NAFTA: 2 Years Afta   Term Paper ID:27419 Click to get this paper

Essay Subject: On the occasion of the 2nd anniversary of the implementation of the North American Free Trade Agreement, the positive & negative effects are analyzed. Concludes that the data is inconclusive.... More...

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Paper Abstract: On the occasion of the 2nd anniversary of the implementation of the North American Free Trade Agreement, the positive & negative effects are analyzed. Concludes that the data is inconclusive. Paper Introduction: INTRODUCTION The North American Free Trade Agreement (NAFTA) is intended to promote free trade among the countries of North America by removing trade barriers, tariffs, quotas, and other such barriers. The agreement is quite extensive and includes many provisions related to such things as plant inspection and even wages. The agreement was negotiated among Mexico, the United States, and Canada, and as it was being considered, it was much discussed in terms of what it would mean for the United States and whether on balance it could be considered a positive or negative move for the U.S. The same questions were raised with reference to Mexico and to the benefits that might accrue to Mexico, and the emphasis on Mexico was related to the perception of economic need in that country and the effect the Mexican economy has on the U.S. NAFTA Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. "GOP fast-track plans may split fragilefree-trade coalition." CQ, 1992-1993. Manufacturers have lower costs becausethey do not have to live by U.S. (Sterling, 1996, B9)Salinas believed that Mexico could be brought into the First World by theact of breaking down protectionist trade barriers and by reforming archaic,nonproductive agricultural practices. The agreement also covers onlythings economic, such as financial matters, investment, intellectualproperty, and commerce as well as dispute resolution, banking,transportation, and services. The statistics show, however, that trade betweenthe United States and Mexico increased by over 2 percent, and during thesame period, 1 , jobs were created in the United States. Cornelius, Judith Gentleman, and Peter H.Smith. Opposition to NAFTA, however, was based onfears that the treaty would cost the country a lot of jobs and thatenvironmental standards would be ignored. . and Mexico in1994; 1) the Perkin-Elmer Corp. Dabrowski (1993, March 1). U.S. No measures could be consideredunder this provision unless they were immediately and directly relevant tothe advancement of free trade, which could prohibit the sort ofenvironmental and labor considerations seen in NAFTA. & A. Mexico's exports to the United States roseslightly faster than its exports to other countries. CONCLUSION NAFTA remains controversial after passage as it was before, and mostof the controversy centers on uncertainty as to its benefits or harms.Those who believe NAFTA is a good thing seize on successes, while those whooppose it seize on anything that seems to indicate economic damage or otherharm. merchandise exports toCanada were up 13.5 percent from 1994; 4) Mexico cut tariffs on some chemicals sooner than required; and 5) lawyers were able to appear before a NAFTA trade-disputes panel inMexico City and present arguments in a case of alleged steel dumping,something very different form Mexico's usual writing-only legal tradition--the U.S. (1995, October 2 ). Critics in the U.S. ("Is NAFTA good for the U.S.?," 1994, 15)Pat Buchanan stated that on the contrary, all the ills claimed by criticsof NAFTA had come to pass--the Mexican peso had crashed and wiped outmillions in U.S. Rubin, A.J. trade surplus during the first eight months of 1994. An analyst from theInstitute for International Economics says that technology gains andincreased immigration rather than expanded trade account for as much as 9 percent of the loss of income for U.S. supporters of NAFTAbelieve that the agreement will make it possible to attack Mexico's laborproblems, but in truth this will not be possible without threatening thecountry's political stability or without jeopardizing the economicadvancements achieved in recent years. He says as wellthat the losses in the peso only mean that Mexican labor is growing cheaperand Mexicans are losing jobs in even greater numbers, thus giving incentiveto U.S. The leaders have believed that the only way toattract the foreign capital necessary to stabilize the exchange rate and tofund the ensuing current account deficit would be to provide hesitantpotential investors with guarantees of continuity through economic policyand access to the U.S. He notes that there has been an economic crisis in Mexico andthat a stronger trade pact will help Mexico in the long run and thus helpthe United States at the same time: The deeper our cooperation, the better we will be able to fight together our common problems like drugs and crime and pollution. in August of 1995posted a $1 billion trade deficit with