FREE ESSAY ON NAFTA'S DECEIT

NAFTA'S DECEIT

On January 1, 1994, Canada, Mexico and the United States passed the North American Free
Trade Agreement (NAFTA). Promoted to Congress by the Clinton administration, with the
assurance that it would give rise to more jobs - exactly how many though, is not
precisely known. 
Yet, according to the Journal of Commerce, the U.S. went from having a $5.5 billion trade
surplus with Mexico before NAFTA, to having a massive $16 billion trade deficit today. At
the same time, it is estimated that 400,000 Americans have lost manufacturing jobs
because of NAFTA within the treaty's first three years, that's about the same number of
jobs which have been created in the Mexican maquiladoras. Instead of sharing of the
wealth and profit, one might think that there has been a big transfer of wealth from
north to south of the border and that Mexican laborers have profited at the expense and
torment of their American counterparts. The reality is that working conditions, wage,
health and safety standards in Mexico have deteriorated. One American employee for a
steering-wheel plan made approximately $10.46 per hour, compared to his Mexican
counterpart, who makes about $0.75 per hour. 
Within the agreement, it stated ...the government of Canada, the government of the United
Mexican States and the government of the United States of America resolved to establish a
free trade area. In addition, NAFTA also determined to:
u Strengthen the special bonds of friendship and cooperation among the nations;
u Contribute to the harmonious development and expansion of world trade and provide a
catalyst to broader international cooperation;
u Create an expanded and secure market for the goods and services produced in their
territories;
u Establish clear and mutually beneficial rules governing their trade;
u Create new employment opportunities, improve working conditions and living standards in
their respective territories;
u Ensure a predictable commercial framework for business planning and investment.
A very important section of NAFTA is the elimination of tariffs, which are charged for
imports and exports within the three nations. Along with the eradication of tariffs, the
agreement opened up enormous opportunities, creating a $6.3 billion GNP for the three
countries. As mentioned in the agreement objective, NAFTA will and should, create
economic opportunities. The three nations, following the agreement, will move more and
more into the liberalization of trade, at the expense of American and international
workers. Under the agreement, the goods and services must be produced within the NAFTA
territory to be considered tariff free. Not all tariffs are going to be eliminated at
once, the agreement follows staging categories, which are as follows:
Immediate elimination of tariffs on 1/1/94: 
u Cattle
u Computers
u Jewelry
u Microwave ovens
u Passenger cars
u Telephones
u Televisions
Elimination of tariffs within five years, beginning on 1/1/94:
u Baseball Caps
u Cotton Yarns
u Men's Pajamas
u Table Cloths
u Women's Cotton Dresses
Elimination of tariffs within ten years, beginning on 1/1/94:
u Cigarettes
u Cotton
u Footwear
u Glassware
u Luggage
u Rum
Elimination of tariffs after fifteen years, beginning on 1/1/94:
u Dry Beans
u Most Fresh Vegetables
u Orange Juice
u Peanuts
u Sugar
With this in mind, critics present the problem that Mexican companies may take advantage
of tariff free goods, resulting in the switching to low Mexican wages. As a result,
United States workers may lose their jobs to Mexican citizens that can be paid less. When
President Clinton was one of the Chief Proponents of NAFTA his Council of Economic
Advisors brought forward this issue,
...Although wages are lower in Mexico than in the United States, the productivity of
Mexican workers is also lower than the U.S. workers. Moreover, companies make plant
location decisions based on a variety of factors in addition to wages, including
telecommunications and transportation's infrastructure and business services, all of
which are more sophisticated in the United States (Arnold, 296). 
But the latter has not slowed down American companies from going south of the border for
cheaper labor and less demanding working conditions from government agencies. So far,
companies like Thompson Consumer Electronics, Jay Garment, Magne Tek, Uniroyal Goodrich
and Breed Technologies have moved at least 107 plants in Indiana alone.
To attempt mutual acceptance, NAFTA has presented readers with their goods and service
overview. The following are short assessments that NAFTA provides:
Agriculture:
The food everyone eats is very important to every country, thus being our main source of
consumption, NAFTA makes it easier for goods to be exported and imported with limited
quotas throughout the years of operation. When NAFTA entered into force at least one half
of the agricultural exports in Mexico became duty free. This is a great advantage to the
United States because it will be able to export as many goods into Mexico, gaining in not
only trade, but in economics as well. Now, within the five years of NAFTA operation, the
agreement states that most of the remaining tariffs will be eliminated. As the success
continues the goal for NAFTA is to disintegrate nearly ninety five percent of the United
States agricultural exports with Mexico. This is what is agreed on by the tenth year, and
as a result many of Mexico's import licenses will also be eliminated.
