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Introduction
Economic integration is best viewed as a spectrum with the various integrative agreements in effect today lying in the middle of this spectrum The level of integration defines the nature and degree of economic links among countries
What is NAFTA?
Effective as of January 1, 1994 A trade agreement between CANADA, MEXICO, and the UNITED STATES which provides for the elimination of tariffs on North American goods shipped among the three countries.
The NAFTA originated in October 1992.NAFTA called for immediately eliminating duties on half of all U.S. goods shipped to Mexico and gradually phasing out other tariffs over a period of about 14 years. Restrictions were to be removed from many categories, including motor vehicles and automotive parts, computers, textiles, and agriculture.
Mexico
Mexico was a more important trading partner for the United States than for Canada (the buyer of 9.0 percent of U.S. exports in 1993 versus 0.4 percent of Canadian exports, and the source of 6.8 percent of U.S. imports versus 2.0 percent of Canadian imports).
The treaty also protected intellectual property rights (patents, copyrights, and trademarks) and outlined the removal of restrictions on investment among the three countries. Provisions regarding worker and environmental protection were added later as a result of supplemental agreements signed in 1993.
This agreement was an expansion of the earlier Canada-U.S. Free Trade Agreement of 1989. Unlike the European Union, NAFTA does not create a set of supranational governmental bodies, nor does it create a body of law which is superior to national law.
Effects of NAFTA
Farmers in Mexico have opposed NAFTA because the heavy agriculture subsidies for farmers in the United States have put a great deal of downward pressure on Mexican agricultural prices, forcing many out of business. Opposition to NAFTA also comes from environmental, social justice, and other advocacy organizations that believe NAFTA has detrimental non-economic impacts to health, environment, etc. In Mexico the poverty has risen considerably since the signing of NAFTA. Wages have decreased by 20 percent.
Effects of NAFTA
Wages have decreased by 20 percent. NAFTA's approval was quickly followed by an uprising amongst indigenous people led by the Zapatistas, and tension between them and the Mexican government remains a major issue. Furthermore, NAFTA was accompanied by dramatic reduction of the influence of trade unions in Mexico's urban areas. NAFTA has been accompanied by a dramatic increase of illegal immigration from Mexico to the United States.
Various economic studies have generally indicated that rather than creating an actual increased trade, NAFTA has caused trade diversion, in which the NAFTA members now import more from each other at the expense of other countries worldwide. Some economists argue that NAFTA has increased concentration of wealth in both Mexico and the United States.
Opposition in Canada
In Canada a large amount of the opposition to NAFTA comes from fears over the possible effects of various clauses and articles of the treaty. For example if something is sold even once as a commodity, the government cannot stop its sale in the future. This of course applies to the water from Canada's Great Lakes and rivers, fueling fears over the possible destruction of Canadian ecosystems and Canada's water supply. Other fears come from the effects
Opposition in Canada
NAFTA has had on Canadian law making, in 1996 an American company brought a toxin damaging to the nerve system known as MMT into Canada. The Canadian government sued the company, but was forced to drop the charges due to the agreement which prevents governments from doing harm to foreign companies. Instead the U.S. company charged the elected government of Canada for enforcing a law aimed at protecting Canadians.
Top U.S.
and
1. Motor Vehicles 2. Oil/Natural Gas 3. Motor Vehicle Parts 4. Semiconductors 5. Electronic Parts 1. Aircraft 2. Electronic Computing Equipment 3. Motor Vehicle Parts 4. Motor Vehicles 5. Semiconductors 6. Aircraft/Space/Missile Parts 7. Chemicals 8. Plastics 9. Airplane Engines/Parts 10. Refined Petroleum Products
NAFTA Pros
+ Goods/Services at lower cost
most (i.e. standards of trade increased) + Tariffs reduced + Jobs created + Mexicos economy is growing again
NAFTA Cons
Fuel for peso crisis Benefits Mexico more than the U.S. U.S. deficit with trading partners Loss of low-wage American jobs to
Mexico
Environmental problems Traffic congestion and delays along the
borders
Trucking Industry
The areas of concern include: vehicle safety, driver training, environmental issues and possible illegal drug trafficking.
A recent investigation determined that the average 18-wheeler in Mexico is 40% overloaded, carrying a gross vehicle weight of more than 120,000 pounds. If U.S. truckers operated at a similar overcapacity, interstate highways would have a life span of 14 years, as opposed to their 40-year design life.
The North American Free Trade Agreement (NAFTA) Impact on Mexico and the United States
Economic and environmental change in North Americas two most populous countries.
NAFTA members are the United States and Mexico (including Canada)
Mexico
Developing world economy with over one hundred million people in 2002 Per capita GNP in 2002: $3,840 High unemployment and low literacy rate Extreme crowding in urban areas, like Mexico City
Mexican Farms
Lack technology and mechanization Small plots called milpas are tilled by subsistence farmers Many farmers move to cities to find work because their marginal farm fails to feed their inordinately large family (remember that Catholic families in Latin America are usually large because of papal dictum; also machismo is a factor in large families) Large farms called haciendas produce meat and grain for international markets NAFTA will allow farmers to shift from growing low revenue grains to high revenue vegetables and fruits Mexicos comparative advantage during winter reduces food prices by importing low cost grain from the US and Canada
A sign warns drivers to watch out for illegal aliens crossing the border between the US and Mexico.
NAFTAs Opposition:
The Zapatistas of Chiapas State
The Zapatista National Liberation Army (ZNLA) began their guerilla war on Mexico the day NAFTA went into effect, January 1, 1994. The ZNLA is looking for autonomy and protection from the damaging effects of globalization. Previously agreed upon peace plans have fallen through and the cycle of violence has continued. Vicente Fox, the Mexican president elected in 2000, has renewed the effort to negotiate a peace settlement. Poverty still grips the most isolated Indian communities of Mexico and no agreement has been reached.