| NAFTA, the North American Free Trade Agreement, | | | | incentives-for Mexicans to stay at home. In some |
| has been getting a lot of not so favorable, and | | | | ways, NAFTA has been a boon for activists. Just |
| sometimes, controversial headlines in recent years. | | | | think how much higher the northward flow of |
| Some critics blame it for the current labor shortages | | | | work-seeking immigrants from Mexico would have |
| in the United States, due to the fact that most U.S. | | | | been in the absence of NAFTA" (Newsweek). |
| companies have been and continue to outsource and | | | | Mexico seems to be the one that has most |
| ship jobs overseas. While its proponents have been | | | | benefited than the other two partners. A lot has |
| hailing it as a great success in helping lowering national | | | | changed in Mexico since NAFTA was implemented to |
| prices on certain manufactured goods and services | | | | include it as part of the free trade partners. |
| and that it has caused to increase wages for certain | | | | According to the report by Carlos Salas in the |
| jobs within the U.S. | | | | Economic Policy Institute: Although Mexico now has a |
| In this document, we are going to explore the cons | | | | large trade surplus with the U.S., Mexico has also |
| and pros of NAFTA. The author of the document | | | | developed a large and growing overall trade deficit |
| has specifically selected this topic because of a | | | | with the rest of the world. In fact, Mexico's net |
| familiar ground. Most of his families and friends have | | | | imports from the rest of the world now substantially |
| lost their jobs in recent years, and whenever the | | | | exceed its net exports to the United States. Official |
| word 'NAFTA' is mentioned, the blame seems to be | | | | unemployment levels in Mexico are lower now than |
| more placed on NAFTA and Bill Clinton, for causing it | | | | before NAFTA, but this decline in the official rate |
| to happen, than on the current economic downturn | | | | simply reflects the absence of unemployment |
| cycle. Before we look deeper on the aforementioned | | | | insurance in Mexico. In fact, underemployment and |
| issues, we must first look at what is NAFTA, its | | | | work in low-pay, low-productivity jobs (e.g., unpaid |
| causes, advantages and disadvantages. | | | | work in family enterprises) actually has grown rapidly |
| In 1989, Canada and the United States implemented | | | | since the early 1990s. Furthermore, the normal |
| a bilateral free trade agreement, and in 1993, they | | | | process of rural-to-urban migration that is typical of |
| included Mexico. On December 8, 1993, the leaders of | | | | developing economies has reversed since the |
| the governments of Canada, United States, and | | | | adoption of NAFTA. The rural share of the population |
| Mexico signed, then the most anticipated trilateral | | | | increased slightly between 1991 and 1997, as living |
| free trade agreement, known as, the North American | | | | and working conditions in the cities deteriorated. |
| Free Trade Agreement (NAFTA), and was | | | | As Mexico flourish, the opposite is happening in the |
| implemented on January 1, 1994, for the sole purpose | | | | US. Forbes magazine recently reported a list of the |
| of helping to remove most of the trade and | | | | fastest dying cities in America, and in Ohio, Dayton, |
| investment barriers, while boosting high economic | | | | Cleveland, and Youngstown are some of many in the |
| growth between the tri-bloc neighboring countries. | | | | US that have been affected, not only by the current |
| The Agreement was signed by Bill Clinton, president | | | | economic crisis, but by many of the manufacturing |
| of the United States, Brian Mulroney of Canada, and | | | | jobs being shipped overseas, while leaving most |
| Carlos Salinas de Gortari of Mexico. It was hailed as | | | | American jobless. The report indicates that |
| the highest achievement and largest trilateral | | | | Youngstown is on the blink of completely becoming a |
| agreement between the tri-bloc countries in decades. | | | | ghost town. Most retail stores have moved out, and |
| "Under the NAFTA, all non-tariff barriers to agricultural | | | | the City of Youngstown has been on the buying |
| trade between the United States and Mexico were | | | | spree, buying up abandoned properties, and |
| eliminated. In addition, many tariffs were eliminated | | | | dismantles them to clean them up and turn them in |
| immediately, with others being phased out over | | | | to parks instead. Whereas in Mexico, "total |
| periods of 5 to 15 years. This allowed for an orderly | | | | employment grew from 33.9 to 39.1 million jobs over |
