Pros and Cons of Nafta

Only available on StudyMode
  • Topic: International trade, North American Free Trade Agreement, Free trade
  • Pages : 5 (1558 words )
  • Download(s) : 602
  • Published : December 15, 2010
Open Document
Text Preview
Pros and cons of NAFTA

NAFTA, the North American Free Trade Agreement, has been getting a lot of not so favorable, and sometimes, controversial headlines in recent years. Some critics blame it for the current labor shortages in the United States, due to the fact that most U.S. companies have been and continue to outsource and ship jobs overseas. However, its proponents have been hailing it as a great success in helping lowering national prices on certain manufactured goods and services and that it has caused to increase wages for certain jobs within the U.S.

The Agreement was signed by Bill Clinton, president of the United States, Brian Mulroney of Canada, and Carlos Salinas de Gortari of Mexico. It was hailed as the highest achievement and largest trilateral agreement between the tri-bloc countries in decades. "Under the NAFTA, all non-tariff barriers to agricultural trade between the United States and Mexico were eliminated. In addition, many tariffs were eliminated immediately, with others being phased out over periods of 5 to 15 years. The pros and cons of NAFTA can be regrouped as following:

Proponents claim that:
The accord has stimulated democratic reform and opened markets in Mexico and has also improved the standard of living in Mexico. The Bush administration claims that NAFTA has led to income gains and tax cuts amounting to about $930 each year for the average U.S. household of four. Many of the 20 million new jobs the U.S. generated from 1993 to 2000 can be attributed to the free-trade bloc that NAFTA created, the administration continues. NAFTA brought in a flood of foreign investment and contributed to a 24% rise in Mexico's per capita income as well as a reinforced political cooperation

While detractors argue that:
The agreement has taken a toll on both U.S. and Mexican jobs, according to the Institute for Policy Studies (IPS). While real wages for Mexican manufacturing workers declined 13.5%, more than half a million U.S. employees have entered government retraining programs after their companies moved production south or north of the border, says IPS. NAFTA has wiped out Canadian social programs, purports IPS.

The pact has also destroyed Mexico's small farmers, says IPS, bringing in an influx of subsidized U.S. food imports. In fact, about 1.3 million farm jobs have been lost since 1993, indicates a recent report by the Carnegie Endowment for International Peace. The Carnegie report also concluded that the pact has generated few new jobs in Mexico and might only be credited for a "very small net gain" in jobs in the U.S.

What Are the Advantages of NAFTA?:
NAFTA created the world’s largest free trade area, linking 444 million people and producing $17 trillion in goods and services annually. Estimates are that NAFTA increases U.S. GDP by as much as .5% a year. That's because it eliminates tariffs and creates agreements on international rights for business investors. This reduces the cost of trade, which spurs investment and growth especially for small businesses. Eliminating tariffs also reduces inflation by decreasing the costs of imports. Increased Trade:

Trade between the NAFTA signatories tripled, from $297 billion in 1993 to $1 trillion in 2007 (latest data available). Exports from the U.S. to Canada and Mexico grew from $142 billion to $452 billion.Exports from Canada and Mexico to the U.S. increased from $151 billion to $568 billion.One reason trade grew because NAFTA provided the ability for firms in member countries to bid on government contracts. It also protected intellectual properties. Boosted U.S. Farm Exports:

NAFTA increased farm exports because it eliminated high Mexican tariffs. Mexico is the top export destination for beef, rice, soybean meal, corn sweeteners, apples and beans. It is the second largest for corn, soybeans and oils. As a result of NAFTA, the percent of U.S. agricultural exports to Canada and Mexico has grown from 22% in 1993 to 30% in 2007....
tracking img