NAFTA, the North American Free Trade Agreement, was signed by the United States, Canada, and Mexico.NAFTA was signedin 1993 and wentinto effect onJanuary 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 MembersPrepare for Picnic!”b. “NAFTA MembersGraciously ShareBusiness Ventures!”c. “NAFTA MembersCover UpConspiracy!”d. “NAFTA MembersVie 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 •Honda 20th Century Plastics •Honeywell, Inc. Acer Peripherals •Hughes Aircraft Bali Company, Inc. •Hyundai Precision America Bayer Corp./Medsep •IBM BMW •Matsushita Canon Business Machines •Mattel Casio Manufacturing •Maxell Corporation Chrysler •Mercedes Benz Daewoo •Mitsubishi Electronics Corp. Eastman Kodak/Verbatim •Motorola Eberhard-Faber •Nissan Eli Lilly Corporation •Philips Ericsson •Pioneer Speakers Fisher Price •Samsonite Corporation Ford •Samsung Foster Grant Corporation •Sanyo North America General Electric Company •Sony Electronics JVC •Tiffany GM •Toshiba Hasbro •VW Hewlett Packard •Xerox Hitachi Home Electronics •Zenith
Good or Bad? United States Mexico They can move their factories to They would not like foreign owned Mexico and ship the goods to the factories because they would US with no tariffs. create competition and hurt They would not have to pay the Mexican owned businesses. workers in Mexico as much as in Maquiladoras would provide jobs the United States. for Mexicans, but the profit made They would be able to sell their by maquiladoras would go back product for cheaper, but still into the US economy, not into make a good profit Mexico’s Many American factory workers It would provide a job in a country lose their jobs because the owners where there are not enough jobs move the factories to Mexico. However, the wages are very low American factory workers cannot and the working conditions are move to Mexico to keep their jobs. not good Goods made in Mexico would Building factories creates cost a lot less because labor is pollution. An environmentalist cheaper there. would want to make sure that Mexico had laws to protect the environment.