Nafta: A Promising Future For Essay, Research Paper

NAFTA: A Promising Future For The U.S. and Mexico

After six years of remarkable trade successes, The North American Free Trade Agreement, also known as NAFTA, still continues to cause discussions and debates as to its pros and cons. Even Vicente Fox, the newly inaugurated President of Mexico, failed to receive a commitment from George W. Bush nor Al Gore with regard to an assurance of support to expand NAFTA, during a recent visit to the United States (Wall Street Journal). Neither candidate wanted to touch on the controversial topic during their close presidential race. It may be political now, but after the U.S. election is decided one can rest assured that there will be continued U.S. support for this trade agreement between our borders.

NAFTA is a viable and positive initiative for free trade between the United States, Canada, and Mexico. Opinions are especially varied, personally and politically, when it comes to NAFTA s relationship with the U.S. and Mexico. The U.S and Canada already had a five-year trade agreement before Mexico entered into the trade triad. The opinion that NAFTA has resulted in advantageous growth will be explored in this paper with regard to trade, jobs, the environment, and the economy for both the United States and Mexico.

NAFTA is a comprehensive, rules-based agreement, that was formed from a 1989 trade agreement between the United States and Canada that reduced or actually eliminated many tariffs between the two countries. NAFTA, the North American Free Trade Agreement, was signed into effect on January 1, 1994. It is an agreement designed to improve almost all aspects of trade between the three partners. Immediately after being signed, NAFTA called for eliminating duties on half of all U.S. goods shipped to Mexico and a gradual phasing out of other tariffs over the next fourteen years. Some of those U.S. exports to Mexico that were immediately free from tariffs included semiconductors and computers, telecommunications and electronic equipment and medical devices. U.S. automotive parts entering Mexico saw a seventy-five percent reduction in duties over the first five years of NAFTA and the rest are phased over ten years. NAFTA also removes many nontariff barriers like quotas. About half of the agricultural products traded between the two countries had tariffs cut immediately, but import sensitive items, such as corn and beans for Mexico and orange juice and sugar for the U.S. are to be phased out over fifteen years. This allows each country to adapt to the new competitive market. The treaty also maintains that restrictions are to be removed from many categories, including motor vehicles, automotive parts, computers, textiles, and agriculture. NAFTA also protects intellectual property rights such as patents, copyrights, and trademarks. It also covers the removal of restrictions on investments among the countries. Mandates for minimum wages, working conditions, and environmental protection were added as supplemental agreements (NAFTA Forum).

NAFTA goes beyond tariff reduction as it opened previously protected sectors in agriculture, energy, textiles, and automotive trade. It opened up the U.S.- Mexico border to trade services with specific rules in finance, transportation, and telecommunications. NAFTA also set rules on government procurement and intellectual property rights as previously mentioned. It set specific safeguards on how to deal with subsidies and unfair practices and set up procedures for dealing with private commercial or agricultural disputes. It even set up a process for dealing with all NAFTA implementation concerns. As this description lends itself to contractual detail, it is covered to give example that NAFTA is a comprehensive trade agreement with safeguards to ensure protection for all parties concerned. With NAFTA enacted, trade between the U.S. and Mexico has shown remarkable growth.

From Mexico s embassy in Washington, D.C. it is recorded that “trade and investment flows have increased dramatically and U.S. employment is at an all time high.” U.S.-Mexico trade, as of November 21, 2000, reached $22.1 billion. This is a 222 percent increase from 1993 just before NAFTA was signed (Embassy of Mexico). Mexico has surpassed Japan to become the 2nd largest trading partner to the U.S., after Canada.

