Term Paper on The socio-economic and political ramifications of NAFTA in the United States and Mexico
The United States, Mexico, and Canada applied the North American Free Trade Agreement (NAFTA) in January 1994, the biggest free trade region in the world. The objective of NAFTA is to generate better trading conditions through tariff decline, elimination of investment barriers, and progress of intellectual property protection. NAFTA remains to regularly lessen tariffs on set dates and intends to remove all tariffs by the year 2004. Before NAFTA was recognized, investing in Mexico was a tricky procedure. Investors required the Mexican Government's backing and were also estimated to comply with specific investment guidelines. These necessities required investors to export an established level of goods and services, make use of domestic goods and services, and transport technology to competitors. Under NAFTA, investors no longer require government endorsement to invest and are dealt with as domestic investors. NAFTA has also augmented intellectual property rights and permitted companies to acquire copyrights in Mexico and Canada. Formerly, companies were doubtful to export research and development intensive goods; with amplified intellectual property protection, nonetheless, exports of these goods have exposed a definite increase.
As a consequence of improved trading circumstances, exports and imports of most other goods have augmented along with the research and development intensive goods. In Mexico, the removal of investment obstacles has permitted investment to develop. Augmented trading and investment has then shaped many jobs, raised the Gross Domestic Product, and worsened consumer prices. The free trade that NAFTA has recognized among the United States, Mexico, and Canada has to a great extent helped the U.S. economy. This widespread growth is attributed mainly to the reduction of tariffs. As tariffs were let down, U.S. goods became cheaper and more cutthroat in Mexican and Canadian markets, and at this inferior price level the size demanded of U.S. goods greater than before. So it becomes less costly for U.S. firms to provide goods to Canada and Mexico as the supply curve shifts up. So as to meet the new order, the firms must hire new workers and augment investment. The boost in employment and investment then directs to amplified national income. The work of NAFTA has also assisted to help Mexico's economy; in accord with the United States' economy, Mexico's exports have amplified, more than doubling since 1993.
The removal of investment barriers has sourced a spectacular rise in foreign investment. NAFTA has facilitated Volkswagen, IBM, and the textile industry to try to find labor and materials in Mexico. NAFTA has also permitted IBM to produce plants in Guadalajara that would otherwise have been constructed in Asia. Mexico's textile industry has developed as a consequence of NAFTA, in 1996 overtaking China to become the biggest supplier of textiles to the United States. U.S. mills put in hundreds of millions of dollars to construct plants in Mexico as a result of the condensed tariffs and shipping time. Free trade under NAFTA has also supported international specialization, the manufacture of only the goods that a fussy economy can generate most resourcefully. If the U.S. for instance, is competently manufacturing cars and Mexico, manufacturing corn, then the U.S. should make only cars and Mexico, only corn. They are more resourceful if they each manufacture at they’re highest output, and trade for other goods. International specialization adds to efficiency, lowering consumer prices; consumers no longer have to give for inefficiently produced goods. With all the high-quality effects of NAFTA regrettably there is some negative effects. One of the utmost impacts on Canadian and United States economies has been loss of jobs and reduced wages. Even though NAFTA has fashioned jobs in the export sector, other production industries have shifted their facilities to Mexico where wages are poorer and operating costs are inferior. Also, wages in Canada and the United States have been monitored and in some instances decreased by the hazard of job loss connected with companies moving to Mexico if employees were not eager to work for less benefits or wages. On a whole, it is supposed that workers rights have lessened somewhat because employers now can employ cheaper labor. In the United States and Canada some wages are vegetating if not waning somewhat. Additionally, many border workers on the United States and Mexican sides have lost their service when factories were moved to other regions where lower wages assisted to reduce production costs and add to profits. In spirit, the larger corporations and businesses have gained from NAFTA while smaller companies have been successfully erased from the economic equation.
The invasion of immigrants from Mexico has augmented even though some see this as only momentary but however has also led to damage of jobs or wages for some Americans because the immigrants will work for minimum wage more willingly and normally do not have the power heavy unions to defend them. The agricultural division from all sides has seen a variety of unfavorable effects of NAFTA. United States and Canadian exports are rising in the agricultural sector but the worth of the exports has reduced because of competition from the south. Mexican farmers have also seen augmented exports but have lost their government subsidies, which in fact contradicts the profits from increased exports. There are many advantages of NAFTA, which are amplified employment, elevated national income, higher productivity, and lower consumer prices. The negative effects are augmented pollution, loss of U.S. jobs, and unjust treatment and hazardous conditions for Mexican workers. The payback certainly outweigh the negative effects in the long run because better economies will hoist the standard of living and endorse better on the whole economic growth in all of North America. The actual results of the North American Free Trade Agreement have been much different than the predicted ones. Unfortunately for the United States, the predictions were far too optimistic when forecasting the affects on the U.S.
United States Agriculture After NAFTA
Many economists were predicting that NAFTA would bring higher average farm
incomes, and increases in the number of farming households, as farm exports
to other NAFTA countries increased. United States farm exports to Mexico
have grown by 35 percent. This, however, has not translated into an increase
in net farm incomes. Approximately 45 percent of small to mid-size farms
have experienced declines in their income level. The expected increases in
the number of farms in the country are not present either. The number of
small to mid-size farms in America has actually declined over 10 percent
since the adoption of NAFTA.
The United States agricultural producers have to compete with agri- business
in Mexico, that is, big business farming. A few rich businessmen are getting
richer by exploiting the cheap Mexican labor, lower health and safety
standards that are much easier to meet, and less stringent environmental
standards.
Areas Hardest Hit By NAFTA
Currently, U.S. agriculture is in a serious crisis situation. The hardest
hit American farmers are wheat, fruits and vegetables, and tomatoes. One of
the hardest hit areas has been Florida. Tomato farming is traditionally a
very large business in the state of Florida. However, with the flood of
Mexican tomatoes entering their market, it is quickly dying out. Mexican
tomato exports to the U.S. have increased by 65 percent during the period
between 1993 and 1998. Over 100 tomato farms and 25 packinghouses have gone
out of business in Florida alone. As for the economic growth that NAFTA was
supposed to bring U.S. agriculture, it is not evident either. The loss of
tomato farming in Florida has lowered farm revenues by 1 billion dollars.
This is not the only example of trends like this beginning to become
evident. Prior to NAFTA, brussels sprouts consumed in America were grown
almost entirely in California. During the six years that NAFTA has been in
existence, the number of sprouts imported from Mexico has increased by over
50 percent. California farmers cannot compete with Mexican agri-business
because of the drastically lower labor rates in Mexico. Mexican farm
laborers are paid, on average, $6 per day, while farm labor in the U.S.
makes that in an hour.
Consumer Aspects of NAFTA
It was expected that consumer prices would decline as a result of the
agreement. Lower production costs should result in lower sales prices.
However, this is not the case either. Prices for most agricultural products
have remained constant or risen moderately since NAFTA was signed. Average
consumer prices for tomatoes have actually risen 16 percent since NAFTA
began. The consumer is not feeling the lower production prices, because they
are being transferred into more profit for agri-business rather than being
passed on to suppliers and consumers. (tiger.towson.edu)
Works cited
Actual Outcomes From NAFTA, November 28, 2001,
http://tiger.towson.edu/users/mogle1/outcomes.html
The effects of NAFTA expansion on U.S. forest products exports, November 28,
2001,
www.rtp.srs.fs.fed.us/econ/pubs/jpp971.htm
Chicago Rally Blasts FTAA, Effects of NAFTA, November 28, 2001,
www.ranknfile-ue.org/uen_0501_chicagoftaa.html
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