NAFTA Analysis Essay Example For Students

NAFTA Analysis Essay NAFTASince the beginning of civilization, trade has been an important issue. Christopher Columbus sailed to the Americas in search of a faster and safer trade route to India. We as Americans fought for our independence over trade related issues, such as tariffs and rules on with whom we were allowed to export and import goods. Our people have always fought for the rights and ability to buy and sell what they want at a reasonable price. The North American Free Trade Agreement, or NAFTA, is yet another attempt at this. NAFTA was signed on December 17, 1992 and put into effect on January 1, 1994 (SICE). It is a trade agreement between Canada, the United States, and Mexico. This paper will explain all the finer points of the agreement, its affects on our economy, and some predictions to the future. I shall end with my opinion of NAFTA based on what I have learned while researching this paper. To discuss NAFTA with a greater understanding, it is important to realize why the three major go vernments on the North American continent would want to form a trade alliance. According to the law library at Southern Methodist University its purpose was to remove tariff barriers between Canada, the United States and Mexico (North). Removal of these barriers obviously promotes trade between these countries. It also promotes the buy and selling of goods between these countries by making those goods more easily accessible. Sellers can produce with lower costs and buyer can get the end product cheaper than if the tariffs were included in the price. But NAFTA had much loftier goals then just lowering cost and price. It was established with the goal of fostering greater economic growth in Canada, the United States, and Mexico (John). The ways in which NAFTA planned to create this spark in the economies of three different nations, was outlined in the actual NAFTA agreement text, in Article 102: Objectives. It states that the purpose of the agreement is to: eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories, promote conditions of fair competition, increase substantially investment opportunities , provide adequate and effective protection and enforcement of intellectual property rights , create effective procedures for the implementation and application of NAFTA, for the resolution of disputes, and, establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of NAFTA. (SICE)In laymans terms, NAFTA hoped to encourage trade by eliminating the former obstacles in order to facilitate the ease of goods and services across all borders. It also expected to improve fair competition by making all countries abide by the rules laid out in the agreement.. An example of how NAFTA has improved investment opportunities is evident in Canada, where the direct investment in the United States and Mexico has increased by 340 percent between 1990 and 2002 fr om $60 billion to 205 billion. In addition Canada benefited from $225 billion in American and Mexican direct investment in Canada (Further). As far as intellectual property in concerned, everyone knows that its easy to get foreign, more specifically Mexican made, designer knock-offs. Under NAFTA, these practices would be prohibited and each country would have to respect the others trademarks, copyrights, etc. NAFTA sets out guild lines to deal with disputes as well as a set of rules that outlines practices and procedures. Through these objectives, NAFTA is tying to improve the relations and the economies of all three nations. Of course, no one would enter into an agreement on just good faith. There are many rules and conditions of NAFTA. One of these rules is the Rule of Origin, which is a requirement that encourages the production of goods with in Canada, the U.S. and Mexico by granting them lower tariffs (Qualifying). However, you cant just slap a Made in the U.S.A sticker on you product and say it originated here. For the most part, all of the materials and the labor used to make finished goods must have originated in that country. This ensures that only those countries that are part of the agreement benefit from NAFTA. But how much are we really benefiting from NAFTA? What are some of the advantages and disadvantages of the agreement? According to the Federal Reserve Bank of St. Louis website, one absolute advantage is the ability to do something more efficiently with less labor or resources than another country (Comparative). NAFTA also made the cost of producing lower by lowering the tariffs. Through its implementation NAFTA provided for immediate tariff reductions on 68 percent of U.S. exports to Mexico, and 49 percent of U.S. imports from Mexico. With respect to U.S.-Canada trade, virtually all tariffs on U.S.