NAFTANAFTANorth American Free Trade North American Free Trade AgreementAgreement

NAFTA BackgroundNAFTA Background NAFTA stands for North America NAFTA stands for North America

Free Trade Agreement and is a Free Trade Agreement and is a Trade AreaTrade Area

Trade AreasTrade Areas Unrestricted trade among Member Unrestricted trade among Member

nationsnations No common external tariffsNo common external tariffs No economic unity (monetary and No economic unity (monetary and

fiscal)fiscal)

NAFTA BackgroundNAFTA Background Canada’s goals in negotiation:Canada’s goals in negotiation:

Avoid economic isolation, protect Avoid economic isolation, protect cultural industries, avoid US penaltiescultural industries, avoid US penalties

MexicoMexico Joined mostly hoping for additional Joined mostly hoping for additional

investment capitalinvestment capital United States:United States:

Access to markets, balance power of Access to markets, balance power of European Union, warmer political European Union, warmer political relationsrelations

Success as of 2005Success as of 2005 Real Economic Growth – 1994 to Real Economic Growth – 1994 to

2005:2005: 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 Trade among the nations

increased 173% increased 173% From $297 billion to $810 billionFrom $297 billion to $810 billion

Benefits to the U.S.Benefits to the U.S. Exports to NAFTA partners grew 113%Exports to NAFTA partners grew 113% NAFTA partners account for 55% of NAFTA partners account for 55% of

increase in agricultural exportsincrease in agricultural exports Industrial production rose 49%Industrial production rose 49%

28% in prior period28% in prior period 36.2% increase in business sector 36.2% increase in business sector

productivityproductivity 20.1% growth in jobs20.1% growth in jobs Average unemployment rate dropped Average unemployment rate dropped

from 7.1% to 5.1%from 7.1% to 5.1%

Benefits to CanadaBenefits to Canada More than half of exports go to More than half of exports go to

the U.S.the U.S. Exports now account for over 40% Exports now account for over 40%

of GDPof GDP Exports to U.S. increased by 250%Exports to U.S. increased by 250% 86.6% of total exports go to 86.6% of total exports go to

NAFTA partnersNAFTA partners 17.5% increase in jobs from pre-17.5% increase in jobs from pre-

NAFTA levelsNAFTA levels

Benefits to MexicoBenefits to Mexico 37% difference between wages in 37% difference between wages in

export-related sectors and othersexport-related sectors and others Agricultural exports to U.S. Agricultural exports to U.S.

increased by $5.7 billionincreased by $5.7 billion Exports to Canada grew almost Exports to Canada grew almost

227%227% Two-way trade with the U.S. has Two-way trade with the U.S. has

grown more than 125%grown more than 125% Productivity increased 55%Productivity increased 55%

Important NoteImportant Note The official sites for NAFTA list all The official sites for NAFTA list all

positive reviews for the past 12 positive reviews for the past 12 years.years.

Others claim these benefits may Others claim these benefits may have come from other changes in have come from other changes in the economythe economy

Plenty of information exists to Plenty of information exists to argue both sidesargue both sides

Special ProblemsSpecial Problems

Special Problems or DebatesSpecial Problems or Debates

1.1. Employment effectsEmployment effects2.2. Mexico’s Suffering Agriculture Mexico’s Suffering Agriculture

SectorSector3.3. Environmental problems and Environmental problems and

decreased standard of livingdecreased standard of living

United States EmploymentUnited States Employment United StatesUnited States

Overall, 28 million new Overall, 28 million new jobs created since jobs created since 19941994

Very small amount, if Very small amount, if any, can be directly any, can be directly attributed to the attributed to the creation of NAFTAcreation of NAFTA

Ross Perot and the Ross Perot and the “Giant Sucking Sound”“Giant Sucking Sound”

Canadian EmploymentCanadian Employment

2.3 million jobs 2.3 million jobs created in Canada created in Canada since NAFTAsince NAFTA

Increase of 17.5%Increase of 17.5% Very little debate Very little debate

on the on the employment employment effects of NAFTA effects of NAFTA in Canadain Canada

Mexican EmploymentMexican Employment MexicoMexico

Employment Employment increased directly increased directly following NAFTA following NAFTA introduction, but has introduction, but has recently decreased. recently decreased.