Automotive:
Increasing competitiveness, creating employment opportunities and reducing prices for
consumers is what NAFTA will integrate for the automotive sector. This is not the only
advantage NAFTA is creating; it is also taking part in the termination of Mexican Auto
Decree. Which is leading to the elimination of the limits of sales from vehicles imported
from the United States or Canada into Mexico. This makes stolen vehicles harder to sell
to Mexican civilians. The Amendment to Trade Balancing will also contribute in reducing
not only fifty percent on tariffs, but on auto parts from the United States. Thus, Mexico
will also allow Canada and the United States to invest in Mexican national suppliers of
parts as well as in enterprises (Mexico Business, NAFTA). There is a problem, however,
companies only wish to establish firms in the US or Canada but not in Mexico.
Energy:
With the North American Free Trade Agreement in effect, the United States and Canada have
greater access to electricity, gas, petrochemical, energy services and equipment markets
from Mexico. This allows for these three Northern countries to share and rely on each
other for products that are essential to the everyday lives of their citizens. Through
open rules the United States and Canada have the opportunity to sell to PEMEX, the
Mexican owned oil company. This gives the United States and Canada a chance to sell their
product while also allowing Mexico to buy from its North American neighbors without any
hassle or problems. All three nations will benefit from the free trade, which would have
been a problem before. For Mexico, in particular the North American Free Trade Agreement
will also reduce investments restrictions lifting previous restricted basic
petrochemicals. Overall the program provides performance incentives, which are used on
activities such as oil drilling.
Environment:
On September of 1992, the United States, Mexico and Canada established the North American
Commission on Environmental Cooperation. The main objective is, to set in motion a
process for sustained long term effective trilateral environmental cooperation (Mexico
Business, NAFTA). NAFTA does not support substances that deplete the Ozone Layer, such as
Montreal Protocol. As presented in the agreement, investment requires the maintenance of
stringent health, safety and environmental standards; in which, NAFTA plans to open up
numerous opportunities for environmental equipment, firms and services. The plan is to
provide companies which will increase environmental protection such as: solid waste
disposal technology, sewage treatment, wastewater treatment, hazardous and non-hazardous
waste engineering consulting, water treatment, specialized monitoring services and
overall environmental rehabilitation. If these companies are not provided, it could mean
harm for our ecology and democracy. 
Financial Services:
The United States, Canada and Mexico have all been benefiting through the agreement of
the North American Free Trade Agreement. In Financial Services, the agreement has helped
each member of the party acquire help with different companies, which in return make
possible many consumer activities. An advantage to many of the Mexican consumers that
cross the border everyday for goods and services is having the security of being able to
rely on Mexican banks in operation here in the United States. In Return, Mexico will
permit Canada and the United States to establish subsidiaries to engage in consumer
opportunities for example, commercial lending, mortgage lending and the provision of
credit cards. This will not only establish a market share, but will emphasize on national
treatment. Another key element from the North American Free Trade Agreement is that the
United States and Canada, which are involved in trade with Mexico, will be able to take
advantage of one stop shopping, both domestic and international operations. (Mexico
Business, NAFTA)
Insurance/Pharmaceuticals
NAFTA enables the United States and Canadian firms to squeeze into Mexico's billion
dollar insurance markets. On the other hand the agreement between these three parties
also states that market sharing will enable Mexico to form subsidiaries without
ownership. United States exports on pharmaceutical products to Mexico and Canada reached,
six hundred and forty five billion and one hundred and twenty one million in 1991. With
these growing numbers every year, NAFTA has allowed Mexico to remove import licenses,
eliminating tariffs on these products. Today these pharmaceutical products play a big
role on the everyday lives of many citizens of the three parities; therefore along with
the elimination of tariffs, NAFTA is also increasing patent protection. According to the
agreement Mexico should open up to receive these products with open arms.
Sanitary and Photo sanitary measures:
Under the agreement, each country is entitled to establish its own measures as long as
they are based on scientific principle and risk assessment. Rules may not be established
to exercise unfair discrimination, or to serve distinguished restriction on trade.
Overall the establishment must focus on protection of human, animal, and plant life, as
well as standards for health risks due to animal pest or plant diseases, food additives,
or food contaminants.
Services/ Telecommunications:
Canada's two hundred and fifty billion and Mexico's one hundred and forty six billion
service markets are now within easier access to the United States, liberalizing trade
related services. The elimination of a provider establishing a local presence is also
vanished with NAFTA. Nevertheless, although NAFTA does not focus on basic telephone
services, it does focus on advanced data processing while keeping the desire to maintain
open international shipping markets. It is expected that by the year 2000
telecommunication products will be expected to grow to forty two percent, for this reason
Mexico is expected to remove all tariffs on telecommunication equipment imports into
their country. These changes also increase the quantity of United States exports on
telecommunications equipment and enhanced services. With the movement toward future
compatibility, incorporate telecommunication services can be operated in the United
States, Mexico, and Canada without transport networks or services from other parties.
