NAFTA Essays (2472 words) - International Trade,

NAFTA 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. When NAFTA entered into force at least one