Why nafta is good

It also paved the way for unprecedented economic integration between partners, creating a platform where companies from Canada, the U. NAFTA came into effect on January 1, , creating the largest free trade region in the world at that time, generating economic growth and helping to raise the standard of living for the people of all three member countries.

Given that the Agreement is over 23 years old, there are many clarifications and technical improvements that could be made in all trade areas covered by NAFTA, such as labour, the environment, or culture, for example.

Some Total merchandise trade between Canada and the United States more than doubled since , and grew nine-fold between Canada and Mexico. Canada is the largest merchandise export market for the U. In , the U. Almost 9 million jobs in the U. Canada is the main foreign supplier of energy to United States, and was the fifth largest cumulative source of foreign direct investment FDI into the United States. In other words, you would calculate, maybe for every job we have lost in the U.

While conceding that many U. Before NAFTA went into effect in , the automotive sector throughout North America was insular and regional, and most vehicles were developed for the markets in which they were sold, notes Michael Robinet, managing director of IHS Automotive, a consultancy based in Michigan.

South of the U. Protected by high import duties, import licenses and quotas, Mexican plants were notorious for producing shoddy goods unpopular even in their domestic market. As recently as ,Japan exported almost twice as many cars to the United States as did Mexico. This year, however, Mexico will export 1. By ,Mexico will export 1. For both the U. Some components or sub-assemblies are sent back to the U.

It is as if there is no border, as if it is one economic zone. All this activity has had a predictably negative impact on the U. By , That is to be expected for several reasons, he says. They were mostly for the Mexican market, and they were not very efficient.

Another part is training of the labor force, for the same reason. These were cars made for export, so they needed to be well-done cars.

However, the trend is more visible in the automotive sector because there are less than two dozen vehicle assembly plants in Mexico. You can more readily see the changes in the automotive industry, but it is happening in the others too…. There are Central Americans coming to the U. So just imagine, without NAFTA and with Mexico not doing that well, we would have had the additional problem of an unstable Mexico with lots of people wanting to come to the United States. The railroad has seen high double-digit quarterly intermodal growth inside Mexico, as the U.

He agrees that manufacturing in Mexico for export to U. Whenever there is this kind of growth process, especially when foreign investment comes in, you always get that inequality. They found mixed effects on the US labor force. Although for the average worker there wasn't too much of a difference, a concentrated minority saw a significant decrease in wage growth that could be correlated with NAFTA.

Blue-collar workers were more likely to be affected, college-educated workers were less so, and executives saw some benefits. These workers saw wage growth drop by as much as 17 percentage points relative to wage growth in unaffected industries," McLaren said in an interview with UVA Today. McLaren said that it wasn't just the industries that were affected but entire towns that depended on those industries: Factory towns have grocery stores, bowling alleys, and public schools that all rely on industrial workers as customers.

The example McLaren gave was this: "A waitress working in a town that depends heavily on apparel manufacturing might miss out on wage growth, even though she does not work in an industry directly affected by trade.

Ultimately, he notes that, yes, there is evidence to support that for some American workers, wages were hurt by NAFTA. However, at the same time, these figures should not be exaggerated. Some commentators throw around claims that millions of jobs were destroyed by NAFTA, which I don't think are supported by the evidence.

Additionally, it's notable that a big drop-off in manufacturing jobs correlates with the economic shock of China joining the World Trade Organization WTO in And, the steepest decline occurs after the financial and housing crisis in At the national level, employment has fallen in U.

Additionally, although Trump has fixated on the US trade deficit with Mexico, it's notable that it is far smaller than the US trade deficit with China. Both deficits are highlighted in red below. A couple of months back, Capital Economics' Andrew Hunter shared a chart in a note to clients comparing manufacturing output purple line to manufacturing employment black line.

Although manufacturing employment has been trickling downward since the mids, manufacturing output has been increasing and is now near its pre-financial crisis high. In other words, firms have been able to increase output overall with fewer workers over the years, which is likely at least partially due to automation. But US manufacturing has also experienced high productivity growth, with the computers and electronics industry, which has lost the most jobs, seeing the fastest productivity growth of all," wrote Hunter.

Moreover, Canada and Mexico are the two largest destinations for US exports, making up over a third of the total. It allowed U. Local farmers could not compete with the subsidized prices. As a result, 1. In , 2. It increased to 4.

The recession drove that figure to 6. In , it fell to 4. Fourth, unemployed Mexican farmers went to work in substandard conditions in the maquiladora program. Maquiladora is where United States-owned companies employ Mexican workers near the border. They cheaply assemble products for export back into the United States. Employment in maquiladoras reached 1. Fifth, U. Agribusiness in Mexico used more fertilizers and other chemicals, resulting in increased pollution.

Rural farmers were forced into marginal land to stay in business, resulting in increased deforestation rates. Mexican trucks are not held to the same safety standards as American trucks. This provision was delayed and never fully implemented, though the U. NAFTA's disadvantages are significant.

Can anything justify the loss of entire industries in New York or Michigan? Worker mistreatment in the maquiladora program is also concerning. NAFTA may also be responsible for environmental damage along the border. Without it, the impacts of competition from the growing economies of the European Union or China could be felt more acutely.

That's critical now that both of these trade regions rank above the United States as the world's largest economies.

However, many experts believe that free trade agreements are a necessity for the United States when competing in an ever more globalized world. It has been ratified by each country's legislature.