice, Mexico is the number one market in the world.”

Its inward Foreign Direct Financial investment amongst NAFTA nations for 2006 was $235.1 million, while the variety of jobs produced in the U.S. between 1993 and 2007 was 4.1. Its national employment level is 16.9 million. For the United States, its population, as of July 2007, is 301.6 million, with a GDP of $13,844 billion, and $870.2 billion in trade with NAFTA Partners. Since 2006, the United States attained over $165.1 billion in inward Foreign Direct Financial investment amongst NAFTA countries, while the number of tasks produced between 1993 and 2007 reached 25.8 million, and its nationwide level work was 140.0 million. For the 3rd member country, Mexico, its population in July 2007, was 105.2 million, and it reached a record GDP of $886 billion, while its trade with NAFTA partner reached $375.4 billion. In 2006, Mexico reached an inward Foreign Direct Investment of $129.1 billion among NAFTA nations, and the varieties of jobs developed in Mexico between 1993 and 2007 were 10.1 million, while its nationwide work level increased to a record 42.9 million

This is done to attract manufacturing of goods in Mexico. “The U.S. tariff schedule provision known as 9802, formerly known as 806/807, greatly assisted the development of the Maquiladoras industry. This permitted U.S. goods to be exported to Mexico and face a duty only on the value added when the finished product is imported back into the United States”. In 1996 40% of all Mexican exports to the U.S. were from the Maquiladora program. Also the U.S.-Mexico Chamber of Commerce conceived a group named “Transformation 2000”, whom would inform and educate all manufactures on the Maquiladora programs by the year 2001”.

Between 1988 and 1994, imports rose from $19 to $60 billion, an increase of over 300%. While many people would expect this increase to show up most in the realm of consumer products, it is noted that a large majority (71%) of Mexican imports consisted of intermediate goods. Although this number indicates increased integration between the US and Mexico, it is also a testament to policies which focused on the expansion of domestic industry.

The North American Free Trade Agreement (NAFTA) was created in 1994 as one of the largest free trade zones in the world. NAFTA has provided access to new business opportunities to Mexican companies (NAFTA, 2016). However, NAFTA has been threatened by the United States president Donald Trump, which

NAFTA has had positive effects on Mexico, which have not been evenly distributed in the whole country. For example, it helped improve the productivity of Mexicans. They adopted technological innovations from the US which helped them grow their automotive industries as well. Jobs increased considerably and macroeconomic volatility among Mexicans reduced. Coordination of businesses between Canada and Mexico helped Mexico adapt technological innovations from the US much easier. However, NAFTA generally failed to improve the overall economy of Mexico because there were not supportive policies to facilitate the provisions that NAFTA gave. Sectors such as the education and infrastructure development suffered as a result. This led to this

He states that jobs that come from designing and overall development of products still comes from the USA and Canada. Free trade has brought around two hundred thousand new jobs to the United States mainly based around agriculture so it is believed that the job loss has balanced out (Baldwin and Goodwin). The manufacturing in Mexico is still relatively smaller in Mexico compared to the US and Canada because even though there have been massive increases in Mexican car production they still only account for twenty-five percent of North American car production compared to the USA and Canada combine for seventy five percent. NAFTA has also spread the means of production, develop, and assembly, which drives down prices (U Penn, NAFTA, 20 Years Later: Do the Benefits Outweigh the Costs). When parts are made in Mexico, those parts are cheaper to assemble in the USA and Canada so the companies can theoretically drive down prices (U Penn, NAFTA, 20 Years Later: Do the Benefits Outweigh the Costs).

The late 1980s and early 1990s marked an age of reform and liberalization in Mexico. After a long period of economic turmoil and isolation behind its borders, Mexico began to allow foreign capital and foreign direct investment (FDI) to flow into its economy, and the external debt that had been hanging over Mexico’s head since the 1982 balance of payments (BOP) crisis was finally restructured. With the signing of the North Atlantic Free Trade Agreement (NAFTA) on January 1, 1994, a trilateral trade bloc was created in North America between Mexico, the United States, and Canada. Foreign trade restrictions were eliminated and commercial agreements with other countries were negotiated, consolidating Mexico’s integration into international

The North American Free Trade Agreement (NAFTA) facilitates the free flow of goods and services between Canada, The United States and Mexico. This allows ALPES to move into untapped markets in three countries rather than just its base country of Mexico. This would also increase profits substantially due to an increasing market demand.

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

One other vital push factor that instigates Mexicans to migrate is the deals made by NAFTA. NAFTA has created dramatic economic dislocations in Mexico. For example, imports of U.S. corn have severely affected the local Mexican agricultural sector. NAFTA arrangements have helped increase the imports from 3 million metric tons in 1994 to more than 5 million metric tons in 2002 (Massey, 1374). Also, the brief rise in outsourced U.S. manufacturing that helped the Mexican economy has ceased as these factories have now moved to Asia. (OXFAM; USDA, Nadal, 2002). A bad economy and among other reasons have resulted to the increased high crime rates in Mexico and thus driving mostly the youths to the United States to look for better jobs which are not easily accessible in their country. "Some 30,000 soldiers and federal police have now been deployed to a dozen states throughout Mexico as part of President Felipe Calderon 's war on drug cartels and organized crime, and Juarez is just the latest front. On March 28, after the murder toll there rose to more than

NAFTA supporters, on the other hand, argue that foreign direct investment in Mexico has been higher after NAFTA, but it must be recognised that it also has had a number of negative consequences. One of the most important negative consequences is that the flow of foreign investment has been focused on the creation of companies producing goods or services directly exported to the USA (maquiladoras) (Ruiz 2015: 44). Investment flows have been generated primarily to produce goods or services for the USA; this type of foreign direct investment is vertically integrated, it is fuelled by low trade costs given the unskilled and cheap workforce, it is a type of investment in which developed countries use developing countries as a re-export platform or as leverage in the search for new markets, creating economic dependency relationships (Calderon and Hernandez 2011: 114-116). Another consequence is that domestic industry has deteriorated by imported inputs and competition from foreign direct investment, due to the displacement of local companies that were unable to compete with multinational corporations, and thus generating job loss. Another important negative consequence to consider is that the money of foreign investment has led directly to the wealthiest regions of Mexico, since they are the ones who have the education, skilled labour, transport infrastructure and necessary communications to facilitate product export to the USA, which has intensified disparities and inequalities