NAFTA On January 1, 1994, Canada, Mexico and the United States passed the North American Free Trade Agreement (NAFTA). Promoted to Congress by the Clinton administration, with the assurance that it would give rise to more jobs – exactly how many though, is not precisely known. Yet, according to the Journal of Commerce, the U.S. went from having a $5.5 billion trade surplus with Mexico before NAFTA, to having a massive $16 billion trade deficit today. At the same time, it is estimated that 400,000 Americans have lost manufacturing jobs because of NAFTA within the treaty’s first three years, that’s about the same number of jobs which have been created in the Mexican maquiladoras.
Instead of sharing of the wealth and profit, one might think that there has been a big transfer of wealth from north to south of the border and that Mexican laborers have profited at the expense and torment of their American counterparts. The reality is that working conditions, wage, health and safety standards in Mexico have deteriorated. One American employee for a steering-wheel plan made approximately $10.46 per hour, compared to his Mexican counterpart, who makes about $0.75 per hour. Within the agreement, it stated “..the government of Canada, the government of the United Mexican States and the government of the United States of America resolved to establish a free trade area.” In addition, NAFTA also determined to: Strengthen the special bonds of friendship and cooperation among the nations; Contribute to the harmonious development and expansion of world trade and provide a catalyst to broader international cooperation; Create an expanded and secure market for the goods and services produced in their territories; Establish clear and mutually beneficial rules governing their trade; Create new employment opportunities, improve working conditions and living standards in their respective territories; Ensure a predictable commercial framework for business planning and investment. A very important section of NAFTA is the elimination of tariffs, which are charged for imports and exports within the three nations. Along with the eradication of tariffs, the agreement opened up enormous opportunities, creating a $6.3 billion GNP for the three countries. As mentioned in the agreement objective, NAFTA will and should, “create economic opportunities”.
The three nations, following the agreement, will move more and more into the liberalization of trade, at the expense of American and international workers. Under the agreement, the goods and services must be produced within the NAFTA territory to be considered tariff free. Not all tariffs are going to be eliminated at once, the agreement follows staging categories, which are as follows: Immediate elimination of tariffs on 1/1/94: Cattle Computers Jewelry Microwave ovens Passenger cars Telephones Televisions Elimination of tariffs within five years, beginning on 1/1/94: Baseball Caps Cotton Yarns Men’s Pajamas Table Cloths Women’s Cotton Dresses Elimination of tariffs within ten years, beginning on 1/1/94: Cigarettes Cotton Footwear Glassware Luggage Rum Elimination of tariffs after fifteen years, beginning on 1/1/94: Dry Beans Most Fresh Vegetables Orange Juice Peanuts Sugar With this in mind, critics present the problem that Mexican companies may take advantage of tariff free goods, resulting in the switching to low Mexican wages. As a result, United States workers may lose their jobs to Mexican citizens that can be paid less. When President Clinton was one of the Chief Proponents of NAFTA his Council of Economic Advisors brought forward this issue, “..Although wages are lower in Mexico than in the United States, the productivity of Mexican workers is also lower than the U.S.
workers. Moreover, companies make plant location decisions based on a variety of factors in addition to wages, including telecommunications and transportation’s infrastructure and business services, all of which are more sophisticated in the United States” (Arnold, 296). But the latter has not slowed down American companies from going south of the border for cheaper labor and less demanding working conditions from government agencies. So far, companies like Thompson Consumer Electronics, Jay Garment, Magne Tek, Uniroyal Goodrich and Breed Technologies have moved at least 107 plants in Indiana alone. To attempt mutual acceptance, NAFTA has presented readers with their goods and service overview.
The following are short assessments that NAFTA provides: Agriculture: The food everyone eats is very important to every country, thus being our main source of consumption, NAFTA makes it easier for goods to be exported and imported with limited quotas throughout the years of operation. When NAFTA entered into force at least one half of the agricultural exports in Mexico became duty free. This is a great advantage to the United States because it will be able to export as many goods into Mexico, gaining in not only trade, but in economics as well. Now, within the five years of NAFTA operation, the agreement states that most of the remaining tariffs will be eliminated. As the success continues the goal for NAFTA is to disintegrate nearly ninety five percent of the United States agricultural exports with Mexico. This is what is agreed on by the tenth year, and as a result many of Mexico’s import licenses will also be eliminated. Automotive: Increasing competitiveness, creating employment opportunities and reducing prices for consumers is what NAFTA will integrate for the automotive sector.
This is not the only advantage NAFTA is creating; it is also taking part in the termination of Mexican Auto Decree. Which is leading to the elimination of the limits of sales from vehicles imported from the United States or Canada into Mexico. This makes stolen vehicles harder to sell to Mexican civilians. The Amendment to Trade Balancing will also contribute in reducing not only fifty percent on tariffs, but on auto parts from the United States. Thus, Mexico will also allow Canada and the United States to invest in Mexican “national suppliers” of parts as well as in enterprises (Mexico Business, NAFTA).
There is a problem, however, companies only wish to establish firms in the US or Canada but not in Mexico. Energy: With the North American Free Trade Agreement in effect, the United States and Canada have greater access to electricity, gas, petrochemical, energy services and equipment markets from Mexico. This allows for these three Northern countries to share and rely on each other for products that are essential to the everyday lives of their citizens. Through open rules the United States and Canada have the opportunity to sell to PEMEX, the Mexican owned oil company. This gives the United States and Canada a chance to sell their product while also allowing Mexico to buy from its North American neighbors without any hassle or problems. All three nations will benefit from the free trade, which would have been a problem before. For Mexico, in particular the North American Free Trade Agreement will also reduce investments restrictions lifting previous restricted basic petrochemicals.
Overall the program provides performance incentives, which are used on activities such as oil drilling. Environment: On September of 1992, the United States, Mexico and Canada established the North American Commission on Environmental Cooperation. The main objective is, “to set in motion a process for sustained long term effective trilateral environmental cooperation” (Mexico Business, NAFTA). NAFTA does not support substances that deplete the Ozone Layer, such as Montreal Protocol. As presented in the agreement, investment requires the maintenance of stringent health, safety and environmental standards; in which, NAFTA plans to open up numerous opportunities for environmental equipment, firms and services.
The plan is to provide companies which will increase environmental protection such as: solid waste disposal technology, sewage treatment, wastewater treatment, hazardous and non-hazardous waste engineering consulting, water treatment, specialized monitoring services and overall environmental rehabilitation. If these companies are not provided, it could mean harm for our ecology and democracy. Financial Services: The United States, Canada and Mexico have all been benefiting through the agreement of the North American Free Trade Agreement. In Financial Services, the agreement has helped each member of the party …