In today’s political arena, the North American Free Trade Agreement (NAFTA) has come under heavy fire more so today than ever before. NAFTA has been in effect for over twenty three years and is a treaty that was entered into by the United States, Mexico and Canada in hopes to expand free trade. Before NAFTA, free trade existed between Mexico and the United States, but individuals wanted to broaden the agreement and also include Canada. NAFTA created the largest free market in the world, with the combined economies measuring in at 6 trillion dollars and affecting more than 365 million people. The creation of NAFTA was originally fueled by the want to remove tariff barriers to agricultural and manufacturing, remove investment restrictions, improve environmental and labor safeguards and to protect intellectual property rights—this demand was all because individuals within the United States and Canada saw Mexico as an up and coming economy/industry.
Since coming into effect on January 1st, 1994, the United States Chamber of Commerce states that NAFTA has created 5 million net jobs and that trade between the United States and Canada/Mexico supports 14 million US jobs. Before NAFTA’s implementation, 3rd party presidential candidate Ross Perot spoke out strongly against NAFTA during his campaign, stating that NAFTA would create “a giant sucking sound going south” in reference to US jobs. Critics, including Perot, stated that NAFTA’s implementation would lead to an increased trade deficit with Mexico and cause the loss of thousands of jobs. Although some jobs were lost, mainly in manufacturing sectors, the United States Chamber of Commerce’s, data supports that more jobs were created and maintained in the long run than jobs lost in the short run. What many critics mistakenly tend to include in their arguments when discussing the short run job losses due to NAFTA, are the jobs lost due to globalization between the United States and China. These jobs, although were lost, should not be included in the data used as to why NATFA is a negatively effecting the United States. Many individuals who separate the two job losses discuss that even though “the U.S. had a trade deficit with Mexico of $54 billion [in 2013], with China, it was [a deficit of] $318 billion, so the [U.S.] deficit is five times bigger with China than with Mexico. In other words, you would calculate, maybe for every job we have lost in the U.S. to Mexico, five [jobs] were lost to China.”
NAFTA’s main goal was to remove and lower tariffs on the importation and exportation of goods between Canada, Mexico and the United States—these lower tariffs not only increased trade with Mexico for the United States, but it also reduced the prices of imports from Mexico. Many critics claim that the removal of these tariffs, combined with the differences in standards of living between Mexico and the United States, the Mexican wage would be lowered to a level significantly below the American wage. Individuals feared that this lower/cheaper wage would create an incentive for firms to relocate to Mexico. Workers who opposed NAFTA, also stated that lower wages in Mexico made it more difficult for American workers to ask for raises or receive bonuses/higher pay. Although some critics’ fears were acknowledged with the relocation of select US firms to Mexico, the amount lost was much less than previously predicted. Analysts today state that the benefits of lower prices, specifically on goods such as oil and food, benefit the United States more than the losses generated by the relocation of firms to Mexico. In today’s economy, the United States’ largest import is oil and each year, the United States imports approximately 157.8 billion dollars in oil from Mexico and Canada. Without NAFTA, not only would the cost of importing oil from Mexico and Canada be higher, but the United States reliance on importing oil from Middle Eastern countries, such as Iran and Venezuela, would have to be increased. This ability to import oil from Mexico and Canada at a relatively inexpensive cost is important because it has allowed the United States to place economic sanctions on Iran and halt all importation of oil from them in hopes to increase the financial burden of the sanction. Along with oil being less expensive to import, so is food. By removing tariffs on the importation of food, the lower price of the fresh produce, chocolate, and beef coming from Mexico allows United States’ citizens to spend their money elsewhere within the economy or even invest it.
Although many critics attempt to cite job loss and the outsourcing of US firms as causation to remove NAFTA, NAFTA in reality not only helped lower the prices of goods imported and exported, but also created and maintained millions of jobs in the long run. The economic growth experienced by the United States after the implementation of NAFTA is encouraging and should be viewed as a main reason to maintain NAFTA for years to come. With many politicians claiming the removal of NAFTA in the near future, I would encourage them to examine the costs of removing free trade between the United States and Canada/Mexico and the negative social implications it could bring abroad, in countries like Iran.