Nafta: Pros and Cons

Topics: North American Free Trade Agreement, International trade, Mexico Pages: 10 (3575 words) Published: April 14, 2011
The Ups and Downs Due to the Creation of the North American Free Trade Agreement

The North American Free Trade Agreement was put into effect in 1994, although the thought of a free trade in North America was first pushed by President Ronald Regan, who based a campaign on a common North American market. President Ronald Regan and Canadian Prime Minister Brain Mulroney agreed to begin negotiation to establish a free trade between the United States and Canada. These negotiations would eventually lead to the signing of the Free Trade Agreement in 1988, and placed into effect in 1989. In 1992 President George H.W. Bush, Mexican President Carlos Salinas de Gortari, and Canadian Prime Minister Brian Mulroney would cause the dissolution of the Free Trade Agreement with the signing in of NAFTA. In 1993 President Bill Clinton signed NAFTA into law and it took force on January 1, 1994. Although NAFTA promoted free trade between the three North American countries it was not until January 1, 2008 when all tariffs between the three signing counties were finally eliminated.

While reading this paper you will be informed of not only the positive effects that North American Free Trade Agreement has had on North America’s economy, but you will also gain an insight of the negative impact it has brought along with it. The purpose of this paper is not to try and persuade you to agree with either side independently. Are purpose is to provide you with the present facts so you as a individual can draw your own conclusion on whether or not NAFTA should continue, be dissolved, or maybe even be altered. For the first section of the paper we will cover the positive effects that NAFTA has had on North American countries, and follow up with the negative effects it brought upon the involved countries.

Positive Effects of NAFTA
Since its inception, NAFTA has provided many benefits to the countries and people involved within the agreement. It essentially created the world’s largest free trade area, “linking 444 million people and producing $17 trillion in goods and services annually” (Advantages of NAFTA). It also has helped to increase the US GDP every year. The reason for this is because it eliminates tariffs and taxes as well as to help to create agreements based on international rights for business owners. This is especially good for small businesses as it reduces costs of trading, thus spurring increased investment and growth. Based on this, inflation can be reduced because import costs are less.

One area in which NAFTA has been a benefit for the US is the trade surplus in services. More than 40% of the US GDP is made up of services, such as health care and financial services. However, these are not easily transported, so NAFTA has allowed for them to be easily exported into surrounding countries. NAFTA helped to increase exporting services in “Canada and Mexico from $25 billion in 1993 to $106.8 billion in 2007” (Advantages of NAFTA). This boost was caused by the elimination of highly regulated trade barriers in the services sector. The hidden costs of business were thus reduced as governments are now required to publish any regulations they have.

Not only that, but NAFTA has allowed for each of the partner countries to encourage specialization. The agreement helps to promote for countries to concentrate and specialize in their own products and services. This allows for increased efficiency. “For instance, in 2008, the NAFTA partner countries were the third largest suppliers of goods to the US. NAFTA accounted for 26.4% of overall US imports and included products such as mineral fuel and oil, vehicles, electrical machinery, machinery, and other special returns” (Benefits of NAFTA). NAFTA therefore has led to a stable and more prosperous neighborhood between the US, Canada, and Mexico. For example, the US foreign direct investment (FDI) in these surrounding countries “was $348.7 billion in 2007, which was 11.3% more as compared...
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