Textiles and Apparel: 
Fibers, yarns, textiles and clothing are all covered under the North American Free Trade
Agreement. Under the agreement, the United States, Mexico and Canada, have focused on the
rules of origin. One of them in particular states that yarns as well as fabrics in a
garment must be produced in one of the three countries, United States, Mexico, or Canada.
This is done in order to take advantage of removing import quotas on textile, apparel
goods, and also on goods produced in Mexico. In 1991 the six point four billion Mexican
textile and apparel market is introduced with the North American Free Trade Agreement,
which also takes part in the United States exports of one point one billion. With this
change the North American Free Trade Agreement immediately vanished Mexican barriers up
to twenty percent allowing the movement of exports into countries to be a huge success.
With this in mind over the years both Canada and Mexico will also begin to eliminate
quotas keeping safeguards. These safeguards will help in actions taken in increasing
tariffs when damage caused by greater volumes of imports are resulting; overall keeping
the industry of imports and exports to a limit of balance, while satisfying the
industries but not damaging the economy.
Transportation:
Everyday buses are the main transportation devices used by Mexican and United States
civilians. Now with the North American Trade Agreement in full effect, barriers to
various land transportation services have been eliminated. Thus bringing forward new
establishments of land transport with new safety standards. By the end of this year
Mexico will permit buses to and from any part of the country; this advantage, will also
benefit service trucks. Another important factor in the transportation service is that
NAFTA will focus on safety. This means drivers with valid licenses, and placing equipment
standards to prevent the transportation of dangerous goods.
The North American Free Trade Agreement has been criticized by almost everyone including
those who do not know a lot about its existence. In reference towards jobs created or
lost, NAFTA plays an important role. According to the United States Library of Congress,
more than twice as many jobs have been created since NAFTA went into effect in 1994. On
the other hand one economist in El Paso, TX, states that an estimate of 440 thousand net
jobs have been lost in the United States. On a recent meeting economists from the United
States, Mexico and Canada, all met in a conference to reveal job loss and gain. Harvey
Rosenblum, senior vice president of the Federal Reserve Bank of Dallas stated,  All three
countries are better off for having NAFTA, consumers are benefiting from more efficient
operations (electric library: Library of Congress: Experts disagree on NAFTA and Jobs).
In the conference the three parties agreed that many job cuts have been a result of many
factories moving across the border for cheaper labor. To prove this, economist Jesse
Rothstein estimated that 1.1 million jobs have been created in the United States while
1.6 have been lost because of increase of imports. Furthermore, Mary Jane Bolle, a
specialist in international trade states that, Overall, NAFTA's first five years have
resulted in one and a half times as many job gains as losses (electric library: Library
of Congress). Though experts cannot agree on whether NAFTA has been good or bad for the
economy, it is certain that it has benefited many areas.
In 1997, the Heritage Foundation, a research and educational institute, and the Wall
Street Journal published the 1997 Index of Economic Freedom. The main focus was to find
the relationships among countries with freedom and wealth. Specifically, countries with
low tariffs and insignificant non-tariff barriers were said to have freer trade policy
than countries with high tariffs and significant non-tariff barriers to trade (The Wall
Street Journal; Economics: Arnold 298). During the research many countries were analyzed
and given a rank of 1 through 5. Countries ranking in the range of 1 or 2 were said to be
the richer countries. Notice, once again that the trade scores indicate that the
relatively rich countries have freer trade than the poor countries [see figure 1-1] (The
Wall Street Journal: Index of Economic Freedom: Arnold 298). 
According to the Economic Report of the President, NAFTA has been successful throughout
these beginning years. As for United States, Mexico and Canada, they too have grown
tremendously under the agreement. As the success continues, NAFTA will head toward new
challenges including the goal of wanting the free trade area to consist of thirty four
Western Hemisphere countries by the year 2005.
Bibliography
Bureau of Labor Statistics, 1996-1997 Jobs Outlook. 
See Chicago Tribune, NAFTA at 5, Promises & Realities, November 29, 1998. 
U.S. Census Bureau, http://www.census.gov/foreign-trade/www/deficit.html 
Rothstein, Jesse and Rob Scott. NAFTA's Casualties, Economic Policy Institute: September
19, 1997. 
Dailey, Rickey. NAFTA Gets Mixed Reviews, The Brownsville Herald, August 22, 1998.
Border Counties Poorest in Nation, The Brownsville Herald, July 23, 1998. 
NAFTA Increases Brussels Sprouts Woes, Financial Times, 11/30/98.