The North American Free Trade Agreement - Assignment Example

The North American Free Trade Agreement The North America Free Trade Agreement carries a great importance for the researchers, politicians and residents of member countries. There are several facts which go for and against NAFTA. These facts require close attention and concentration to weigh between the pros and cons of this agreement. This paper is to examine the pros and cons of NAFTA and suggest if NAFTA is posing to be a threat for U.S. economy or is it a friendly agreement for the betterment of the state.

It is a well known fact that NAFTA has created the world’s largest free trade area. It has linked up approximately 439,000,000 people and ended up making $15.3 trillion in goods and services every year. It is also estimated that U.S. GDP is increased by 0.5% per year as a result of North America Free Trade Agreement. This agreement eliminates the requirement of tariffs and agreements on international rights for business investors. T his benefit to the investors boosts up the trade and increases the capital hence encourages business growth and overall economic prosperity.

The needlessness of tariffs has also resulted in the cost cutting of imports and further reduced the inflation by such a decrease in the imports’ costs (U.S., & Clinton, 1997). Beyond any doubts, NAFTA has increased the trade between the signatory countries. The trade patterns between these countries have been tripled from $297 billion in 1993 to $903 billion in 2007. In particular it is evident that the United States sales to Canada and Mexico rose from $142 billion to $364.6 billion. Imports of goods from these countries to U.S. grew by as much as 231%, which is a much larger increase.

NAFTA also encourages the firms of member countries to propose and take part in government contracts. NAFTA also provides intellectual properties protection. The disadvantages of NAFTA also need to be considered as they also create a point to debate in the affairs of United States. The availability of cheaper labor available in Mexico has encouraged the US manufactures to move their production towards low cost Mexican labor. Hence, US employees lost their jobs and statistics reveal that from 1994 to 2002 a net loss of 897000 jobs has been observed.

It is unquestionable that it created new jobs too, but the overall impact was a loss of a considerable number of jobs. The manufacturing industry faced the most due to NAFTA by losing 78 percent jobs. Owing to this surplus of employees at a lower cost, manufacturers suppressed the wage growth and US employees were either left with a choice to work at a lower wage rate or stay unemployed. Hence, NAFTA has directly or indirectly caused a decline in US wage rates. The threats of NAFTA are not limited to US as it also affected the Mexican agricultural industry.

The elimination of tariffs has made it possible for Mexico to import corn and other food supplements below cost. This aspect seems beneficial for the consumers but not for the Mexican farmers who are left with no choice but to leave the industry ( Carnegie Endowment For In., 2003). In conclusion, it can be said that the advantages of NAFTA are undoubtedly of great importance, yet, there is a need to redefine certain conditions in order to improve the employment rates, prices, and agricultural industry of USA and the member countries.

Bibliography: Nafta's promise and reality: Lessons from mexico for the hemishphere. (2003). [S.l.]: Carnegie Endowment For In. United States, & Clinton, B. (1997). Study on the operation and effects of the North American Free Trade Agreement. [Washington, D.C.?]: President of the U.S.