Mexico, a reverse from the $1.5billion U.S. . The Zedillo government in Mexico is seeking a recoveryfrom the worst recession in recent Mexican history. (1995, July 8). (199 ). In truth, therecession in Mexico has been exacerbated by the influence of NAFTA.Sterling (1996) believes that Carlos Salinas and others in his governmentwanted Mexico to be more like the United States but failed to see that muchof what separated the countries involved real cultural differences thatwould not be so easily overcome: They saw economic development essentially in abstract terms, as if statistics had a universal validity and life of their own, applicable to any situation, any country, regardless of historical or unique internal factors. The glaring socioeconomic problems in Mexico can no longer be ignored.Sterling sees a new Mexico coming into being, though slowly and withgrowing pains (Sterling, 1996, B9). as companies move south to Mexico, while environmentalists feared thatNAFTA would both undermine American laws and also devastate the Mexicanenvironment as polluters move south ("After NAFTA," 1993, 71). One analyst believes this situation will continue in the nearfuture and sees no chance of improvement in the Mexican real GDP in 1996.This also means that U.S. RECENT FIGURES Recent reports show that the consequences of NAFTA have not been asharsh as critics have charged any more than the benefits have been asoriginally promised. Thereis opposition from an unlikely coalition among protectionist Republicanconservatives, members concerned about how the agreement would affectcertain home-state industries, and Democrats concerned about the impact ofthe agreement on environmental quality and labor standards. The more effective our partnership, the stronger an example we will be able to set for all the nations of our hemisphere. (1993, September/October). This can be changed as Mexico builds up itseconomy once more, after which they will once again be among the bestcustomers for U.S. Castaneda andHeredia stated that a good agreement would include: compensatory financing, or the creation of regional funds. Bacon (1995) finds that the United States has been placed at adisadvantage and that the U.S. Rules of origin ensures that only North Americangoods benefit from tax shelters. However, they agreed only to pursue an academic studyof the problem of registering new unions in Mexico (Bacon, 1995., 572-573). In 1995 it was reported that the real gross domesticproduct in that country fell 9.6 percent in the third quarter after adecline of 1 .5 percent in the second quarter, both higher than had beenpredicted. "NAFTA after two years."Industry Week, 21-23. Castaneda, J.G. Heredia (1993, March). The N.A.O. . (1996, January 1 ). "Laboring to cross the NAFTA divide."Nation, 572-574. "Is NAFTA good for the U.S.?" (1994, November 17). Another complaint was filed before theNational Administrative Office in Washington in the fall of 1994 by theCoalition for Justice in the Maquiladoras, the International Labor RightsFund, the American Friends Service Committee, and Mexico's NationalAssociation of Democratic Lawyers on behalf of workers at Sony'smaquiladora in Nuevo Laredo, south of Texas, where Sony had fired a groupof workers who tried to form a union and then brought in riot police tobeat workers and force them to return to their jobs. Castaneda, J.G. Free trade with a developing country like Mexico was a particularconcern to America's organized labor and environmentalist groups thatbelieve that Mexico's laws in these areas are too weak and poorly enforced. The U.S. CONSEQUENCES OF NAFTA NAFTA took effect on January 1, 1994 and eliminated most tradebarriers between the United States, Canada, and Mexico. as beingan agreement that will help alleviate this problem by improving thesituation in Mexico so that there is less economic incentive for crossingthe border. . On the Mexican side of the border, the recession is notseen as being as damaging as had been feared, and some analysts in Mexicosee current conditions as nothing the Mexican people have not enduredbefore (Morris, 1995, S2). He states that since its implementation, the United States hasincreased exports to Mexico by 19 percent, three times the rate of increasein exports elsewhere. President Clinton stated recently that NAFTA is workingwell. Now that NAFTA has been in place for some two years, manysee it as time to assess the changes that have been made and to decidewhether, on balance, NAFTA has been positive or negative for the U.S.economy. He citesinstances of such cooperation between U.S. The United States and Mexico have long been at odds over immigrationpolicy and enforcement, and NAFTA has been presented by the U.S. Much of the loss of exportsto Mexico can be attributed not to NAFTA but to the fact that Mexico cannotbe as good a customer as in the past because of its financial problems andthe devaluation of the peso. There has not been the promised increase in the number ofjobs in the United States, for