NAFTA Flashcards
NAFTA ?
North American Free Trade Agreement
Between: Canada, USA + Mexico
Came into force in 1994
How come the three countries decided to get together? (NAFTA)
USA (60s): shortage of labor
Mexico: un unemployment problem
So: Agreement was reached => Mexican products coming to the USA would be taxed only on their added value and not on their retail prices
Benefits for Mexico? (NAFTA)
Create jobs + Mexican products would gain access to the huge American market + Mexican products benefits from American investments
Benefits for the US?
Response to the foreign market competition and single market in Europe + supposed to create jobs in the US related to exports
Political objective: to reduce Latino immigrants
Benefits for Canada?
No clear objectives
But main goal m: To make sure that trade would not be diverted away from Canada to Mexico
What really happened? (NAFTA)
Trade between those three countries boosted
The US food exports to Mexico have increased (American farmers have been able to sell more to Mexico). It really helped stabilize the Mexican economy but a lot of people argue that a lot of jobs have been lost in the US to Mexico (Jobs disappeared especially in the manufacturing industry) but they expected that new ones would be created but it was not the case. Also (Point of view of US): NAFTA was supposed to turn the trade deficit, the US and NAFTA was supposed to turn it in a surplus. Actually the trade deficit increased. Companies in the US threatened their workers to relocate to Mexico in order to make them accept concessions.
What is the conclusion of the NAFTA ?
NAFTA did not keep all its promises but it can’t be blamed either for all US job losses. There are other factors: globalization and automation (it has reduced the need for labor). The three countries have started to meet for renegotiations but have yet to agree (since trumps election might be even harder)