| adjustment to free trade with Mexico, with full | | | | the 1995-99 period (3.7% annually), according to |
| implementation beginning January 1, 2008" (United | | | | officially reported data (INEGI 1995 and 1999). But |
| States Department of Agriculture, Foreign Agricultural | | | | these data must be used with some caution, because |
| Service). | | | | the sample used for the National Employment Survey |
| Over the years, the partner countries have continued | | | | changed in 1998. Comparing the 1998 and 1999 data |
| to make certain provisions, adding or removing some, | | | | provides a more realistic rate of employment growth. |
| according to economic conditions in order to improve | | | | Total employment reported for 1998 was 38.6 million |
| the agreement. Certain provisions were not initially | | | | jobs, resulting in an actual rate of growth in 1999 of |
| included such as the agricultural provision was not | | | | only 1.2%" (Economic Policy Institute). |
| amended until in 1998. Such provisions are necessary | | | | As for Canada, all else equal, the tri-bloc member |
| as each country tries to improve its international | | | | country has one specific pressing issue, losing its |
| trade relationship with other trade partners. "The | | | | water to the U.S. as a result of NAFTA. According to |
| agricultural provisions of the U.S.-Canada Free Trade | | | | Inter Press Service; under the North American Free |
| Agreement, in effect since 1989, were incorporated | | | | Trade Agreement, Canada lost control over its |
| into the NAFTA. Under these provisions, all tariffs | | | | energy resources. Now, with "NAFTA-plus", it could |
| affecting agricultural trade between the United States | | | | also lose control over its freshwater resources, say |
| and Canada, with a few exceptions for items | | | | experts. Canada's water is on the trade negotiating |
| covered by tariff-rate quotas, were removed by | | | | table despite widespread public opposition and |
| January 1, 1998. Mexico and Canada reached a | | | | assurances by Canadian political leaders, said |
| separate bilateral NAFTA agreement on market | | | | Adèle Hurley, director of the University of |
| access for agricultural products. The | | | | Toronto's Programme on Water Issues at the Munk |
| Mexican-Canadian agreement eliminated most tariffs | | | | Centre for International Studies. "A new report |
| either immediately or over 5, 10, or 15 years. Tariffs | | | | released Sep. 11 by the programme reveals that |
| between the two countries affecting trade in dairy, | | | | water transfers from Canada to the United States |
| poultry, eggs, and sugar are maintained" (United | | | | are emerging as an issue under the auspices of the |
| States Department of Agriculture, Foreign Agricultural | | | | Security and Prosperity Partnership (SPP). The SPP -- |
| Service). | | | | sometimes called "NAFTA-plus" -- is a forum set up in |
| Since its implementation, some of the tri-bloc | | | | 2005 in Cancún, by the three partners, |
| partners seem to have greatly benefited from the | | | | Canada, United States and Mexico"( Inter Press |
| trade agreement, with the exception of the United | | | | Service). |
| States. According to NAFTAnow.org, its official web | | | | In addition to Canada being a large supplier of fresh |
| site, as of 2007's NAFTA's fiscal report indicate that | | | | water to the United States, this may be a surprise to |
| NAFTA members have a combined population of | | | | some that, Canada is also the largest supplier of |
| over 439 million, with a combined Gross Domestic | | | | crude oil to the United States. "Canada exports more |
| Product (GDP) of $16.2 trillion, and the number of | | | | crude oil to the United States than any other nation, |
| jobs created since 1993 are more than 39 million, with | | | | including Saudi Arabia. All of that oil, along with a |
| a national employment level of 205.8. "In terms of | | | | gusher of natural gas, comes free of any kind of |
| combined purchasing power parity GDP of its | | | | export controls or tariffs, courtesy of NAFTA. In |
| members, as of 2007 the trade block is the largest in | | | | fact, the United States consumes almost 100 percent |
| the world and second largest by nominal GDP | | | | of Canada's energy exports" (Salon.com). |
| comparison. It also is one of the most powerful, | | | | So, who actually benefits the most from the North |
| wide-reaching treaties in the world" (NaftaNow.org). | | | | American Free Trade Agreement? According to the |
| On an individual member basis, Canada has a | | | | Office of United State Office of Trade |
