The North American Free Trade Agreement, most commonly known as NAFTA, is a trade agreement between Mexico, Canada, and the United States. It was signed into effect on January 1, 1994 by former President Clinton with the hopes of improving the economy of all of the countries involved as well as promoting growth and job creation. It greatly reduced the boundaries that were involved in trading and investing from one country to another by reducing tariffs and restrictions. While it may have seemed like a wonderful idea at the time, it certainly created undesirable situations and had some hefty consequences. If we want to truly understand the effects that NAFTA has caused in these three countries, we need to look at all of the benefits and drawbacks that ensued.
Advantages of NAFTA
1. Lowered Prices In All Countries
Being able to import and export goods to different countries with less penalties, the competition in many markets rose dramatically. This competition created price wars for things like produce, greatly driving the prices down for consumers.
2. Increased Variety Available
Certain things that where native to one single country, where made available to all three of them. This improved the quality of food and increased the variety of products available greatly. This mainly benefited Mexico.
3. Created A Wealth Of Jobs
Since businesses could invest in other countries, it also created jobs in those countries. This helped to lower the unemployment rates as well as the poverty rates in these countries.
4. Wage Increases
All three of the countries involved in the NAFTA agreement had significant wage increases across the board. The country whose wages increased the most was Mexico, with a 1.3 percent increase. The United States experienced an increase of .17 percent and Canada had a .96 percent increase in wages.
5. Greatly Increased Trade
The amount of trade being conducted between these three countries greatly rose. In the first 15 years that NAFTA was put into place, there was a surplus of trade goods of over 28 trillion dollars. This helped to boost the economy and improve the global standing of these three countries.
Disadvantages of NAFTA
1. Trade Can Still Be Stifled
While NAFTA did do away with all of the tariffs associated with international trade, it kept the majority of their regulations in place. These regulations can still slow down trade among the countries involved, which dilutes the true power that the North American Free Trade Agreement truly has the power to have.
2. Mexico Greatly Suffered and Still Does
Mexico relies heavily on farmers. These farms used to supply all of the produce in Mexico, but once NAFTA came into effect, the United States was able to start importing produce there. The large scale productions in the U.S. and the streamlined methods of production cannot be matched by the small Mexican farms. This caused them to lose their business, and over a million jobs in Mexico farming where lost because of this.
3. A Loss of Jobs Occurred
Labor and workers could be found much cheaper in countries like Mexico, which prompted many businesses and companies in the United States and Canada to move their operations to Mexico. Many jobs were lost due to these shifts.
4. The Environment Is Impacted
Factories, farms and other types of businesses in Mexico needed to compete with big operations in the United States. In response to this they began using more chemicals and fertilizers on their crops. This has caused an increase in pollution to the environment all over Mexico.
Important Facts About NAFTA
