International Trade: How has NAFTA affected the economies of these countries?

Résumé du document

World trade is ruled by a lot of free trade agreements. These agreements permit countries to trade more easily and without barriers or protectionisms. North American Free Trade Agreement (NAFTA) is one such example. This is a trilateral free trade deal between USA, Canada and Mexico. NAFTA was signed in January 1994. The NAFTA created a large free trade area which links 450 million people across three countries for an output reaching $17 trillion worth of goods and service.

A number of formal mathematical studies proved that the NAFTA would raise the GDP of the countries, for example, the U.S GDP , Mexico has grown by 5% annually and tripled the value of its exports.. Since 1993, trade among the NAFTA nations more than tripled from $297 billion to $930 billion. Each day, the three countries of NAFTA conduct nearly $2.4 billion in trilateral trade.

But despite the fact that there is a strong economic growth, there are numerous opposite opinions concerning the NAFTA benefits. Indeed, some viewpoints suggest that there is a loss regarding the manufacture with low-skilled labor. These assumptions are not totally senseless.

However, not all assumptions are based on valid or neutral arguments . For example, Robert Baldwin and Christopher Magee, in their paper titled "Is the trade policy for sale?", demonstrated that the vote of the NAFTA was dual between business sector, which it estimated will benefit by the agreement and on the other hand, the trade union, which anticipated strong pressure on the work conditions and general economic conditions, and dangerous competition which can lead the economy of low-skilled worker to a bad situation.

The paper showed that all these facts affected voting of NAFTA and that finally, the entities which voted were funded by the lobby. This would tend to suggest that the NAFTA was decided only to the benefit of the minority and be unfavorable to the majority. But these suppositions could not be proved by theoretical models. We will see all along the course of essay the different evidences and we will compare them.

Extraits

[...] For Canada, which had already signed a FTA with the United States in 1989 called CUST, NAFTA has helped to strengthen the free trade zone in North America and it was to conquer the Latin market American intensifying trade with Mexico and in the near future with Chile, which is a candidate for accession to the NAFTA. Another issue of NAFTA was the point of view of immigration between Mexico and the United States in order to limit, in effect 3 to 4 million Mexican immigrants crossing the U.S. border each year. So, by creating jobs in Mexico thanks to the "maquiladoras" it would limit migration but not really. Another important objective was the level of the environment to limit the emissions of Mexican industries. [...]

[...] Of course It will be disadvantageous for the US workers who would lose their jobs. And we could say that the Mexican workers are underpaid. But now, the Americans could buy more goods B and the Mexicans could buy more goods A (before the cost was 1/8 and now is 1/4). Then, this model showed that the low-skilled US worker don't take advantage of the NAFTA. The case of Canada Canada seems be the country which benefited most from the NAFTA with the strongest gains . [...]

[...] Trade liberalization and wage inequality in Mexico can be characterized by the two economic theorems mentioned above. Mexico in the years 80 and 90 experienced a significant increase in income inequality in contrast to other Latin American countries. A variety of factors can explain this and studies attribute the growth in wage inequality, that is to say the wages of the most skilled workers rose relative to those of less skilled workers, an increase of demand for skilled workers, due to technological change and foreign direct investment requires a high level of skill. [...]

[...] It is therefore the United States who have benefited from NAFTA to assert its wealth and power. ANNEXE: Source: http://www.ustr.gov/sites/default/files/Quantification%20of%20NAFTA%20Benefi ts.pdf http://www.cfr.org/trade/alden-nafta-wrong-target-concerns-us- economy/p15621 http://www.ustr.gov/sites/default/files/NAFTA%20Benefits.pdf http://www.nber.org/papers/w6376.pdf www.nafta-sec-alena.org/ www.international.gc.ca/ www.naftanow.org/ Book: International trade by P. [...]

[...] By cons, NAFTA has increased inequality between North and South to Mexico and between industrial and agricultural sectors. The objectives presented by NAFTA during the signing of the agreement were virtually held. Trilateral trade and investment have increased significantly but this has mainly allowed companies to be more mobile and free. We also note that trade between Canada and Mexico has not really changed. In reality there is not really a trilateral trade but two- way trade (Mexico / United States and United States / Canada) so Canadian and Mexican trade is heavily dependent on U.S. trade. [...]