NAFTA North American Free Trade Agreement

NAFTA Background NAFTA stands for North America Free Trade Agreement and is a Trade Area NAFTA stands for North America Free Trade Agreement and is a Trade Area Trade Areas Trade Areas Unrestricted trade among Member nations Unrestricted trade among Member nations No common external tariffs No common external tariffs No economic unity (monetary and fiscal) No economic unity (monetary and fiscal)

NAFTA Background Canada’s goals in negotiation: Canada’s goals in negotiation: Avoid economic isolation, protect cultural industries, avoid US penalties Avoid economic isolation, protect cultural industries, avoid US penalties Mexico Mexico Joined mostly hoping for additional investment capital Joined mostly hoping for additional investment capital United States: United States: Access to markets, balance power of European Union, warmer political relations Access to markets, balance power of European Union, warmer political relations

Success as of 2005 Real Economic Growth – 1994 to 2005: Real Economic Growth – 1994 to 2005: U.S.: 48% U.S.: 48% Canada: 49% Canada: 49% Mexico: 40% Mexico: 40% $2.2 billion in trilateral trade daily $2.2 billion in trilateral trade daily Trade among the nations increased 173% Trade among the nations increased 173% From $297 billion to $810 billion From $297 billion to $810 billion

Benefits to the U.S. Exports to NAFTA partners grew 113% Exports to NAFTA partners grew 113% NAFTA partners account for 55% of increase in agricultural exports NAFTA partners account for 55% of increase in agricultural exports Industrial production rose 49% Industrial production rose 49% 28% in prior period 28% in prior period 36.2% increase in business sector productivity 36.2% increase in business sector productivity 20.1% growth in jobs 20.1% growth in jobs Average unemployment rate dropped from 7.1% to 5.1% Average unemployment rate dropped from 7.1% to 5.1%

Benefits to Canada More than half of exports go to the U.S. More than half of exports go to the U.S. Exports now account for over 40% of GDP Exports now account for over 40% of GDP Exports to U.S. increased by 250% Exports to U.S. increased by 250% 86.6% of total exports go to NAFTA partners 86.6% of total exports go to NAFTA partners 17.5% increase in jobs from pre-NAFTA levels 17.5% increase in jobs from pre-NAFTA levels

Benefits to Mexico 37% difference between wages in export-related sectors and others 37% difference between wages in export-related sectors and others Agricultural exports to U.S. increased by $5.7 billion Agricultural exports to U.S. increased by $5.7 billion Exports to Canada grew almost 227% Exports to Canada grew almost 227% Two-way trade with the U.S. has grown more than 125% Two-way trade with the U.S. has grown more than 125% Productivity increased 55% Productivity increased 55%

Important Note The official sites for NAFTA list all positive reviews for the past 12 years. The official sites for NAFTA list all positive reviews for the past 12 years. Others claim these benefits may have come from other changes in the economy Others claim these benefits may have come from other changes in the economy Plenty of information exists to argue both sides Plenty of information exists to argue both sides

Special Problems

Special Problems or Debates 1. Employment effects 2. Mexico’s Suffering Agriculture Sector 3. Environmental problems and decreased standard of living

United States Employment United States United States Overall, 28 million new jobs created since 1994 Overall, 28 million new jobs created since 1994 Very small amount, if any, can be directly attributed to the creation of NAFTA Very small amount, if any, can be directly attributed to the creation of NAFTA Ross Perot and the “Giant Sucking Sound” Ross Perot and the “Giant Sucking Sound”

Canadian Employment 2.3 million jobs created in Canada since NAFTA 2.3 million jobs created in Canada since NAFTA Increase of 17.5% Increase of 17.5% Very little debate on the employment effects of NAFTA in Canada Very little debate on the employment effects of NAFTA in Canada

Mexican Employment Mexico Mexico Employment increased directly following NAFTA introduction, but has recently decreased. Employment increased directly following NAFTA introduction, but has recently decreased. Many new jobs were in the Maquiladora area’s Many new jobs were in the Maquiladora area’s Agriculture sector specifically hit hard Agriculture sector specifically hit hard Estimated 28,000 small and med sized businesses eliminated due to low cost producers. Estimated 28,000 small and med sized businesses eliminated due to low cost producers.

