Benefits Of The North American Free Trade Agreement
Two decades ago, Guillen says, “people knew that trade within NAFTA was going to increase, so the U.S., Canada and Mexico would act more with each other. We also knew that low-wage production ranged from Canada and the United States to Mexico. And of course, some of them are also being moved to China and elsewhere, but Mexico has the advantage of moving closer to the United States. He acknowledges that Mexico has a trade surplus with the United States – “and NAFTA has accelerated things. But the United States has a trade deficit with 90% of the world`s countries. Mexico is therefore not unique. In fact, the U.S. also has a deficit with Canada, mainly because of oil and gas. Under NAFTA, total trilateral merchandise trade has more than tripled since 1993 relative to the sum of each country`s imports by its other two NAFTA partners. It is difficult to find a direct link between NAFTA and general employment trends.
The Economic Policy Institute, partially funded by unions, estimated that 682,900 net jobs were ousted in 2013 by the U.S. trade deficit with Mexico. In a 2015 report, the Congressional Research Service (CRS) said NAFTA “did not cause the huge job losses feared by critics.” On the other hand, it allowed that “in some sectors, trade-related effects could have been greater, particularly in sectors more exposed to the elimination of tariff and non-tariff barriers, such as textiles, clothing, automotive and agriculture”. Before NAFTA came into effect in 1994, the auto industry was isolated and regional across North America, and most vehicles were designed for the markets where they were sold, notes Michael Robinet, general manager of IHS Automotive, a Michigan-based consulting firm. “The rest of the world didn`t want our vehicles” because they lacked the size and mileage consumers demanded. In the southern United States, Mexican administrations have adopted a policy known as “import substitution” and contrary to free trade. Protected by high import duties, import licenses, and quotas, Mexican factories were infamous for producing low-quality goods, even unpopular in their domestic market. The immediate objective of NAFTA was to increase cross-border trade in North America, and in this regard it has undoubtedly been successful.
Reducing or eliminating tariffs and removing certain non-tariff barriers, such as. B Mexican local content requirements, NAFTA has led to an increase in trade and investment. Most of the increase came from trade between the United States and Mexico, which totaled $US 481.5 billion in 2015, and trade between the United States and Canada, which amounted to $US 518.2 billion. Trade between Mexico and Canada, while by far the fastest growing channel between 1993 and 2015, was only $34.3 billion. In fact, NAFTA was negotiated by Bill Clinton`s predecessor, George H.W. Bush, who decided to continue discussions on opening trade with the United States. Bush initially tried to reach an agreement between the United States and Mexico, but President Carlos Salinas de Gortari insisted that a trilateral agreement be reached between the three countries. After talks, Bush, Mulroney and Salinas signed the agreement in 1992, which went into effect two years later after Clinton was elected president. A number of NAFTA benefits reduce the cost of consumer goods in all three countries. Creating a single business space allows companies to achieve much better economies of scale. A Canadian device manufacturer now has access to a much larger marketplace that reduces costs.