| population of 33 million as of July 2007, and achieved | | | | Representative, when NAFTA was implemented 10 |
| a record GDP of $1,425 billion, while its trading with | | | | years ago, it created the world's largest free trade |
| NAFTA partners reached $542.9 billion. Its inward | | | | area, which now links 426 million people in an area |
| Foreign Direct Investment among NAFTA countries | | | | which produces more than $12 trillion worth of goods |
| for 2006 was $235.1 million, while the number of jobs | | | | and services. During the past decade, NAFTA |
| created in the U.S. between 1993 and 2007 was 4.1. | | | | partners have been conducting business within a |
| Its national employment level is 16.9 million. For the | | | | framework that is extremely open, governed by |
| United States, its population, as of July 2007, is 301.6 | | | | clear rules and accessible enforcement mechanisms, |
| million, with a GDP of $13,844 billion, and $870.2 billion | | | | with the goal of greater economic integration and |
| in trade with NAFTA Partners. As of 2006, the United | | | | cooperation. |
| States achieved over $165.1 billion in inward Foreign | | | | "In the first decade of NAFTA, U.S. manufacturing |
| Direct Investment among NAFTA countries, while the | | | | output soared, U.S. employment grew, and U.S. |
| number of jobs created between 1993 and 2007 | | | | manufacturing wages increased dramatically. Income |
| reached 25.8 millions, and its national level | | | | gains and tax cuts from NAFTA were worth up to |
| employment was 140.0 millions. For the third member | | | | $930 each year for the average US household of |
| country, Mexico, its population in July 2007, was 105.2 | | | | four. While, for Mexico, wages in export-related |
| million, and it reached a record GDP of $886 billion, | | | | industries are 37% higher than the rest of its |
| while its trade with NAFTA partner reached $375.4 | | | | economy. Mexican wages and employment tend to |
| billion. In 2006, Mexico reached an inward Foreign | | | | be higher in states with higher foreign investment and |
| Direct Investment of $129.1 billion among NAFTA | | | | trade, and migration from those states is lower. |
| countries, and the numbers of jobs created in Mexico | | | | Wages are also higher in sectors with more exposure |
| between 1993 and 2007 were 10.1 million, while its | | | | to imports or exports. Two-way agricultural trade |
| national employment level rose to a record 42.9 million | | | | between the United States and Mexico increased |
| (NAFTANow.org). | | | | more than 125% since NAFTA went into effect, |
| Each of the NAFTA's three-member countries seems | | | | reaching $14.2 billion in 2003 compared to $6.2 billion in |
| to have amassed a great success as a result of | | | | 1993. As for Canada, merchandise exports to the |
| international trade, with Mexico and Canada being the | | | | United States expanded by 250% since 1989 and |
| most beneficial nations. "Trade liberalization has | | | | account for 87.2% of Canada's total merchandise |
| transformed and modernized Mexico's vibrant | | | | exports. Foreign Direct Investment in the finance and |
| economy by successfully boosting trade and | | | | insurance industry accounted for 36% of Canadian |
| investment flows. Within just a few years, Mexico's | | | | FDI in Mexico in 2001, while not even registering in |
| exports have diversified from primarily oil to include | | | | 1989" (Office of the U.S. Trade Representative). |
| an array of manufactured products, making Mexico | | | | All these numbers and reports are good and highly |
| one of the largest exporters in the world. While, one | | | | enticing, however, more and more people in the U.S. |
| in five jobs in Canada is linked to international trade, | | | | have lost their jobs. According to the United States |
| and Canada's prosperity is built on its openness to | | | | Department of Labor, about 600,000 jobs were lost |
| international trade and investment. As such, the North | | | | towards the end of January 2009 alone. One can |
| American continental partnership is without a doubt | | | | easily blame NAFTA, India, China or other countries |
| an important competitive advantage for Canada. | | | | offering lower wages that in turn cause to attract |
| Canada is using this continental platform as a way to | | | | many US companies to ship jobs to these countries. I |
| help Canadian business embrace commercial | | | | am of the opinion that from a macro-employment |
| opportunities around the world. As for the United | | | | perspective, on a long-term basis, NAFTA is not |
| States, the largest and most diversified economy in | | | | entirely the only cause of the current high rise of |