instance, and Canada, Mexico, and the UnitedStates are not responding collectively and effectively to internationalcompetition but are more narrowly focused on their domestic political andeconomic concerns. Emphasis has been placed on the needto change regulation of foreign investment in order to increase Mexico'sattraction to multinational enterprises. At the same time, there have been some clear successesin the first two years of the agreement: 1) $2 billion in new trade was noted between the U.S. Tradebarriers for textile and apparel goods were generally removed, while therewere continuing tensions over traditional issues involving lumber, wheat,and dairy products and also over new regulations with reference to labelingand domestic content of automobiles ("Trade commission sees increases inNAFTA trade," 1995, 21). Mexicao's Alternative Political Futures, 215-236. (1995, June 14). However, asMaxfield writes, . jobs. One of the reasonsfor this legislation is congressional opposition to NAFTA and GATT. of Norwalk, Connecticut recorded a 1 percent rise in sales to customers in Mexico as a result of increaseddemand for spectrophotometers, gas chromatographs, and other quality-control and environmental-control instruments; 3) in the first nine months of 1995, U.S. Improving the climate for foreigninvestors has long been a U.S. "Perseverance and prudence."Chemical Week, S2. Maxfield believed that the future of government-businessrelations in Mexico would probably face the continued easing ofrestrictions on foreign investment. consumers,producers and workers. This meant that the further loss in the peso could not beattributed to speculators thinking there would ultimately be no support,and the decline has to be seen as endemic, based on domestic economicconditions. Opposition tofast track is expected to come from the same coalition that opposed NAFTA,but the exclusion of any environmental and labor provisions will create themost opposition from the left of the spectrum because they believe thatNAFTA has caused job losses, failed to improve the environment, and failedto increase economic stability in the member countries (Rubin, 1995, 1992). After the first year of NAFTA, the International Trade Commissionreview showed that there had been vigorous trade and investment expansionwhile at the same time there had only been fitful and frustrating effortsto remove trade barriers. (1995, November 13). Proponents saidthat this change would boost the economy by providing American companieswith better access to Mexican consumers, while critics said that it wouldencourage American factories to move to Mexico. In Canada, there is significantly less concernabout jobs moving south to Mexico under NAFTA. In 1995there were 35, applications in the first nine months alone, and Baconstates that the actual number of NAFTA-caused job losses is undoubtedlymuch higher, given the problem of chronic underreporting. exports to Mexico will continue to stagnate thisyear. The Mexican economy at this time issuffering the worst decline since the Great Depression of the 193 s and hasso far shown no meaningful signs of recovery: "In retrospect, rammingNAFTA down Mexico's throat, when that country was not ready for it, did notdo anyone any favors" (Evans, 1995, 68). Canada is struggling with a definition of itsfederalism and has had to deal with the powerful separatist faction in theprovince of Quebec. No action was taken. "Salinas' fatal flaw: His Yanquivision." Los Angeles Times, B9. President Carlos Salinas of Mexicotreated NAFTA as a major element in his development policy and as a way to"lock in" the national, rural, and urban elements of this policy initiatedby himself and President Miguel de la Madrid. Mexican workers receive low wages partly because they are deprived ofrights they would have in the U.S. It washoped that NAFTA would satisfy both requirements and that the sustainedeconomic growth generated by would narrow income differentials by creatingjobs (Castaneda, 1993, 73). goods (McClenahen, 1996, 23). For example, ClydePrestowitz of the Economic Strategy Institute in Washington, D.C., saidthat the treaty was "the last thing the United States needs," while RichardGephardt, the House majority leader, told the administration that he couldnot back the treaty on "a leap of faith" as he felt he was being asked todo. It is clear that the mass migration of jobs predicted by opponentsof NAFTA has not happened. At the sametime, though, there was a dramatic shift as the U.S. . The truth is that the statistics regarding NAFTA do not supporteither position fully because NAFTA has not brought about any massiveeconomic shifts after implementation. . However, this hasbeen controversial, and even if the figure is accepted, there may bereasons other than NAFTA for the job reduction. "Can NAFTA change Mexico?" Foreign Affairs, 66-8 . U.S. Robinson, L. Franklin, D. demand in bilateral trade negotiations, andthis was a move intended to restore confidence in the PRI's respect