Political Science: Globalization and Trade
Impacts of NAFTA on the Member States
NAFTA is a free trade agreement that was enacted in the year 1994 and signed by President Bill Clinton. The focus of this agreement is to abolish numerous tariffs that are imposed on products traded among three countries United States, Canada and Mexico (Mary E. Burfisher, Sherman Robinson, and Karen Thierfelder. 2001). In this paper the impact of NAFTA on the member states have been discussed in detail. Some groups advocates that NAFTA is exerting positing influence on its members while the others advocates that it is exerting negative influence on the member economies. The unions and the groups that advocate consumers are of the opinion that NAFTA is exerting negative influence on the economies of United States and Mexico, and the resulting low wages and outsourcing is hurting domestic economy of United States and destabilizing the rural industries in Mexico.
The economists are however saying that NAFTA is gaining momentum and is improving trade relations among the member countries but the critics argue that this agreement has resulted in several failures in the past and so the countries should avoid repeating the same mistake again.
NAFTA has however benefitted its members by eliminating tariff on approximately half of the exports facilitated by Mexico to United Sates and has even gradually removed the other tariffs between the member countries. This pact is proved advantageous and this fact can be analyzed from the fact that the United States have $918 billion in 2010, these dollars are earned from the two way trade with Mexico and Canada and this reality is disclosed by a representative of United States trade (Julian Aguilar. 2012).
The economists describe that the progress is achieved from NAFTA despite of the increase in security measures worldwide after the attacks of September 11 and upsurge of the violence related to drugs in Mexico. Moreover, the policy makers and economists have elaborated the success of NAFTA in current symposium and have also brainstormed methods for building on it and strengthen the economic output. The symposium has explicitly concluded that the future is broadening (Ralph H. Folsom. 2004). The managing director of North American Development Bank is favoring continuation of NAFTA because it is making the region more competitive in the world. But the critics are arguing that it has paved the way to loss of shipping employment and manufacturing in the United States and has resulted in poor production. They also say that NAFTA has dislocated several Mexican workers that are associated with agriculture and they are forced to move into other economic sectors and some are even forced to illegally immigrate to the United States.
Further, they have described that various disparities ate arising in the number of people that are entering in the labor force and number of available jobs. This is leading to huge problems of migration despite of the enhanced enforcement. The supporters of the NAFTA are however not conceived for solving the domestic problems of the member countries instead they are of view that growth in the GDP of the nation speaks out the truth about the positive impacts on the economy. This include creation of a huge number of employment opportunities and numerous trade facilities between Mexico and the United States and the proof of this is that the Ports of El Paso and Laredo are now the busiest ports in United States. This can be analyzed from the figures that approximately $172.5 billion are earned from the trade with Mexico that passed through Laredo Port and $65 billion are earned from trade through El Paso (Julian Aguilar. 2012).
The supporters further say that Mexico’s condition would be worse if it was not a member of NAFTA today. The Congressional Budget office has noted the economic consequences of NAFTA in 2003 and came to the conclusions that the trade between United States and Mexico was increasing before implementation of NAFTA and it would have continued to grow further without reaching on the agreement of NAFTA. The direct impact of NAFTA on the trade between the United States and Mexico is quite small and its direct impact on trade is also a very minute. They further concluded that overall this deal of NAFTA has very slightly increased the gross domestic production of United States and is exerting the same influence on the Mexican and Canadian economies.
In nut shell, the trade relations among Mexico, Canada and the United States have expanded significantly since the implementation of NAFTA, though the experts do not agree to the level to which this widening or expansion is the direct result of the agreement. According to the office of United States Trade Representative Data, the overall, trade in i.e., intra North America’s trade has increased more than three times since the inception of the agreement. The United States Trade Representative however adds that the business investment at regional level has increased in United States up to 117% between 1993 and 2007, compared to the 45% increase fourteen years ago. Trade with NAFTA partners presently account for above 80% of the Mexican and Canadian trade and above third of the American trade (William M. Pride, Robert J. Hughes, and Jack R. Kapoor. 2010).
Trade Situation of Canada
Some experts claim that Canada’s trade condition was much better before the implementation of NAFTA and trade was much liberalized under Canada-U.S. Free Trade Agreement in 1989, before NAFTA in 1994. But many experts also claim that it has exerted positive impacts on the Canadian economy. Since this deal was made in order to reduce the trade tariffs sp United States and Canada are benefitted more from this agreement (Rock Antioe Mehanna and Hannarong Shamsubanafta. 2002). Specifically in Canada, this deal has enhanced imports of the goods over the last five years in the field of machinery, automobile equipments, and communications apparatuses etc. this has improved the condition of the automotive industry of Canada and allowed the economy to make growth and progress significantly.