| the world, its market economy whose businesses are | | | | unemployment in the United States. It's actually true |
| world leaders in the manufacturing and high-tech | | | | as reported that most U.S. companies have shipped |
| sectors, especially computers, medical equipment, and | | | | and outsourced jobs overseas, as a result of NAFTA. |
| aerospace, and in services, including financial services | | | | However, most of these jobs are low paying jobs |
| and telecommunications, and in agriculture, may have | | | | that most Americans wouldn't have wanted in the |
| benefited equally" (NAFTANow.org). | | | | first place. In a short run, it may be true that NAFTA |
| The data and summation herein provided seem to | | | | has caused the high rise of unemployment in the U.S., |
| indicate a huge success in partner trade between the | | | | but looking at the long term, as most companies |
| NAFTA country-members, however, many critics are | | | | choose to have their goods and services |
| not so merry-and-jolly about the free trade | | | | manufactured in countries with low paying wages, |
| agreement. Most blames the huge loss of jobs, as | | | | these companies then transfer the goods, as |
| U.S. companies outsource and ship jobs to Mexico, | | | | manufactured in foreign countries, and sell them in |
| Latin America and South East Asia as a result of this | | | | the United States, at a far cheaper price than if they |
| liberalized trade agreement. "Debate a decade ago | | | | were manufactured locally. Also, as these companies |
| over the North American Free Trade Agreement, or | | | | transfer these goods from their overseas plants to |
| NAFTA, drew loud warnings that liberalized trade with | | | | the United States, they are causing to the price labor |
| Mexico would lead to huge job losses in the U.S. | | | | to increase, meaning that people with more |
| Trade with Mexico has soared since NAFTA's debut | | | | experience and or better education and training are |
| in 1994, but recent studies have concluded that the | | | | now, in a long run, able to find better and high paying |
| U.S. did lose more jobs in various industries than it | | | | employment. In addition, overseas customers, even |
| gained because of the pact" (Wall Street Journal, | | | | for the same low paid labors, are now able to afford |
| December 8, 2008). | | | | to buy American goods and services, even prior to |
| In fact, the issue with NAFTA has been some of the | | | | being shipped back to the U.S., and in return, the U.S. |
| main focus by both candidates during the 2008 U.S. | | | | companies can then repatriate profits from their |
| presidential and primaries campaign. The presidential | | | | foreign operations and reinvest it back within the U.S. |
| candidates, Obama, McCain, and Clinton, both agreed | | | | Overall, in doing so, better paying jobs in the U.S. |
| that NAFTA was a mistake. The main blame was | | | | continue to rise, the U.S. GDP continues to grow, and |
| that NAFTA has caused a huge loss of employment | | | | the overall economy may be better off, in the long |
| to many Americans, as most jobs were shipped | | | | run. However, there seem to have an empty vacuum |
| overseas to countries who are offering cheap labor, | | | | between classes of American people; the low income |
| while those who still hold on to their jobs in the U.S., | | | | families versus middle income families. As a result of |
| have seen their wages shrinking to the lowest, | | | | U.S. companies shipping low paying jobs overseas, |
| coupled with huge pay cut, reduced benefits and | | | | those with less or no education and in this case, less |
| most times, no medical insurance benefits, all as a | | | | productive, may end up not having jobs, and those |
| result of an increase labor demand versus shortage in | | | | with a college education, special training, expertise or |
| labor supply. "Campaigning in Ohio, a formerly industrial | | | | specialization may continue to find better paying |
| state that is rapidly becoming a postindustrial state, | | | | employment. |
| both Hillary Clinton and Barrack Obama expressed | | | | In the process, those who continue to find no better |
| reservations about the trade deal and suggested it | | | | paying employment because of lack of education, |
| might need to be revisited. Clinton tried to make a | | | | special training or specialization, they may end up |
| meal over a report that Obama economic adviser | | | | living on social welfare and in poverty. Whereas, who |
| Austan Goolsbee, a University of Chicago professor | | | | choose to upgrade themselves with current |