forprivate property but that might also alienate small and medium-sizedentrepreneurs. the more internationally integrated financial markets become, the harder it is to induce domestic capitalists to make long-term fixed investments. and Mexican unions and workers,leading to the first two complaints filed under NAFTA's labor sideagreement. Issues between Mexico andthe rest of the world should also be seen in terms of third worlddevelopment and the special need of countries like Mexico for ways to spurinternal growth. investments; the trade surplus had vanished; and 34 , American jobs had been lost ("Is NAFTA good for the U.S.?," 1994, 15). The peso also took a further drop in 1995, which has beenespecially troubling given the fact that the U.S. More recent assessments have found that the promises offered byproponents of NAFTA have not come about in the first two years of itsimplementation. In a free- trade process between two or more countries, there is always a long period of transition during which painful adjustments take place. (1996, January 8). "Reaching to the South."U.S. (1995, October 8). companies to move to Mexico to take advantage of the situation.Bacon sees the solution in more cross-border cooperation. Bacon, D. company won the dispute (McClenahen, 1996, 21). The adjustment process has a cost that is, in theory, shared equitably between the parties. (1995, December 4). Labor Secretary Robert Reich met withMexican officials. :NAFTA hasn't cost America jobs."Journal of Commerce and Commercial, 6A. Theprovisions of NAFTA addresses tariffs and benefits to U.S. News & World Report, 43-46. exports to Mexico grew at twice the rate ofU.S. BACKGROUND ON NAFTA The tripartite free trade agreement between the U.S., Canada andMexico is known as the North American Free Trade Agreement (NAFTA). The results of NAFTA in Mexico have not seemed so positive in spite ofthe claims of critics that the agreement gave Mexico more than it gave theUnited States. Most of the goods being exported from theUnited States to Mexico are going to the industrialized north of Mexico.Heading the list of imports from Mexico are organic chemicals worth $72million, while $22 million worth of oil also comes from Mexico to theUnited States. It does not include other topics--thepolitical, the social, the environmental (at least not directly), or thecultural. The situation has not been as good for Mexico as it has for the U.S.,though critics in the U.S. Sterling notes that when Salinasbegan dismantling the Mexican infrastructure, he found the deficiencies ofthat infrastructure exposed so they could no longer be ignored. Scholastic Update,15. . workers over the last 15 to 2 years. "NAFTA backfire?" Industry Week, 68. The premise of NAFTA is that free trade should be left exclusivelyto the free market. and Mexico both stoodbehind the peso. environmental standards many see ascostly. and Mexico have radicallydifferent views of workers' rights and proper working conditions (Robinsonand Dabrowski, 1993, 43-44). Mexico conducts as much as 9 percent of its trade with the UnitedStates. Castaneda notes that the Mexican government has been using NAFTA as away of addressing Mexico's severe economic problems and has been movingthis way singlemindedly. Evans (1995) blames this situation on the U.S. "Amexica the beautiful." Economist,SS17-SS18. The United Stats isfaced with a growing neo-isolationist group in Congress and with aPresidential election which includes a heated debate over federal budget-deficit reductions. "International Economic Opening and Government-Business Relations." In Wayne A. Coming from highly privileged backgrounds, they failed to truly grasp the complex realities underlying poverty in developing countries like their own; they underestimated the human dimension. The political fighting hascontinued with implementation, as can be seen in exchanges over the matterbetween President Clinton and Pat Buchanan in the first year ofimplementation. McClenahan, J.S. The U.S.system has also not had to contend with Mexico's authoritarian environmentor rampant corruption at all levels. The Mexican government is also counting on NAFTA to ease theseeconomic pressures on the people of Mexico. in thiscase issued a report, and U.S. has lost many jobs because of NAFTA and thatNAFTA has not been the boon to workers on either side of the border thatwas originally claimed. Unions predicted that this would mean job and wage cuts in theU.S. The agreement is quite extensiveand includes many provisions related to such things as plant inspection andeven wages. He states that in 1994 the Labor Departmentcertified 17, applications out of 34, received for unemploymentextensions for workers who had lost their jobs because of NAFTA. Evans, M.K. It has also been reported that business under NAFTA has increasedgreatly in certain industries. & C. Manzella, J. Even as there has been a 53 percent fall in thevalue of the peso, the volume of U.S.