It is hard to understand the opposing views of NAFTA as a vehicle that robs citizens of jobs. One opponent, Chris McGinn, deputy director of global trade for Public Citizen, a Washington D.C.-based consumer group, says “It s staggering how far NAFTA has fallen short of the promises of its proponents. It has failed to improve the environment and public health along the Mexican border. It has failed to create jobs it promised. It turned a trade surplus into a massive deficit.” (SECOFI-NAFTA Homepage)

As a resident of the border in Laredo, Texas, it s obvious that Mr. McGinn hasn t seen the effects of NAFTA s promise first-hand. In the last five years in Laredo, our city has seen remarkable growth in population, business, improved government initiatives, construction, jobs and services of all kinds from medical (a newly constructed $140 million hospital), to the economy. The recently constructed international bridge is another sign of marked increase in trade and services because of NAFTA. Raquel Perez, President of ICBS, Ltd. In Laredo, stated “My customs-brokerage company has more than doubled in international business between the U.S. and Mexico since NAFTA.

Also noted in U.S.- Mexico Chamber of Commerce records (www.usmcoc.org) were job salary increases for Mexican workers. Increased trade and investment growth under NAFTA has brought jobs back to the U.S. and Mexico that previously had been lost to Asia. In Mexico, workers in firms that sell most of their products out of their country, earn wages 50% higher than the average national wage earner. There is a positive job situation in the U.S. also, but only in part to NAFTA. Our good economy continues to drive our employment situation. Opponents to NAFTA are the unionized labor groups who want all production to stay in the U.S. One offering from NAFTA though, is the NAFTA TAA or Transitional Adjustment Assistance. Any worker whose job produced a product that was directly affected by NAFTA is offered assistance for any job loss. These workers must petition the Labor Department for this assistance and it is available. The U.S. government estimates that around 350,000 jobs were created in the U.S. due to exports to Mexico under NAFTA with pay wages 13 to 16% higher than jobs that may have been lost due to imports from Mexico (NAFTA Forum).

As important as the economy and jobs, the environment is of utmost concern for NAFTA as well. As the border separates two countries, it also separates two very different income levels and progress levels. It will take time for Mexico to build its infrastructure and create a healthier environment for all its citizens. The Sierra Club in the U.S. and many other citizen groups complain of unfair and unsafe environmental concerns in Mexico. NAFTA is aware of this environmental challenge and the U.S. has invested in resources necessary for environmental protection and development. The North American Agreement on Environmental Cooperation (NAAEC) was approved as a side agreement to NAFTA. The Border Environment Cooperation Commission (BECC) also helps deal with extensive environmental problems that may occur on the border. In many ways, NAFTA is serving the needs of both Mexico and the United States. Both countries are benefiting. Environmental laws must be followed, and strict enforcement is upheld by NAFTA.

As international trade continues, the future looks bright for both the U.S. and Mexico thanks to NAFTA. Trade surpluses stand out markedly as U.S. imports from Mexico reach record levels, surpassing $12.4 billion in September 2000. Bilateral trade reached $183.6 billion, a 206% higher level than pre-NAFTA in 1993. Statistics show remarkable benefits to both the United States and Mexico, but as the controversy over jobs, and the environment continue, it is important that NAFTA s participating countries continue to strive to improve conditions for everyone involved. It is also important that NAFTA makes certain all its provisions and requirements are being fully enforced and implemented before any expansion of NAFTA is to happen with other Latin American countries. In just seven years, NAFTA has produced dramatic results for North American companies and workers. This shared growth and development has had great advantages to both the United States and Mexico and hopefully these successes will continue well into the future.

Works Cited

Castellanos, Camila. 1999. Diversity Abroad. Business Mexico. 8(12): 50-51.

Embassy of Mexico. 2000

NAFTA Forum. 2000

Perez, Raquel. Telephone Interview. 01 Dec. 2000.

Reed, Stanley and Elisabeth Malkin. 1995. NAFTA Eases the Way. Business

Week. 3450: 110-114.

SECOFI-NAFTA Homepage. Ed. SECOFI. 2000

Sutter, Mary. 1997. Material Gains. Business Mexico. 7(9): 5-12, September.

Wall Street Journal, The. Ed. Dow Jones & Company Inc. 30 Nov 2000