Environmental/Standard of living Effects Maquiladora - is a factory that imports materials and equipment on a duty-free and tariff- free basis for assembly or manufacturing and then re-exports the assembled product usually back to the originating country. Maquiladora - is a factory that imports materials and equipment on a duty-free and tariff- free basis for assembly or manufacturing and then re-exports the assembled product usually back to the originating country. Maquiladora firms have approx. doubled since NAFTA Maquiladora firms have approx. doubled since NAFTA 2,143 to over 3,703 currently 2,143 to over 3,703 currently This is a problem for NAFTA because Maquiladora’s are notorious for having terrible low-pay working conditions. This is a problem for NAFTA because Maquiladora’s are notorious for having terrible low-pay working conditions.

A town about a mile from a Maquiladora factory

Maquiladora Working conditions Women, especially, discriminated against Women, especially, discriminated against Average wage is $1.00 per hour Average wage is $1.00 per hour Work hours a day Work hours a day Compared to sweat shops of China Compared to sweat shops of China Many are working to improve rights of Maquiladora workers. Many are working to improve rights of Maquiladora workers.

Environmental Conditions Special side agreement in NAFTA to calm environmentalists about toxic waste around Maquiladora’s. Special side agreement in NAFTA to calm environmentalists about toxic waste around Maquiladora’s. Did side agreement work Did side agreement work No enforcing power No enforcing power Different views of environmental quality. Different views of environmental quality. Many argue the pollution has worsened. Many argue the pollution has worsened. "NAFTA has intensified severe problems of water and air pollution, hazardous wastes dumping and increased the incidence rates of certain diseases and birth defects in the border region." "NAFTA has intensified severe problems of water and air pollution, hazardous wastes dumping and increased the incidence rates of certain diseases and birth defects in the border region."

Environmental Effects "We have no way to provide water, sewage, and sanitation workers. Every year, we get poorer and poorer even though we create more and more wealth." "We have no way to provide water, sewage, and sanitation workers. Every year, we get poorer and poorer even though we create more and more wealth." Ciudad Juarez, Mayor Gustavo Elizondo Ciudad Juarez, Mayor Gustavo Elizondo

Mexico’s Agriculture US farmers are being subsidized. US farmers are being subsidized. Mexico farmers do not receive subsidies, this… Mexico farmers do not receive subsidies, this… Puts downward pressure on Mexican Farmers Puts downward pressure on Mexican Farmers Results in Dumping Results in Dumping US Farmers selling below cost in Mexico because they have already received subsidies. US Farmers selling below cost in Mexico because they have already received subsidies. Results in Unemployment and Immigration to United States Results in Unemployment and Immigration to United States Some claim as many as 2 million Mexican farmers are out of business Some claim as many as 2 million Mexican farmers are out of business

Mexico’s Agriculture Many claim dumping is evident due to Mexico’s imports of U.S. agriculture products Many claim dumping is evident due to Mexico’s imports of U.S. agriculture products $3.6 billion in 1993 $3.6 billion in 1993 $7.9 billion in 2003 $7.9 billion in 2003 $8.5 billion in 2004 $8.5 billion in 2004 U.S. farmers are better at the expense of Mexican farmers U.S. farmers are better at the expense of Mexican farmers

Mexico’s Agriculture Immigration from Mexican Farmers has increased since NAFTA. Immigration from Mexican Farmers has increased since NAFTA. At least 4 million Mexican immigrants in the United States. At least 4 million Mexican immigrants in the United States. 150,000+ per year 150,000+ per year Many due to population growth Many due to population growth A problem because this goes directly against one of the original claims of NAFTA. A problem because this goes directly against one of the original claims of NAFTA.