nafta

NAFTA…?NAFTA…?

New Zealand Australia Free New Zealand Australia Free Trade Agreement.Trade Agreement.

North American Free Trade North American Free Trade AgreementAgreement

Signed by which countries?Signed by which countries? MexicoMexico United StatesUnited States CanadaCanada

Went into effect when?Went into effect when? January 1, 1994January 1, 1994

Mexican president Carlos Salinas de Gortari, United States president George Bush, Mexican president Carlos Salinas de Gortari, United States president George Bush, and Canadian prime minister Brian Mulroney, and Canadian prime minister Brian Mulroney, left to right,left to right, look on as their trade look on as their trade

ministers initial the North American Free Trade Agreement (NAFTA) in San Antonio, ministers initial the North American Free Trade Agreement (NAFTA) in San Antonio, Texas, in 1992. Passage of the treaty in 1993 counted as one of the Mulroney Texas, in 1992. Passage of the treaty in 1993 counted as one of the Mulroney

government’s most significant achievements.government’s most significant achievements.

NAFTA ProvisionsNAFTA Provisions NAFTA called for immediately eliminating duties NAFTA called for immediately eliminating duties

on half of all U.S. goods shipped to Mexico and on half of all U.S. goods shipped to Mexico and gradually phasing out other tariffs over a period gradually phasing out other tariffs over a period of about 14 years. Restrictions were to be of about 14 years. Restrictions were to be removed from many categories, including motor removed from many categories, including motor vehicles and automotive parts, computers, vehicles and automotive parts, computers, textiles, and agriculture. The treaty also textiles, and agriculture. The treaty also protected intellectual property rights (patents, protected intellectual property rights (patents, copyrights, and trademarks) and outlined the copyrights, and trademarks) and outlined the removal of restrictions on investment among the removal of restrictions on investment among the three countries. Provisions regarding worker and three countries. Provisions regarding worker and environmental protection were added later as a environmental protection were added later as a result of supplemental agreements signed in result of supplemental agreements signed in 1993. 1993.

ControversyControversy

Who favors NAFTA? Why?Who favors NAFTA? Why?““Transnational Corporations” Transnational Corporations”

have tended to support NAFTA in have tended to support NAFTA in the belief that lower tariffs would the belief that lower tariffs would increase their profits.increase their profits.

ControversyControversy

Who opposes NAFTA? Why?Who opposes NAFTA? Why? Labor unions in Canada and the Labor unions in Canada and the

United States have opposed NAFTA United States have opposed NAFTA for fear that jobs would move out of for fear that jobs would move out of the country due to lower wage costs the country due to lower wage costs in Mexico.in Mexico.

NAFTA FEARSNAFTA FEARS

This Maquila in one of Tijuana’s new industrial parks could easily be This Maquila in one of Tijuana’s new industrial parks could easily be mistaken by a building in San Diego. The road in this area are new mistaken by a building in San Diego. The road in this area are new and well-paved, and professional landscaping surrounds the area.and well-paved, and professional landscaping surrounds the area.

NAFTA: A BRIEF NAFTA: A BRIEF HISTORYHISTORY

Two short videosTwo short videos

http://www.pbs.org/wgbh/commandingheights/lo/ideas/vid_essaylist.html

Trade after Nafta: MexicoTrade after Nafta: Mexico

TRADE WITH MEXICO (in millions of dollars)

YEAR EXPORTS IMPORTS BALANCE

1994 50843.5 49493.7 1349.8

1995 46292.1 62100.4 -15808.3

1996 56791.6 74297.2 -17505.6

1997 71388.5 85937.6 -14549.1

1998 78772.6 94629 -15856.4

1999 86908.9 109720.5 -22811.6

2000 111349 135926.3 -24577.3

2001 101296.5 131337.9 -30041.4

2002 97470.1 134616.0 -37145.9

2003 97411.8 138060.0 -40648.2

2004 110835 155901.5 -45066.5

2005 (August) 77744.8 109960 -32215.2

Trade after Nafta: CanadaTrade after Nafta: CanadaTRADE WITH CANADA (in millions

of dollars)

YEAR EXPORTS IMPORTS BALANCE

1994 114438.6 128405.9 -13967.3

1995 127226 144369.9 -17143.9

1996 134210.2 155892.6 -21682.4

1997 151766.7 167234.1 -15467.4

1998 156603.5 173256 -16652.5

1999 166600 198711.1 -32111.1

2000 178940.9 230838.3 -51897.4

2001 163424.1 216267.9 -52843.8

2002 160922.7 209087.7 -48165

2003 169923.7 221594.7 -51677

2004 189879.9 221594.7 -51671

NAFTA AFTER 10 YEARS: AN NAFTA AFTER 10 YEARS: AN EVALUATION (CATO Institute)EVALUATION (CATO Institute)