Considering the fact that in the year 1998, the increase in the exports from Canada to the regions associated with NAFTA is equal to value of the the exports to Japan and fifteen combined nations of the European Union. These simple but evident statistics clearly indicate that positive impact of North American Free Trade Agreement on imports and exports of Canada and to Canada. This remarkable economic growth has however helped in creation of job opportunities and increased paychecks for the workers in Canada (John J. Audley, Demetrios G. Papademetriou, Sandra Polaski and Scott Vaughan. 2004).
Furthermore, in addition to the better economy, the North American Free Trade Agreement helped the workers to explore better employment opportunities by linking the jobs to the international trade that make NAFTA a significant part of the global trade. With the tariff elimination and saving from the tax between the three regions i.e., America, Mexico and Canada, Canada become capable of spending money in order to hire more workers. The increase in the number of workers enables the country to get more income this more income helps the country to earn more profit which ultimately pave the way to the better economy with improved facilities. This is however a large cycle that is occurring since the North American Free Trade Agreement is signed. Moreover, along with NAFTA, a side agreement was also signed which is known as North American Agreement on Labor Cooperation i.e., NAALC (Claudia Perez Pellicer. 2010). The objective of the NAALC is to highlight the worker’s need and the working conditions prevailing in the NAFTA regions.
Further, their aim is to improve the living conditions and living standards of the workers for encouraging the publication and swapping the information on the institutions and laws governing and protecting labor in the three nations. North American Free Trade Agreement has also made it simple and easy for citizens of the Unite States, Mexico and Canada to enter into the countries in order to invest and conduct business. The North American Free Trade Agreement has not only positively affected the occupation rate of Canada but it has also helped to improve the selection as well as good’s cost for the consumers. It has also doubled the agricultural trade in the Canada. The three countries are now enjoying greater profits that are earned from thr trade of agricultural commodities such as grapes, sugar and cotton etc (Steven Zahniser and John Link. 2002).
If consumer perspective is taken into account then it becomes obvious that NAFTA has resulted in low price and better quality and selection of the good in Canada as well as in whole North America. The basic reason for the cheaper and improved quality commodities is the capability of the duty and tariff free trade of the goods that are tagged as the household effects, which include the items for instance carpets, furniture, tableware and paintings within the regions of NAFTS. The savings from these duty free imported products leave the country i.e., Canada with the excessive amount of money in order to spend for importing good with improved and latest varieties and product lines and further facilitates the consumers to do better selection of the products both perishable and imperishable at a reduced cost. NAFTA has also introduced labeling of products in various languages. This is attractive to the customers as well as to the global trade. In Canada there are two languages that are considered as national languages and they are English and French, so NAFTA has allowed labeling in both languages and allowed the country to trade with America and also with other countries such as France, Europe and United Kingdom etc.
Thus in nut shell, the goals of The North American Free Trade Agreement have however been met and are also increasing the overall expectations. Additionally, it is considered as a remarkable success and is also rationale of the economic growth not only for the Canadian economy, but also Mexico and the United States. This agreement has also introduced many jobs and raised salaries for the workers in the three regions. Furthermore, it has also brought good selection of the goods and cheaper prices for the consumers. Due to the North American Free Trade Agreement, the benefits and advantages for Canada have been growing significantly and continue to do so in future.
References
Agular, Julian. “Twenty Years Later, Nafta Remains a Source of Tension”. The New York Times (2012), http://www.nytimes.com/2012/12/07/us/twenty-years-later-nafta-remains-a-source-of-tension.html?_r=0
Mary E. Burfisher, Robinson, Sherman, and Thierfelder, Karen. “The Impact of NAFTA on the United States “. Journal of Economic Perspectives 15, no. 1 (2001): 125-144
Folsom, Ralph H. NAFTA and Free Trade in the America: in a nutshell. St. Paul, MN. : Thomson/West (2004)
Aguilar, Julian. “New U.S.-Mexico Cargo Agreement on Horizon”. The Texas Tribune, November, 16, 2012.
Pride, William M, Hughes, Robert J, and Kapoor, Jack R. Business. Cengage Learning: Nelson Education Limited, USA (2010)
Mehanna, Rock Antione, and Shamsub, Hannarong.“Most from NAFTA? An intervention Time Series Analysis”. Journal of Economic Development 27, no. 2 (2002): 69-79
Audley, John J, Papademetriou, Demetrios G, Polaski, Sandra and Vaughan, Scott. “NAFTA’s Promise and Reality: Lessons from Mexico from the Hemisphere”. Carnegie Endowment for International Peace (2004)
Pellicer, Caludia Perez. “Trade Linkage Policy Applied. U.S. Latin America”. Journal of Politics and International Affairs (2010): 67-81
Steven Zahniser and John Link. Effects of North American FreeTrade Agreement on Agricultureand the Rural Economy. Economic Research Service, USDA.
