Nafta and the U.S. Textile Industry

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International Business

Case 8:
NAFTA and the U.S. Textile Industry

   NAFTA AND THE U.S TEXTILE INDUSTRY
 
NAFTA (North American Free Trade Agreement)
In 1988, the U.S and Canada agreed to enter into a free trade agreement, which took effect in January 1st 1989. Their aim was to eliminate all tariffs on bilateral trade between U.S and Canada. Then in 1991 U.S, Canada and Mexico aims at establishing NAFTA. It went into effect in 1994.         Many people expressed their fears that, it will cause large job losses in the U.S textile industry’s production is moved from United States to Mexico. They agreed that the treaty should not be adopted because of the negative impact it would have on U.S employment. But their argument was not successful.         Between 1994 and 2004 production fell by 40% and 20% in the textile production in U.S. The employment in textile mills in U.S also dropped from 478,000 to 239,000, while exports from Mexico to the U.S increased from $1.26 billion to $3.84 billion. This proves that the critics of NAFTA had a point about the large job losses due to production moving from U.S to Mexico.         The effect of NAFTA on U.S was also positive in some ways. For instance it reduced the prices of clothing in U.S since 1994 and this has benefited consumers. it has also increased the exports in U.S raw materials of cotton and yarn from $293 million to $ 1.21 billion. The supporters of NAFTA argued that it has created trade, and both consumers and producers are benefitting from it and therefore the gains outweigh the losses. Question 1:

Why did many textiles jobs apparently migrate out of the United States in the years after the establishment of NAFTA?

Question 2:

Who gained from the process of readjustment in the textile industry after NAFTA? Who lost?

Those who gained from the process of readjustment in the textile industry after NAFTA are:...
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