The Negative Effects of the North American Free Trade Agreement

The Negative Effects of the North American Free Trade Agreement

In January 1994, the United States, Mexico, and Canada implemented the North American Free Trade Agreement (NAFTA), forming the largest free trade zone in the world. The goal of NAFTA is to create better trading conditions through tariff reduction, removal of investment barriers, and improvement of intellectual property protection. NAFTA continues to gradually reduce tariffs on set dates and aims to eliminate all tariffs by the year 2004. Before NAFTA was established, investing in Mexico was a difficult process. Investors needed the Mexican Government's approval and were also required to meet specific investment guidelines. These requirements necessitated investors to export a set level of goods and services, utilize domestic goods and services, and transfer technology to competitors. Under NAFTA, investors no longer need government approval to invest and are treated as domestic investors. NAFTA has also increased intellectual property rights and allowed companies to obtain patents in Mexico and Canada. In the past, companies were hesitant to export research and development intensive goods; with increased intellectual property protection, however, exports of these goods have shown a definite increase. As a result of better trading conditions, exports and imports of most other goods have increased along with the research and development intensive goods. In Mexico, the elimination of investment barriers has allowed investment to expand. Increased trading and investment has then created many jobs, raised the Gross Domestic Product, and lowered consumer prices.

The free trade that NAFTA has established among the United States, Mexico, and Canada has...

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...d exports but have lost their government subsidies, which effectively negates the gains from increased exports. There are many benefits of NAFTA, which are increased employment, raised national income, higher productivity, and lower consumer prices. The negative effects are increased pollution, loss of U.S. jobs, and unfair treatment and unsafe conditions for Mexican workers. The benefits definitely outweigh the negative effects in the long run because improved economies will raise the standard of living and promote better overall economic growth in all of North America.

Bibliography:

Works Cited

Dentzer, Susan. The Pain and Gain of Trade. U.S. News Sept. 1992

Harbrecht, Douglas. What Has NAFTA Wrought? Plenty Of Trade. Business Week Nov. 21, 1994: 48-49

Ebrahim, Margaret Can Mexico and Big Business USA Buy NAFTA? The Nation June 14, 1993.