NAFTA, the North American Free Trade Agreement, was signed by the United States, Canada, and Mexico.
NAFTA was signed in 1993 and went into effect on January 1, 1994.
NAFTA was written to create a Free Trade Area in North America.
“ Free Trade” means that countries may freely trade goods with each other without having to pay a tariff (tax) on those goods.
In other words, “free trade” means no trade barriers.
The purpose of the agreement is to:
Allow free movement of goods and services among the countries.
Promote competition in the free trade areas.
Protect the property rights of people and businesses in each country.
Be able to resolve problems that arise among the countries.
Encourage cooperation among countries.
Most economists agree that the agreement has been good for the countries involved.
Free trade increases sales and profits for Mexico, Canada and the U.S.A., thus strengthening their economies.
Lack of tariffs has allowed Mexico to sell its goods in the USA and Canada at lower prices. This makes Mexican products more competitive in these markets and increases Mexico’s profits as it tries to develop its economy.
Free trade is an opportunity for the U.S. to provide financial help to Mexico by making jobs available in factories located there.
a. “NAFTA Members Prepare for Picnic!” b. “NAFTA Members Graciously Share Business Ventures!” c. “NAFTA Members Cover Up Conspiracy!” d. “NAFTA Members Vie For Business!”
Free trade has caused more U.S. jobs losses than gains, especially for higher-wage jobs.
Factories, called Maquiladoras, are built on the Mexican border and workers are hired there to make goods at a much lower wage than workers would be paid in the U.S.A.
Minimum Wage Mexico - $3.40 per day vs. US - $5.15 per hour
Example: Hourly compensation costs for production workers in manufacturing Mexico - $1.21 vs US - $17.70
(Global Trade Watch, The NAFTA Index , October 1, 1998)
These factories make many types of products.
3 Day Blinds
20th Century Plastics
Bali Company, Inc.
Canon Business Machines
Eli Lilly Corporation
Foster Grant Corporation
General Electric Company
Hitachi Home Electronics
Hyundai Precision America
Mitsubishi Electronics Corp.
Sanyo North America
They can move their factories to Mexico and ship the goods to the US with no tariffs.
They would not have to pay the workers in Mexico as much as in the United States.
They would be able to sell their product for cheaper, but still make a good profit
Many American factory workers lose their jobs because the owners move the factories to Mexico. American factory workers cannot move to Mexico to keep their jobs.
Goods made in Mexico would cost a lot less because labor is cheaper there.
They would not like foreign owned factories because they would create competition and hurt Mexican owned businesses.
Maquiladoras would provide jobs for Mexicans, but the profit made by maquiladoras would go back into the US economy, not into Mexico’s
It would provide a job in a country where there are not enough jobs
However, the wages are very low and the working conditions are not good
Building factories creates pollution. An environmentalist would want to make sure that Mexico had laws to protect the environment.