-Mexican trade increased. Mexico's trade withCanada increased at an even higher rate, though from a smaller base. Probably the most argued over statistics so far concern job losses inthe United States and how this is related to NAFTA, but related to this isa concern over the change from a trade surplus to a trade deficit on thepart of the United States. exports to other markets. References "After NAFTA" (1993, March 2 ). He notes that U.S.exports to Mexico declined $2 billion in 1995, removing as much as onepercent off the overall growth rate. Trade among the three countries expandedsignificantly in 1994. Congressional Republicans have been especially doubtful about thesupposed benefits of NAFTA and have been developing what they call fast-track authority for trade agreements that would preclude some of the sortsof provisions that were included in NAFTA. market through an agreement with the U.S. Sterling (1996) says that Salinasfailed to grasp the fact that the economic success of America was notsimply the result of more efficient planning and technology but was basedon cultural values that differ markedly from those of Mexico. This wasthought to translate into a loss of 176, U.S. Automobile and truck exports have increased up to6 percent. The Economist, 71. The impact of NAFTA on employment has been muchcriticized, with claims that NAFTA is a proven failure and that it has cost34 , American jobs. Sterling, H. raised a number of objections. Mexico'saccessions to NAFTA only contributed to an already deteriorating situation. Morris, G.D.L. Studies seemed to indicate thatthese concerns were not justified. Mexico'strade surplus has not cost America 34 , jobs but fewer than 21, (Manzella, 1995, 6A). Castaneda and Heredia (1993), writing for a Mexican magazine,found the agreement to be a bad deal for Mexico because it did notrecognize the enormous disparities between Mexico and the United States.Special treatment for Mexico was removed by the Mexican government becausethe leadership wanted to see Mexico as a country joining the First Worldand not as a more backward economy needing special help. In practice, this means giving free rein to those whocommand the most power and the most wealth. seem to believe otherwise. INTRODUCTION The North American Free Trade Agreement (NAFTA) is intended to promotefree trade among the countries of North America by removing trade barriers,tariffs, quotas, and other such barriers. As the threat of exit becomes more credible and the potential damage greater, policymakers must pay more heed to the voice of capital if they expect to gain its loyalty--in the form of long-term industrial investment (Maxfield, 199 , 215).Trade openings pose a problem for countries like Mexico intent onintroducing reform while not losing the capitalist base they have alreadyachieved. But in reality, the parties are never truly equal, and, in this particular case, they are profoundly unequal (Castaneda and Heredia, 1993, 14).The per capita income in Mexico is eight to ten times lower than that ofthe United States; the distribution of income is skewed to a greaterdegree; and levels of wages, productivity, and technology are inferior inalmost all respects. "The wrong free-tradedeal?" World Press Review, 14-17. The same questions were raised with reference to Mexico and to thebenefits that might accrue to Mexico, and the emphasis on Mexico wasrelated to the perception of economic need in that country and the effectthe Mexican economy has on the U.S. Maxfield, S. The agreement was negotiated among Mexico, the United States,and Canada, and as it was being considered, it was much discussed in termsof what it would mean for the United States and whether on balance it couldbe considered a positive or negative move for the U.S. . Maxfield (199 ) noted some of the problems that would be facing Mexicoin the near future when she indicated that Mexico's political futuredepends to a great extent on the country's national economic performanceand the individual economic well-being of its citizens. It may be too early to assess thissituation, especially given the problems Mexico faces that have little todo with this trade agreement and much to do with underlying systemicproblems. The cost of adjustment is thus much heavier forMexico than for the United States, though some parts of Canada and theUnited States suffer disproportionately greater adjustment costs, evenlarger than in some parts of Mexico (Castaneda and Heredia, 1993, 14-15). NAFTA can be seen as part of a neweffort at globalization as trade barriers are removed and more and morecompanies become multinational in orientation. NAFTA disposes of investment barriers foreach of the member countries and mandates equal opportunities to enablebusinesses to be competitive. It was hoped that financial deregulation and easing ofrestrictions for foreign investors would help restore the confidence oflarge-scale entrepreneurs with the money to make long-term investments(Maxfield, 199 , 233). If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.