The North American Free Trade Agreement was signed in 1994 between the US, Canada, and Mexico and aimed to increase trade, create new jobs, integrate the North American economies and curb illegal immigration from Mexico. In essence, it lowered and eventually eliminated tariffs between the nations. Tariffs are taxes put on imports or exports, usually used to raise the price of foreign goods in order to make domestic goods more appealing or competitive in price.
Critics of this trade agreement claim that NAFTA costs American manufacturing jobs and create an evergrowing trade deficit with our neighbors to the North and South. Companies may relocate to Mexico from the US, where the cost of labor is significantly cheaper and sell goods produced without any tariffs to punish moving and costing the US jobs.
However, in a poll by IGM Chicago, 98% of the economists polled thought that the agreement helped the average American rather than hurt. Proponents of the agreement claim that lower costs for consumer goods and increased trade between nations has given the US economy a net gain than a loss. For example, NAFTA has been a huge boost to the US agriculture sector as Mexico and Canada are 2 of the top destination for US agricultural goods.
President Trump has been a harsh critic of NAFTA and has long sought to renegotiate it. In the past few days, the US came to new terms with Mexico on NAFTA which aimed at bringing back more automobile jobs to the US while talks have stalled with Canada.
Sources:
https://www.cfr.org/backgrounder/naftas-economic-impact
https://www.theatlantic.com/international/archive/2018/08/trump-nafta-canada-mexico/569134/
http://fortune.com/2018/09/03/new-nafta-canada-trump-mexico-trumka-unions/
http://www.igmchicago.org/surveys/free-trade
https://www.wsj.com/articles/trump-to-test-high-pressure-negotiating-style-as-u-s-canada-nafta-talks-resume-1535992792
https://www.economist.com/leaders/2018/08/30/americas-deal-with-mexico-will-make-nafta-worse
https://www.nytimes.com/2018/09/02/opinion/trump-nafta-deal.html
1 comment:
Because of the current length of the post, I decided to put my opinion in the comments. I personally feel as though Trump's rhetoric towards trade deficits and his whole modern-day mercantilism point of view through his trade wars are a backwards way of thinking. Manufacturing jobs have always been falling in number in the US because of the increased use of automation and other cheap labor options like China. NAFTA has allowed US sectors to thrive with increased access to markets in Canada and Mexico. Although this agreement has hurt some sectors in the US economy such as automobile manufacturing and shoe manufacturing, the overall effect of NAFTA has been positive for the US.
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