Many new jobs were in Many new jobs were in the Maquiladora area’sthe Maquiladora area’s

Agriculture sector Agriculture sector specifically hit hardspecifically hit hard

Estimated 28,000 Estimated 28,000 small and med sized small and med sized businesses eliminated businesses eliminated due to low cost due to low cost producers. producers.

Environmental/Standard of living EffectsEnvironmental/Standard of living Effects

MaquiladoraMaquiladora - - is a factory that imports is a factory that imports materials and equipment on a duty-free and tariff-materials and equipment on a duty-free and tariff-free basis for assembly or manufacturing and then free basis for assembly or manufacturing and then re-exports the assembled product usually back to re-exports the assembled product usually back to the originating country.the originating country.

Maquiladora firms have approx. Maquiladora firms have approx. doubled since NAFTAdoubled since NAFTA 2,143 to over 3,703 currently2,143 to over 3,703 currently

This is a problem for NAFTA This is a problem for NAFTA because Maquiladora’s are because Maquiladora’s are notorious for having terrible low-notorious for having terrible low-pay working conditions.pay working conditions.

A town about a mile from a A town about a mile from a Maquiladora factoryMaquiladora factory

Maquiladora Working conditionsMaquiladora Working conditions

Women, especially, Women, especially, discriminated againstdiscriminated against

Average wage is $1.00 per hourAverage wage is $1.00 per hour Work 10-12 hours a dayWork 10-12 hours a day Compared to sweat shops of Compared to sweat shops of

ChinaChina Many are working to improve Many are working to improve

rights of Maquiladora workers.rights of Maquiladora workers.

Environmental ConditionsEnvironmental Conditions Special side agreement in NAFTA to Special side agreement in NAFTA to

calm environmentalists about toxic calm environmentalists about toxic waste around Maquiladora’s. waste around Maquiladora’s.

Did side agreement workDid side agreement work No enforcing powerNo 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 "NAFTA has intensified severe problems

of water and air pollution, hazardous of water and air pollution, hazardous wastes dumping and increased the wastes dumping and increased the incidence rates of certain diseases and incidence rates of certain diseases and birth defects in the border region." birth defects in the border region."

Environmental EffectsEnvironmental Effects "We have no way to provide "We have no way to provide

water, sewage, and sanitation water, sewage, and sanitation workers. Every year, we get workers. Every year, we get poorer and poorer even though we poorer and poorer even though we create more and more wealth." create more and more wealth." Ciudad Juarez, Mayor Gustavo Ciudad Juarez, Mayor Gustavo

Elizondo Elizondo

Mexico’s AgricultureMexico’s Agriculture US farmers are being US farmers are being

subsidized.subsidized. Mexico farmers do not receive Mexico farmers do not receive

subsidies, this…subsidies, this… Puts downward pressure on Puts downward pressure on

Mexican FarmersMexican Farmers Results in Dumping Results in Dumping

US Farmers selling below cost in US Farmers selling below cost in Mexico because they have already Mexico because they have already received subsidies. received subsidies.

Results in Unemployment and Results in Unemployment and Immigration to United StatesImmigration to United States

Some claim as many as 2 million Some claim as many as 2 million Mexican farmers are out of businessMexican farmers are out of business

Mexico’s AgricultureMexico’s Agriculture Many claim dumping Many claim dumping

is evident due to is evident due to Mexico’s imports of Mexico’s imports of U.S. agriculture U.S. agriculture productsproducts $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 U.S. farmers are better at the expense better at the expense of Mexican farmersof Mexican farmers

Mexico’s AgricultureMexico’s Agriculture Immigration from Immigration from

Mexican Farmers has Mexican Farmers has increased since increased since NAFTA.NAFTA. At least 4 million At least 4 million

Mexican immigrants in Mexican immigrants in the United States. the United States.

150,000+ per year150,000+ per year Many due to population Many due to population

growthgrowth A problem because A problem because

this goes directly this goes directly against one of the against one of the original claims of original claims of NAFTA. NAFTA.