For one thing, it has delivered on its For one thing, it has delivered on its principal promise of increasing trade. principal promise of increasing trade. Since 1993, the year before the pact Since 1993, the year before the pact took effect, two-way commerce took effect, two-way commerce between the United States and between the United States and Mexico roughly tripled, from $81 Mexico roughly tripled, from $81 billion to $232 billion billion to $232 billion

NAFTA AFTER 10 YEARS: AN NAFTA AFTER 10 YEARS: AN EVALUATIONEVALUATION

NAFTA helped to break the grip of NAFTA helped to break the grip of the once-dominant PRI party over the the once-dominant PRI party over the daily life of Mexicans. It set the stage daily life of Mexicans. It set the stage for the election of Vicente Fox in for the election of Vicente Fox in 2000 as the first opposition-party 2000 as the first opposition-party candidate to be elected president in candidate to be elected president in 71 years 71 years


Critics continue to assert that NAFTA has Critics continue to assert that NAFTA has cost hundreds of thousands of American cost hundreds of thousands of American jobs and, further, is somehow responsible jobs and, further, is somehow responsible for the lingering recession in U.S. for the lingering recession in U.S. manufacturing. manufacturing.

They use NAFTA as an argument against They use NAFTA as an argument against proposed trade agreements with Central proposed trade agreements with Central American and other Latin American American and other Latin American countries. countries.


There has been no "giant sucking There has been no "giant sucking sound" of jobs and investment sound" of jobs and investment heading south. In the past decade, heading south. In the past decade, the U.S. economy has added a net 18 the U.S. economy has added a net 18 million new jobs. million new jobs.

America's unemployment rate is America's unemployment rate is actually lower today than it was in the actually lower today than it was in the year before NAFTA went into effect. year before NAFTA went into effect.


Since NAFTA, about 400,000 Americans Since NAFTA, about 400,000 Americans have qualified for trade adjustment have qualified for trade adjustment assistance under a special program for assistance under a special program for workers displaced by imports from workers displaced by imports from Mexico, but that is a small number Mexico, but that is a small number when spread over a decade and when when spread over a decade and when compared to the millions of jobs being compared to the millions of jobs being eliminated and created every quarter eliminated and created every quarter in the U.S. economy. in the U.S. economy.


In the past four years, America's direct In the past four years, America's direct manufacturing investment in Mexico has manufacturing investment in Mexico has averaged $1.9 billion a year, a fraction of averaged $1.9 billion a year, a fraction of the $200 billion invested annually in our the $200 billion invested annually in our domestic manufacturing capacity. domestic manufacturing capacity.

In fact, U.S. companies invest far more In fact, U.S. companies invest far more each year in other high-wage, high-each year in other high-wage, high-standard economies, such as those of standard economies, such as those of Western Europe and Canada, than they do Western Europe and Canada, than they do in such developing countries as Mexico. in such developing countries as Mexico.


NAFTA has been a blessing for many U.S. NAFTA has been a blessing for many U.S. manufacturers. Our domestic automobile manufacturers. Our domestic automobile industry, for example, now produces about industry, for example, now produces about the same number of cars and light trucks the same number of cars and light trucks in the United States as it did before the in the United States as it did before the agreement, but it assembles those agreement, but it assembles those vehicles more cost-effectively by vehicles more cost-effectively by spreading out its sourcing among the spreading out its sourcing among the three NAFTA countries -- the United States, three NAFTA countries -- the United States, Mexico, and Canada. Mexico, and Canada.


Total manufacturing output in the Total manufacturing output in the United States has risen 41 percent United States has risen 41 percent during the past ten years, compared during the past ten years, compared to 34 percent in the preceding 10 to 34 percent in the preceding 10 years. In the first five years of years. In the first five years of NAFTA, the U.S. economy added a NAFTA, the U.S. economy added a net half million manufacturing jobs net half million manufacturing jobs


By allowing American manufacturers By allowing American manufacturers to more efficiently allocate their to more efficiently allocate their production, NAFTA deserves a share production, NAFTA deserves a share of the credit for the healthy increase of the credit for the healthy increase in U.S. worker productivity since the in U.S. worker productivity since the mid-1990s. mid-1990s.


