NAFTA North American Free Trade Agreement NAFTA Background

NAFTA North American Free Trade Agreement

NAFTA Background NAFTA stands for North America Free Trade Agreement and is a Trade Area n Trade Areas n n Unrestricted trade among Member nations n No common external tariffs n No economic unity (monetary and fiscal)

NAFTA Background n Canada’s goals in negotiation: n Avoid economic isolation, protect cultural industries, avoid US penalties n Mexico n Joined mostly hoping for additional investment capital n United States: n Access to markets, balance power of European Union, warmer political relations

Success as of 2005 n Real Economic Growth – 1994 to 2005: n U. S. : 48% n Canada: 49% n Mexico: 40% $2. 2 billion in trilateral trade daily n Trade among the nations increased 173% n n From $297 billion to $810 billion

Benefits to the U. S. n n n Exports to NAFTA partners grew 113% NAFTA partners account for 55% of increase in agricultural exports Industrial production rose 49% n n 28% in prior period 36. 2% increase in business sector productivity 20. 1% growth in jobs Average unemployment rate dropped from 7. 1% to 5. 1%

Benefits to Canada More than half of exports go to the U. S. n Exports now account for over 40% of GDP n Exports to U. S. increased by 250% n 86. 6% of total exports go to NAFTA partners n 17. 5% increase in jobs from pre -NAFTA levels n

Benefits to Mexico 37% difference between wages in export-related sectors and others n Agricultural exports to U. S. increased by $5. 7 billion n Exports to Canada grew almost 227% n Two-way trade with the U. S. has grown more than 125% n Productivity increased 55% n

Important Note n The official sites for NAFTA list all positive reviews for the past 12 years. n Others claim these benefits may have come from other changes in the economy n Plenty of information exists to argue both sides

Special Problems

Special Problems or Debates 1. 2. 3. Employment effects Mexico’s Suffering Agriculture Sector Environmental problems and decreased standard of living

United States Employment n United States n Overall, 28 million new jobs created since 1994 n Very small amount, if any, can be directly attributed to the creation of NAFTA n Ross Perot and the “Giant Sucking Sound”

Canadian Employment 2. 3 million jobs created in Canada since NAFTA n Increase of 17. 5% n Very little debate on the employment effects of NAFTA in Canada n

Mexican Employment n Mexico n Employment increased directly following NAFTA introduction, but has recently decreased. n n n Many new jobs were in the Maquiladora area’s Agriculture sector specifically hit hard Estimated 28, 000 small and med sized businesses eliminated due to low cost producers.

Environmental/Standard of living Effects n Maquiladora - is a factory that imports materials and equipment on a duty-free and tarifffree basis for assembly or manufacturing and then re-exports the assembled product usually back to the originating country. n Maquiladora firms have approx. doubled since NAFTA n 2, 143 n to over 3, 703 currently This is a problem for NAFTA because Maquiladora’s are notorious for having terrible low -pay working conditions.

A town about a mile from a Maquiladora factory

Maquiladora Working conditions Women, especially, discriminated against n Average wage is $1. 00 per hour n Work 10 -12 hours a day n Compared to sweat shops of China n Many are working to improve rights of Maquiladora workers. n

Environmental Conditions n Special side agreement in NAFTA to calm environmentalists about toxic waste around Maquiladora’s. n Did side agreement work n n No enforcing power Different views of environmental quality. Many argue the pollution has worsened. "NAFTA has intensified severe problems of water and air pollution, hazardous wastes dumping and increased the incidence rates of certain diseases and birth defects in the border region. "

Environmental Effects n "We have no way to provide water, sewage, and sanitation workers. Every year, we get poorer and poorer even though we create more and more wealth. " n Ciudad Juarez, Mayor Gustavo Elizondo

Mexico’s Agriculture n n US farmers are being subsidized. Mexico farmers do not receive subsidies, this… n n Puts downward pressure on Mexican Farmers Results in Dumping US Farmers selling below cost in Mexico because they have already received subsidies. n Results in Unemployment and Immigration to United States n Some claim as many as 2 million Mexican farmers are out of business n

Mexico’s Agriculture n Many claim dumping is evident due to Mexico’s imports of U. S. agriculture products n n $3. 6 $7. 9 $8. 5 billion in in in 1993 2004 U. S. farmers are better at the expense of Mexican farmers

Mexico’s Agriculture n Immigration from Mexican Farmers has increased since NAFTA. n At least 4 million Mexican immigrants in the United States. 150, 000+ per year n Many due to population growth n n A problem because this goes directly against one of the original claims of NAFTA.