Question

NAFTA is a multilateral trade agreement between Canada, United States, and Mexico enacted in the 1990's. This agreement eliminates trade barriers between these countries and allows trade to move freely without tariffs or restrictions.

However, there is a downside to this. Look at "in the News" on pg. 782 of the text on jobs relating to NAFTA. How do agricultural workers feel about this agreement? How about construction workers? The comparative advantage in these countries has changed due to NAFTA. Bottom line, do you feel NAFTA is a good thing? Is it really beneficial to the citizens of each country? Do you think Mexico benefits more?

Answer 1

The North American Free Trade Agreement created the world's largest free trade area. It links 450 million people. Its member economies generate $20.8 trillion in gross domestic product. NAFTA is also controversial.

Advantages of NAFTA

NAFTA created jobs

U.S. exports to the other two countries led to almost 5 million new American jobs. In NAFTA's first four years, manufacturers created 800,000 jobs.

Foreign Direct Investment

U.S. businesses invested $452 billion in Mexico and Canada. Companies in those two countries invested $240.2 billion in the United States. That helped U.S. manufacturing, insurance, and banking companies.

NAFTA lowered prices. U.S. oil imports from Mexico cost less because NAFTA got rid of tariffs. reduces America's reliance on oil from the Middle East.

Apart from these advantages Mexico got an upper hand and lower hand to USA, it led to the loss of 500,000-750,000 U.S. jobs. Most were in the manufacturing industries in California, New York, Michigan, and Texas. Many manufacturing companies moved to Mexico because labor was cheap. The automotive, textile, computer, and electrical appliance industries were impacted the most. NAFTA put Mexican farmers out of business. It allowed U.S. government-subsidized farm products into Mexico. Local farmers could not compete with the subsidized prices. As a result, 1.3 million farmers were put out of business, according to the Economic Policy Institute. It forced unemployed farmers to cross the border illegally to find work. In 1995, there were 2.9 million Mexicans living in the United States illegally. It increased to 4.5 million in 2000, probably due to NAFTA.

It is not correct to say that Mexico benefited the most by seeing the conditions of Mexico’s farmers and U.S. companies degraded the Mexican environment to keep costs low, Agribusiness in Mexico used more fertilizers and other chemicals. The result was $36 billion more per year in pollution. Rural farmers were forced into marginal land to stay in business. They cut down 630,000 hectares of forests per year. That deforestation contributes to global warming.