-Canadian trade have been eliminated (Executive). Producing at a lower cost gives a company higher profits and the competitive edge of setting prices below that of their competitors. NAFTA allows us to more cheaply attain labor and other resources from the countries in the pact, giving us the ability to produce goods at a lower cost. However, what may seem good for big business is rarely good for the little guy. The Federal Bank of St. Louis also states that, international trade does not benefit everyone. In particular, low-skill U.S. workers may lose out (Key). NAFTA depresses wages of low-skilled U.S. workers because, trade permits us to import unskilled labor (Negatives). Anne Rice: A Fascinating Story EssayWhat does all this say about the future of NAFTAs participants? As more manufacturing jobs move to Mexico, the maquiladora factories will have to become more spaced out, trickling down the nation. This will create more jobs and hopefully raise the wages of Mexican workers. Due to a lose of low-skilled jobs in the U.S. and Canada, more people will be forced to get some form of educations, and our economy will shift more and more to a service economy. Canada is seeing a change in their socialist government to more of a capitalistic one. I have always had a negative opinion of NAFTA. I was hoping that through doing research for this paper I would become enlightened and see what a great agreement NAFTA is. But my I was surprisingly reaffirmed in my previous opinion. As I stated before, Im from Houston, Texas, and my father is a truck driver who owns his own truck. Growing up I always heard him complaining about NAFTA taking jobs out of the trucking i ndustry. Not only do Mexican trucks not have to meet the admissions and licensing standard that American drivers have to, but they wouldnt have to stop at all of the weigh station that slow down U.S. trucks delivery time. Since they dont have to stop at weigh stations, Mexican trucks also dont have to fill out logs or follow the same guidelines on how many hours they are permitted a day to drive and how much they must sleep. This lack of regulations gives Mexican truck a competitive edge, as well as put dangerous, unregulated trucks on American highways. Having the perspective that I have from growing up in such close proximity to Mexico, Ive seen manufacturing companies move across the borders and had many friends parents lost their jobs. I also have had friends whose parents were farmers, and have seen them get poorer and poorer, in part due to the excessive importation of agricultural goods. If it were doing great good for the Mexican economy, I would rule NAFTA as fairly success ful, since I understand that eventually, that money will make its way back to America, but through my research I learned that this is simply not the case. In the over ten years since NAFTA was implemented, Mexican wages have actually decrease. To have an already impoverish people make less money as the cost of living is increasing does not sing praises to NAFTA. Even Canada, which is a stable, successful nation, say a loss of full-time jobs and more money go to the wealthy than to the masses. From what I have read, NAFTA seems to be great for big business, they get to move to Mexico, pay their workers next to nothing, and not worry about environmental standards. For the rest of us, NAFTA seems to be hurting more than helping. Works Cited1.Briefing Paper. 2001. Economic Policy Institute. 03 Apr. 2004. 2.Comparative Advantages. Economic Research: Federal Researve Bank of St. Louis. 02 Apr. 2004. 3.Executive Summary. United States International Trade Commission. 09 Apr. 2004. 4.Further Opportunites. 05 Jun. 2003. Department of Forign Trade Affaris and International Trade. 07 Apr. 2004. 5.Faux, Jeff. Viewpoints:NAFTA at 10. The Nation. 02 Feb, 2004. Economic Policy Institute. 03 Apr. 2004. 6.The John F. Henning Center for International Labor Relations: The North American Free Trade Agreement. 2003. The John F. Henning Center for International Labor Relations. 04 Apr. 2004. 7.Key Points to Remember. Economic Research: Federal Researve Bank of St. Louis. 02 Apr. 2004. 8.Mumme, Stephen. Nafta and Enviroment. Foreign Policy In Focus. Volume 4. Number 26 (1999): 9.Negatives of Trade. Economic Research: Federal Researve Bank of St. Louis. 02 Apr. 2004. 10.North American Free Trade Agreement. 01 Jul. 2003. SMU Under wood Law Library. 02 Apr. 2004 11.The North American Free Trade Agreement (NAFTA): Deepening Economic Integration and resposes to Competition. Center for North American Studies. Jul. 2003. Texas A;M University. 10 Apr. 2004. 12.SICE:North American Free Trade Agreement. SICE: Foreign Trade Information System. 06 Apr. 2004. 13.Qualifying for NAFTA. FedEx. 05 Apr. 2004.