| and an occasional Slate contributor, told Canadians | | | | economic condition may continue to live a better and |
| that Obama's anti-NAFTA rhetoric was just for show | | | | mostly fulfilled life, as a result of gaining better and |
| and that they should trust in Obama's free-trade | | | | high paying employment. "Contrary to what some |
| credentials" (Newsweek). | | | | say, Ohio is benefiting from trade and from NAFTA |
| Like the then presidential candidates, most people in | | | | in extraordinary ways, and no one more than the |
| the U.S., especially in certain states that have lost | | | | state's manufacturers. According to the Bureau of |
| most jobs such Ohio, Michigan, and others, NAFTA is | | | | Labor Statistics, a total of 777,000 Ohioans are |
| not that popular. It's seen as the devil that snapped | | | | employed in manufacturing. These workers produced |
| away people's meals and well-being. "Mexico and | | | | $36.5 billion worth of exports in 2006. Exports to |
| Canada aren't really Ohio's main problems. The last | | | | Canada and Mexico account for about $20 billion in |
| time I visited the state, I went to a steel plant | | | | Ohio's manufacturing output. Do the math. Ohio |
| outside Cleveland where one of the furnaces was | | | | manufacturers are bringing in export revenue of |
| being dismantled and sent to ... China. The state, | | | | $25,000 for every factory worker they employ. The |
| which has lost large numbers of manufacturing jobs, | | | | average manufacturing worker brings home a salary |
| is currently experiencing the negative aftereffects of | | | | of about $42,000. How could Ohio manufacturers |
| an economic boom (high unemployment and | | | | make their payroll without their huge and growing |
| foreclosure rates), even though it never felt many of | | | | sales to Canada and Mexico? The short answer is, |
| the boom's benefits. So what accounts for the | | | | they couldn't. Too often, arguments over trade miss |
| state's visceral hostility to NAFTA? The Wall Street | | | | the simple fact that "free trade" agreements like |
| Journal yesterday published a poll showing that | | | | NAFTA are all about fair trade. The U.S. average duty |
| Democrats in Ohio disapprove of NAFTA by a 59-13 | | | | on imports is about 2 percent. But countries such as |
| margin. (In Texas, only 40 percent of Democrats | | | | Colombia and South Korea impose an average tariff |
| disapprove, while 33 percent approve.) As my | | | | on U.S. manufactured goods of 11 percent - just as |
| NEWSWEEK colleague Keith Naughton notes, Mexico | | | | Mexico did before NAFTA. For the nation as a whole, |
| holds a special symbolic status for employees of | | | | just 35 percent of exports go to our NAFTA |
| automakers and similar smokestack industries, which | | | | partners. What this means is that Ohio depends more |
| used to be large presences in Ohio and which moved | | | | on exports to our NAFTA trading partners than other |
| big chunks of their production south of the border in | | | | states. Ohio's exports to Canada and Mexico have |
| the 1980s and '90s" (Newsweek). | | | | more than doubled since 1994, when NAFTA came |
| However, in Mexico and Canada, the resentment on | | | | into force. Imagine how much more of the |
| NAFTA is not as the same in the U.S. Most people in | | | | international market would have been open to Ohio |
| Mexico deem NAFTA as the blessing in the sky, | | | | manufacturers had our national leaders not |
| because it has caused to create more and better | | | | demagogued free trade agreements with these |
| paying jobs in most part of the country, in which for | | | | countries as bad for America" (The Hillsboro |
| years most residents lived on scrapping farm produce | | | | Times-Gazette). |
| for their daily consumption. And, as more and more | | | | NAFTA is a subject with many supporters and |
| U.S. companies open up large manufacturing plants in | | | | opponents, each group with its own views. Until the |
| most areas in Mexico, more and more Mexicans | | | | economy starts to rebound from its current |
| found themselves plagued by a huge selection of, | | | | condition, this is a subject that may not be easily |
| better paying employment , which even though most | | | | resolved. We will continue to debate and write about |
| account for less than $2 an hour, still makes a big | | | | it, and neither one of us may ever come to an |
| difference to them. "The fact that Mexican firms | | | | agreement on what is good or bad as a result of |
| now export large quantities of goods to Canada and | | | | NAFTA. |
| the United States means they are creating jobs-and | | | | |