Nafta Expansion Essay Research Paper Should the

Nafta Expansion Essay, Research Paper

Should the United States Pursue the Expansion of NAFTA.

Statement of the Problem

The North American Free Trade Agreement (NAFTA) entered into force on January 1, 1994. It created the world’s largest free trade area: 380 million people producing nearly $8 trillion worth of goods and services. One of NAFTA’s primary objectives is to, “contribute to the harmonious development and expansion of world trade and provide a catalyst to broader international cooperation” (US Trade Rep.). To ensure its role in advancing world trade NAFTA must expand its boundaries to the Caribbean as well as Central and South America.

Assumptions

The NSS claims that enhancing access to foreign markets is necessary for promoting prosperity. It states, “Our prosperity as a nation in the twenty-first century also depends upon our ability to compete and win in international markets”(NSS). The expansion of NAFTA into Central and South America will benefit US trade by reducing tariffs in one of the fastest growing regions in the world. The reduction of tariffs will improve the US’ ability to access foreign markets by virtually eliminating the costs to enter the markets. This will enable US corporations to sell their goods at lower prices, therefore allowing the people of the region to purchase US goods. This ability to access such markets will eventually increase the number of capital intensive jobs available in the US. The institutions and mechanisms that NAFTA created have smoothed the path to allow North American businesses to trade, invest and position themselves for better productivity and comparative advantage, thus making our economies stronger against shocks, such as Mexico’s 1994 peso crises. NAFTA does not just safeguard US businesses, it protects the markets that provide employment for our workers.

Internationally, the advancement of NAFTA will help create new employment opportunities, and improve working conditions and living standards abroad by opening up the US marketplace to their major industries. Opening up trade will also enable the countries of the region to sustain economic development. Improved economic conditions have become an important political stabilizer, as it has effectively increased the cost of instability (Harvard Int. Review, Fall 97; pg. 28). The expansion of NAFTA will have as much of an impact on political advancement as it does on economic advancement. Free trade is a necessary ingredient in creating sustainable development, which is important in the consolidation of democracies. In order to assist in the transformation to stable democracies, the countries of Central and South America need access to the North American free market (H.I.R., Fall 97; pg. 28). Free trade increases economic competitiveness. This will aid in establishing the norms of political competitiveness, a key factor in stabilizing a democracy.

The NSS states that, “our prosperity at home depends on our leadership in the global economy” (NSS). The US’s involvement in future agreements will enable it to maintain its leadership role in the globalized market. An agreement with Chile and MERCOSUR (Southern Common Market) will strengthen the US’s presence in the region.

Facts

In relation to the size of the economies, US trade with Canada and Mexico has become much larger than that with any other trading partners. In 1996, almost one-third of the US two-way trade in goods with the world was with Canada and Mexico, at $412 billion. Two-way trade with our NAFTA partners has grown 44 percent since NAFTA was signed, compared with 33 percent for the rest of the world (Democratic Leadership Council, 9/97). Mexico and Canada accounted for 53 percent of the growth in total US exports in the first four months of 1997. Canada remains our largest trading partner, and Mexico has recently surpassed Japan as the US’s second largest export destination in 1997 (Tracking US Trade, 2/98). In 1996 trade with these regions supported an estimated 2.3 million US jobs. This is an increase of 311,000 jobs, 189,000 because of exports to Canada, and 122,000 from exports to Mexico (Tracking US Trade, 2/98). In contrast according to The Economist only 117,000 Americans have signed up for benefits offered to workers displaced by NAFTA.

The US must look to the Western Hemisphere for further economic prosperity. Within the last five years, the Western Hemisphere has become the largest regional destination for US exports, accounting for almost 40 percent of US trade in 1996. Goods exported to the Hemisphere in 1996 totaled $242 billion (Tracking US trade, 2/98). Latin America, including Mexico and the Caribbean Basin has a large consumer market, with a population estimated at more than 470 million. The total gross domestic product of Latin America and the Caribbean Basin was about $1.5 trillion in 1995, with growth expected to average 5 percent or more through the year 2000 (Dem. Leadership Council). The US supplies over two-fifths of the region’s imports. There is no other part of the world where the United States is so competitively positioned.

Twenty trade agreements have been negotiated within the hemisphere without US participation. The EU has agreed to sign a free trade agreement with the nations of MERCOSUR. MERCOSUR is the largest preferential trade agreement in Latin America. It consists of Argentina, Brazil,