The recession in manufacturing sector The recession in manufacturing sector that began in 2000 cannot be reasonably that began in 2000 cannot be reasonably blamed on NAFTA. It began years after blamed on NAFTA. It began years after the agreement took effect, and for the agreement took effect, and for reasons unrelated to NAFTA, such as the reasons unrelated to NAFTA, such as the East Asian financial crisis, the bursting of East Asian financial crisis, the bursting of the dot com and telecom bubbles, a the dot com and telecom bubbles, a collapse of business investment and collapse of business investment and demand, corporate scandals and demand, corporate scandals and uncertainty caused by the war on uncertainty caused by the war on terrorism. terrorism.

NAFTA AFTER 10 YEARS (CATO Institute)NAFTA AFTER 10 YEARS (CATO Institute)

In fact, since 2000, imports from and In fact, since 2000, imports from and exports to Mexico have both exports to Mexico have both declined. The problem for U.S. declined. The problem for U.S. manufacturers is not too much trade manufacturers is not too much trade with Mexico, but not enough.with Mexico, but not enough.

NAFTA AFTER 10 YEARS (Joseph Stiglitz)NAFTA AFTER 10 YEARS (Joseph Stiglitz)

In the United States, the North American In the United States, the North American Free Trade Agreement has failed to fulfill Free Trade Agreement has failed to fulfill the most dire warnings of its opponents the most dire warnings of its opponents and the most fervent expectations of its and the most fervent expectations of its supporters.supporters.

In Mexico, however, the treaty remains In Mexico, however, the treaty remains controversial and even harmful — as do controversial and even harmful — as do America's efforts to liberalize trade America's efforts to liberalize trade throughout the hemisphere.throughout the hemisphere.

NAFTA AFTER 10 YEARS: ANOTHER NAFTA AFTER 10 YEARS: ANOTHER EVALUATION (Joseph Stiglitz)EVALUATION (Joseph Stiglitz)

There is some good news: In America, the There is some good news: In America, the "giant sucking sound of jobs being pulled "giant sucking sound of jobs being pulled out of this country" that Ross Perot out of this country" that Ross Perot predicted never quite materialized.predicted never quite materialized.

The first six years of Nafta saw The first six years of Nafta saw unemployment in the United States fall to unemployment in the United States fall to new lows.new lows.


Nafta has brought some benefits to Mexico as Nafta has brought some benefits to Mexico as well; it was trade with America, fueled by Nafta well; it was trade with America, fueled by Nafta — not the bailout of Wall Street lenders — that — not the bailout of Wall Street lenders — that was responsible for Mexico's quick recovery was responsible for Mexico's quick recovery after the financial crisis of December 1994.after the financial crisis of December 1994.

But while Mexico benefited in the early days, But while Mexico benefited in the early days, especially with exports from factories near the especially with exports from factories near the United States border, those benefits have United States border, those benefits have waned, both with the weakening of the waned, both with the weakening of the American economy and intense competition American economy and intense competition from China. from China.


Growth in Mexico over the past 10 years Growth in Mexico over the past 10 years has been a bleak 1 percent on a per capita has been a bleak 1 percent on a per capita basis — better than in much of the rest of basis — better than in much of the rest of Latin America, but far poorer than earlier Latin America, but far poorer than earlier in the century. From 1948 to 1973, Mexico in the century. From 1948 to 1973, Mexico grew at an average annual rate of 3.2 grew at an average annual rate of 3.2 percent per capita. (By contrast, in the 10 percent per capita. (By contrast, in the 10 years of Nafta, even with the East Asian years of Nafta, even with the East Asian crisis, Korean growth averaged 4.3 percent crisis, Korean growth averaged 4.3 percent and China's 7 percent in per capita terms.) and China's 7 percent in per capita terms.)


And while the hope was that Nafta would And while the hope was that Nafta would reduce income disparities between the reduce income disparities between the United States and its southern neighbor, in United States and its southern neighbor, in fact they have grown — by 10.6 percent in fact they have grown — by 10.6 percent in the last decade. the last decade.

Meanwhile, there has been disappointing Meanwhile, there has been disappointing progress in reducing poverty in Mexico, progress in reducing poverty in Mexico, where real wages have been falling at the where real wages have been falling at the rate of 0.2 percent a year. rate of 0.2 percent a year.


These outcomes should not have These outcomes should not have come as a surprise. Nafta does give come as a surprise. Nafta does give Mexico a slight advantage over other Mexico a slight advantage over other trading partners. But with its low tax trading partners. But with its low tax base, low investment in education base, low investment in education and technology, and high inequality, and technology, and high inequality, Mexico would have a hard time Mexico would have a hard time competing with a dynamic China. competing with a dynamic China.


