This paper examines the impact of NAFTA on trade as well as migration flows between Mexico, Canada, and the United States in the textile industry.

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Abstract

This paper examines the impact of NAFTA on trade as well as migration flows between Mexico, Canada, and the United States in the textile industry. Several questions are being investigated: Why did many textile jobs apparently migrate out of the United States in the years after the establishment of NAFTA? Who gained and lost from the process of readjustment in the textile industry after NAFTA? The act whether to protect or not to protect the textile industry when a free trade agreements? The findings show that the migration of many textile jobs out, mostly Mexico was mainly due to a cheaper and enhanced plants included with a flood of cheap labour compared to the United States. Certain quarters like the people of Mexico, people of the United States, apparel companies, and etc both benefits and lost at the same time. The impact on long-term trends were noticeable, while the short-run impact is more difficult to assess due to competing factors such as changes in business cycle patterns, immigration laws, economical climate, weather conditions, and exchange rate movements. Finally, there is the idea that protecting the textile industry from painful free trade agreement is not a perfect solution, bringing a solid and positive outcome to many with only a little much to sacrifice for the betterment of the countries’ wealth and dependency.

Introduction

The first major international trade agreement in the world was the General Agreement on Tariffs and Trade (GATT) formed in 1947. Countries, including the United States and Canada, were members of this agreement.  Mexico joined GATT several years later.  Many countries had economies that had collapsed due to the World War II, so GATT was designed to increase trade liberalization between countries. The North American Free Trade Agreement (NAFTA) was implemented on January 1, 1994, designed to take away tariff barriers between the U.S., Canada and Mexico. Under the NAFTA, all non-tariff barriers to agricultural trade between the United States and Mexico were eliminated. In addition, many tariffs were eliminated immediately, with others being phased out over periods of 5 to 15 years.  NAFTA is known in French as ALENA (Accord de libre-échange nord américain), and in Spanish as TLC (Tratado de libre comercio) or TLCAN (Tratado de libre comercio de américa del norte). NAFTA promises a lot of benefits but these benefits come at a high price for the participated countries. NAFTA is a very complex agreement containing many chapters and covers a wide range of topics essential in the establishment of the agreement but in this particular case the clause and sections in contrast to textile industries only applied here. NAFTA is not a simple agreement to complete free trade between three countries, however desirable such an idea might have been at the time.  The treaty is a complex series of documents compiled in thousands of pages and covering a wide variety of trade areas, conditions and deadlines. This study will structurely define the ways in which the textile industry has been affected positively or either way in the respected countries since the implementation of NAFTA in different degree of levels. Moreover, this paper will explain how it has affected firms in stages either long term or short term and its results included with some prediction of the aftermath of the countries’ textile industry. And finally the comparison textile industry after-1994 with the pre-1994 average annual growth rate in both Mexico and the States is stated.

Migration of textile companies to Mexico

Very according to the Whitehall Textiles Group and Fruit of the Loom Inc case study, the passage of NAFTA, prompted most textile and garment companies to migrate operations into the nation of Mexico. Numerically the most dramatic effect NAFTA has had on the textile industry is the increase in Mexican garment production for export. Critical review of textile and apparel's case studies since the implementation of NAFTA indicate that, until recently, the textile industry has been the largest United States manufacturing sector when it comes to employment. North Carolina has been one of the hardest hit states as a result of the effects of NAFTA on the economy. The textile industry in the state of North Carolina showed specific decline, according to information provided by the North Carolina Department of Commerce.  It’s a well known corporate fact that Mexico carries an abundance of nonunionized workers. However, it has also been noted that secondary reasons for the large scale closure of textile factories in North Carolina can be attributed to a failure to modernize and launch policy changes to remain competitive with foreign markets. Statistically, during the first seven years of NAFTA, 52,419 employees lost their jobs as a result of the closing textile factory. According to the Autex Research Journal, the most notable impact of NAFTA on the industry's resource is a drop in employment.  In the year 1994, the US textile employment rate has been on a steady decrease. In Mexico the wages for worker were much lower and ‘disunionize’. The Mexican industry's wages and benefits don't even top $2 per hour versus $13 to $14 per hour in the States. Textile and garment companies could save more on vast production than manpower where are easily available. However, it is important to note that a reduction in textile employment is U.S is not due solely to the effects of NAFTA on the industry.  It is worth mentioning that cheap advancements in technology have also significantly impacted the job migration in the textile industry to Mexico. Mexico has a strong capability when it comes to skilled and professional labour as such engineers and technician in textile industry have been operating in the country for over 30 years before even NAFTA was been put into effect which is cheaper to hire, providing equal level of consultation with the States. Aside from that, technological advancement and machinery has increased productivity and efficiency in the industry, but has decreased the need for tangible human interaction in terms of production. 

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Gaining sides in the enactment of NAFTA

Putting to the textile industry as textiles and apparel, positive impact seems to outweigh the negative impact upon enactment of NAFTA. his industry size can be defined by analyzing three relevant information: gross national product (GNP), employment rates, and the amount of establishments in this particular specific sector both in the Mexico and United States. The study states that NAFTA helped Mexican manufacturers to practise to U.S. technological innovations more quickly and likely had positive impacts on the jobs qualitatively and quantitatively. Mexico has a strong capability ...

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