NAFTA/CAFTA
North American Free Trade Agreement is a treaty between Canada, the United States, and Mexico. It was enhanced in 1994 to remove trade barriers, such as tariffs. It is the most significant free trade agreement in Africa (Ansari, Salamah, & Rajesh). It was implemented to encourage free trade between the three countries because the United States imports crude oil and types of machinery from Canada (Ansari, Salamah, & Rajesh). The trade agreement impacted many people, cities, and industries in both positive and negative ways. The purpose of this paper is to discuss how the North American Free Trade Agreement positively affected the people and towns Canada, United States, and Mexico.
After the implementation of the trade agreement, the three countries experienced a high economic growth, higher wages, and increased trade (Stanford). For example, it increased jobs in Mexico because most of the United States manufacturing companies and industries moved to Mexico. It lends to increased jobs with low wage rates in Mexico.
NAFTA increased the economic growth of the United States by almost 1% every year (Stanford). The sectors that benefited from the free trade tariffs were agriculture and automobile sectors. The United States exported types of machinery and food products to Canada and Mexico, which in return led to jobs. The trade increased foreign direct investments in the United States, boosting profits in the United States business by giving them more opportunities to develop and market explore. The trade agreement protected properties and helped the innovation of companies by discouraging pirating and ensuring the investors had the same legal rights (Stanford). It lowered food prices and food imports from Mexico to the United States. The lower tariffs from NAFTA reduced the import prices that lessened the risk of inflation in the markets (Stanford). It favored oil prices in the United States because America’s most significant import is oil; thus, it could import oil products to Canada and Mexico at lower prices.
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The relocation of manufacturing industries to Mexico led to the suppression of wages in the United States. The works had to choose between joining the union and losing the factory. They had little bargaining power that suppressed wage growth. This had negative impacts on the living standards of the workers who were dependent on the industries for the source of incomes.
The farmers in Mexico were put out of business. After the trade agreement, Mexico lost almost 1.4 million farm jobs (Stokes, 17-27). The North American free-trade agreement removed tariffs, and companies from the united states exported farm products to Mexico at a low cost. At the same time, Mexico reduced subsidies to its farmers from 33% of farm income to 13%, which went to Mexico’s large farms (Stokes, 17-27). The small farmers were put out of business by the highly subsidized American farmers. North American Free Trade Agreement expanded the Maquiladora program by removing trade tariffs that led to the exploitation of workers who cheaply assembled products for exports back into the United States.
The North American Free Trade Agreement allowed the firm in the three-member countries to bid all the federal government contracts that reduced government spending (Villareal & Ian). It cut the government budget deficits by allowing more completion and lower-cost bids. It enhanced government saving that promotes development in the three-member countries
In conclusion, the North American Free Trade Agreement had benefits and problems for the people, the economy of the member countries, and the government. The trade had negative impacts on the people because it led to the loss of jobs in the United States; the workers faced exploitation where the packed exports at a lower salary. It leads to a loss of wage rates. NAFTA led to economic growth, lowered prices, reduced government spending, increased foreign direct investments, and increased trade.
References
Ansari, Salamah, and R. Rajesh Babu. “5. North American Free Trade Agreement (NAFTA).” Yearbook of International Environmental Law (2020).
https://academic.oup.com/yielaw/advance-article-abstract/doi/10.1093/yiel/yvz032/5700403
Stanford, Jim. “North American free trade: history, structure, and prospects.” The Handbook of Globalisation, Third Edition. Edward Elgar Publishing, 2019.
https://www.elgaronline.com/view/edcoll/9781788118590/9781788118590.00026.xml
Stokes, Shyla. “The North American Free Trade Agreement (NAFTA): Potential Changes, Effects, and What to Do Concerning the Trucking Industry.” Undergraduate Review 14.2 (2018): 17-27. https://vc.bridgew.edu/undergrad_rev/vol14/iss2/6/
Villareal, M., and Ian F. Fergusson. “The North American Free Trade Agreement (NAFTA).” (2017).https://digitalcommons.ilr.cornell.edu/key_workplace/1937/