Nafta enhanced Mexico's ability to Nafta enhanced Mexico's ability to supply American manufacturing firms supply American manufacturing firms with low-cost parts, but it did not with low-cost parts, but it did not make Mexico into an independently make Mexico into an independently productive economy. productive economy.


Under Nafta, if foreign investors believe they are Under Nafta, if foreign investors believe they are being harmed by regulations (no matter how well being harmed by regulations (no matter how well justified), they may sue for damages in special justified), they may sue for damages in special tribunals without the transparency afforded by tribunals without the transparency afforded by normal judicial proceedings. If successful, they normal judicial proceedings. If successful, they receive direct compensation from the federal receive direct compensation from the federal government.government.

Environmental, health and safety regulations Environmental, health and safety regulations have been attacked and put into jeopardy. To have been attacked and put into jeopardy. To date, suits with claims in excess of $13 billion date, suits with claims in excess of $13 billion have been filed. have been filed.


While many of the cases are still pending, it is While many of the cases are still pending, it is clear that there was not a full and open debate of clear that there was not a full and open debate of the consequences of Nafta before passage. the consequences of Nafta before passage.

Conservatives have long sought to receive Conservatives have long sought to receive compensation for regulations that hurt them, and compensation for regulations that hurt them, and American courts and Congress have usually American courts and Congress have usually rejected these attempts. Now businesses may rejected these attempts. Now businesses may have accomplished indirectly, through treaty, have accomplished indirectly, through treaty, what they could not get more openly through the what they could not get more openly through the democratic political process. democratic political process.


Meanwhile, those harmed by the actions of Meanwhile, those harmed by the actions of the foreign firms, for instance by what the foreign firms, for instance by what they do to the environment, do not have they do to the environment, do not have comparable protections of appealing to an comparable protections of appealing to an international tribunal and receiving international tribunal and receiving compensation. compensation.

This fetid creek runs through the middle of Chilpancingo. The water This fetid creek runs through the middle of Chilpancingo. The water flows down from the polluted mesa above. Community members claim flows down from the polluted mesa above. Community members claim

that a drainage pipe carrying toxins from the maquilas runs only at night that a drainage pipe carrying toxins from the maquilas runs only at night to evade detection by government officials.to evade detection by government officials.


All of this has important implications for the All of this has important implications for the proposed Free Trade Area of the Americas, and proposed Free Trade Area of the Americas, and for countries thinking of signing onto bilateral for countries thinking of signing onto bilateral trade agreements with the United States. Signing trade agreements with the United States. Signing a free trade agreement is neither an easy nor an a free trade agreement is neither an easy nor an assured road to prosperity.assured road to prosperity.

The United States has said it does not want The United States has said it does not want agriculture or nontariff barriers to be on the table agriculture or nontariff barriers to be on the table in these talks. But while it refuses to give in on in these talks. But while it refuses to give in on these points, it wants Latin American countries to these points, it wants Latin American countries to compromise their national sovereignties and to compromise their national sovereignties and to agree to investor "protections."agree to investor "protections."


In fact, the United States has been demanding In fact, the United States has been demanding that countries fully liberalize their capital markets that countries fully liberalize their capital markets just as the International Monetary Fund has finally just as the International Monetary Fund has finally found that such liberalization promotes neither found that such liberalization promotes neither growth nor stability in developing countries. growth nor stability in developing countries.

Unfortunately, many of the smaller and weaker Unfortunately, many of the smaller and weaker countries will probably agree in the quixotic hope countries will probably agree in the quixotic hope that by linking themselves to America, they will that by linking themselves to America, they will partake of America's prosperity. partake of America's prosperity.


In the long run, while particular special-interest In the long run, while particular special-interest groups may benefit from such an unfair trade groups may benefit from such an unfair trade treaty, America's national interests — in having treaty, America's national interests — in having stable and prosperous neighbors — are not well stable and prosperous neighbors — are not well served.served.

Already, the manner in which the United States is Already, the manner in which the United States is bullying the weaker countries of Central and bullying the weaker countries of Central and South America into accepting its terms is South America into accepting its terms is generating enormous resentment. If these trade generating enormous resentment. If these trade agreements do no better for them than Nafta has agreements do no better for them than Nafta has done for Mexico, then both peace and prosperity done for Mexico, then both peace and prosperity in the hemisphere will be at risk. in the hemisphere will be at risk.

nafta

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