s the nafta beneficial for all parties?

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NAFTA

North American Free Trade

Agreement

“Is the NAFTA beneficial for all the three member states?”

Bianca van der Zwaan

IBMS Y2 GBE


Table of content

Introduction        

  1. NAFTA                                                                        P4
  2. Canada                                                                        P6        
  3. United States                                                                P9
  4. Mexico                                                                        P11
  5. conclusion                                                                P13

notes                                                                        P15

Introduction

The North American Free Trade Agreement, known as NAFTA, is an agreement between the United States, Canada and Mexico. The agreement was signed in 1992 and came in to force on January 1st 1994. After signing the agreement trade barriers between the members began to disappear, especially on goods as textile, computers, agriculture and vehicles. NAFTA became the biggest trade block in the world, with the highest GDP¹.

From the beginning the NAFTA agreement was very controversial. For example, the New York Times (7/21/92) said NAFTA promised "jobs, wealth and economic activity throughout the continent." While Presidential candidate Ross Perot warned that a “giant sucking sound” would be heard when jobs were lost in the United States and transferred to Mexico, as U.S. producers abandoned their domestic production facilities².

The above stated contradiction is just one example of almost 800.000 hits that I have found on the internet. I am wondering who is right? Is NAFTA the cause or the solution for the economic problems in Mexico, Canada and the States? I want to know if NAFTA is beneficial for al three member states?

I will base this research of 3 major factors; import/ export, employment, GDP and poverty/wealth, while these are not all the factors where critics and promoters argue about.  

1. NAFTA

On the 1st of January 1994 the free trade agreement between United States, Canada and Mexico came into force. This agreement was and still is, very controversial because of numerous reasons. To begin with it was the first merger between three nations with such a big difference in development³. Mexico is by far, the poorest and the less developed country in this agreement. More than half of al Mexican citizens are living in poverty and one fifth is living in extreme poverty⁴ versus 12% people blow poverty line in the United States and 15% in Canada (note: Canada’s figure is the Low Income Cut-Off (LICO), it does not have an official poverty line)⁵

An other reason is that the NAFTA had also effect on the ‘democratic freedom’ of the citizens in the member states. This is because the ‘trade agreement’ contained a lot of rules, which have to be implemented in their domestic law without considering of these rules are in line with the elected government 6.

As a result, the citizens are divided in two ‘camps’; the promoters and the opponents of NAFTA. During the arise of NAFTA promoters promised a raise in new high-wage U.S. jobs, a raise in living standards in all the nations and Mexico was going to be a booming new market for U.S exports³.

Opponents feared for declining wages, destroy of numerous U.S. jobs which all were going to be transferred to Mexico². Canada especially worried if it could protect its culture, water resources, and standards on health, safety, labor and social programs⁷.  

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To determine what the effect is of the member states I am going to take several points in account, especially those which were in the agenda of the opponents and promoters. First, I will compare the GDP and its annual growth over the last decade, to determine whether there is an economic growth or not. Also the employment and the shift in employment between the countries will be compared. Also the in- and export between all the countries and to finish with I will give an overview of the before NAFTA situation and after.

2. Canada

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