NAFTA Essay Research Paper On January 1

NAFTA Essay, Research Paper

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.

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