North American Free Trade Agreement Essay Research

North American Free Trade Agreement Essay, Research Paper

The North American Free Trade Agreement

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. Over 410 million consumers are able to take advantage of the benefits of this treaty (de Blij, Muller 186). In 1995 Chile was added to the treaty and will become a full-fledged member early in the next century.

The North American Free Trade Agreement is unique because the treaty not only created the largest free trade zone in the world but also outlined economic policies, which set the standard for many other treaties and addressed other issues such as environment and working conditions.

In order to better understand NAFTA, the most important goals of the treaty need to be discussed. The first major goal was to reduce barriers to trade such as tariffs, licensing and quotas. This was accomplished by decreasing or removing import/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. Another goal was to improve working conditions in North America. It was proposed that by increasing trade and a set of standards that working conditions would improve through increased wages and newer 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.

There are many economic incentives for all the treaty members to include access to the larger North American market with over 410 million consumers, new opening investment and development opportunities for North American industries with exports as the driving force, elimination of tariffs (Canadian and United States tariffs were eliminated on January 1, 1998 and Mexico should have all tariffs eliminated by 2008), effective procedures to resolve trade disputes, standardization of goods between all treaty members and “free-flowing” cross border movement of goods and services. Increased international trade would be a source of economic growth, which would in turn create a more efficient use of resources, lowers costs and would promote increased competition, which lowers 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. All of these reasons were a great incentive to all treaty members.

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 exodus 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. Both of these major concerns proved to be less of a problem than first expected but were not totally baseless as will be discussed later. 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 three treaty nations, but Mexico still remains under the poverty level in some regions. Immigration of migrants to the United States from Mexico was another concern as it was assumed that the influx would increase. Also of concern for all treaty members was the dislocation of laborers, and increased competition for jobs.

One of the benefits that were used as a selling point for the North American Free Trade Agreement was an environmental standard for all three countries, which would help protect the environment and insure standardization of environmental protection laws and enforce these standards to protect future generations (Miller 27). On a whole the North American environment would be strengthened and protected. The North American Free Trade Agreement Commission for Environmental Cooperation (NAFTA CEC) was created to promote increased cooperation on a large area of environmental issues to include endangered wildlife, illegal trade in hazardous and toxic waste and the elimination of toxic chemicals and pesticides. Initially, both Canada and the United States, which already have strict environmental regulations, were concerned that the cost to bring Mexican industries in line with environmental standards would be astronomical, however the cost to achieve some of the goals was offset by the gains made after NAFTA was in effect. Through efforts by the NAFTA CEC, Mexico has agreed to join Canada and the United States in banning DDT and Chlordane, ensuring that these toxic chemicals no longer are produced by the treaty nations or cross the