Nafta North American Free Trade Agreement Essay

, Research Paper

FREE TRADE, ENVIRONMENT AND DEVELOPMENT COOPERATION BETWEEN THE UNITED STATES, CANADA AND MEXICO:

RESEARCH INTO THE NORTH AMERICAN FREE TRADE AGREEMENT

INTRODUCTION

In January 1994 the United States, Mexico and Canada entered into the North American Free Trade Agreement (NAFTA) and created the largest free trade sector and the richest market in the world. The treaty was said to benefit over 400 million consumers all over the world. Chile was even recently added to the treaty in 1995 and will become a full member within the next century.1

NAFTA is a regional trade pact that calls for the elimination of all tariffs and trade barriers existing among Canada, Mexico, and the United States. It is unique because the treaty created the largest free trade zone in the world and outlined economic policies as well as address issues like the environment and labor conditions.2 NAFTA also includes bilateral provisions intended to resolve sensitive issues between trading partners.

This regional integration is said to lead to benefits for North America like those members of the European Community, because it would create a single market for millions of people producing and consuming goods and services. For Mexico, the agreement establishes an agenda for continued progress and further economic reforms. For Canada, the treaty extends the 1989 Canadian-American Free Trade Agreement and promises additional benefits for manufacturers, consumers, and the agricultural sector. For the U.S. though, NAFTA is slightly controversial, since it allows businesses to go against labor unions, and skilled professionals to go against unskilled factory workers. This concerns many people because they are threatened on losing their jobs to Mexican laborers if US companies decide to move south. The potential loss of American jobs and the lack of environmental protections caused disagreements and reasons to reject the agreement.3

It has been five years now since the North American Free Trade Agreement was signed, and some say it failed to produce its promised benefits. NAFTA’ promoters have now acknowledged that prosperity, jobs, and environmental clean up has not unfolded. What happened to NAFTA, was it a Failure.

BACKGROUND AND FRAMEWORK OF NAFTA

NAFTA had many important goals in the beginning. Its first major goal was to reduce barriers to trade such as tariffs, licensing and quotas. This was accomplished by decreasing or removing import and export tariffs from all three countries and allowing trade goods to flow to all of the treaty members without restriction as long as the goods met the standards as outlined in the treaty.4

Another goal was to improve working conditions in North America. It was proposed that increasing trade and standards would cause working conditions to improve through increased wages and safer facilities. Creating an expanded and safe market for exports/imports and services was also a goal and is ongoing even today as more goods and services flow across the borders. Trade rules that were beneficial to all treaty members were established and have ’standardized’ the quality of all trade items as well as provided the environmental support to “clean-up” any environmental “hot spots”. The last major goal of the treaty was to foster world trade and set the example for trade cooperation in the world environment and encourage other countries to establish more free trade areas.5

Over 400 million consumers are receiving the benefits of newly opening investments and development opportunities. North American industries in particular have great opportunity with exports as the driving force, elimination of the tariffs, effective procedures to resolve trade disputes, standardization of goods between all treaty members and “free-flowing” cross border movement of goods and services. Economic growth would increase with the increase of international trade, which in turn create a more efficient use of resources, lowers costs and would promote increased competition, lowering costs for both producers and consumers. Increases in income caused by economic growth would be a powerful source to expand markets especially for Mexico because of its’ low average income. 6

Economic concerns for each treaty member were numerous at the outset of the treaty, with the number one concern for Canada and the United States of lost jobs with corresponding unemployment and the emigration of industries to Mexico with its cheaper wages and resources. Mexico was initially concerned that increased influx of Canadian and United States industries would cost it huge loss of territorial lands for the new factories and facilities. Immigration of migrants to the United States from Mexico was another concern. Assuming that the dislocation of laborers would increased competition for jobs. These major concerns proved to be less of a problem than first expected because all three countries have benefited from the treaty but not without some initial problems. Other economic concerns were higher prices in Mexico and lowering of wages in Canada and the United States. On the whole wages increased in all of the three nations, but Mexico still remains under the poverty level in some regions. 7

EXCHANGE OF GOODS AND SERVICES

The big winners under NAFTA have been large “agricultural businesses” who exploit the below-ma