NAFTA's promised benefits and unfulfilled consequences for North America

NAFTA

"Described as a 'living, breathing, evolving' document by its proponents,

NAFTA holds the promise of accruing major benefits for the business communities in Canada, the U.S. And Mexico"

John Cooper (¶ 2).

NAFTA's Promise

"NAFTA'S Promise, Unfulfilled," the article by Elisabeth Malkin, published March 23, 2009 in The New York Times, 15 years after the North American Free Trade Agreement (NAFTA) asserts that only the initial part of the agreement's promise has been realized. An April 21, 2009 New York Times update explains that NAFTA proposed that free trade could benefit "all,"; "the wealthy United States, middle-class Canada and striving Mexico" (Updated, ¶ 2). NAFTA became known as a politically charged symbol not only of free trade promises, but also of the perils of free trade. This paper, which examines NAFTA, considers factors contributing to its origin, how it works, members, significant events/dates, along with benefits and consequences of the trade agreement.

In "North American Free Trade Agreement," an article published on the Web, Sarah Anderson, John Cavanagh and Saul Landau present perceptions regarding the North American Free Trade Agreement (NAFTA), published by IPS, an organization, reportedly "committed to sponsoring a broad public dialogue about U.S. domestic and foreign policy and the role of the United States in the world," purports that NAFTA establishes guidelines to, over a 15-year period, eliminate the majority of investment and trade and investment barriers between Canada, the U.S., and Mexico (Anderson, Cavanagh, and Landau, "North American…," ¶ 2). According to Anderson, Cavanagh, and Landau:

Supporters asserted that NAFTA would lead to a net increase of good U.S. jobs because trade liberalization would spur U.S. exports to Mexico and Canada in high-wage industries. Others argued that NAFTA would help Mexico build a stronger democracy and more modern economy. In a public-relations blitz, President Clinton, former President Bush, and former Secretary of State Kissinger declared that Mexico's economic development merited NAFTA membership.

NAFTA opponents argued that the trade pact would undermine U.S. jobs and wages by providing extra incentive for U.S. corporations to move to Mexico to take advantage of high unemployment, low wages, and rising productivity. One factor behind these conditions, opponents claimed, was that the Mexican government denied basic worker rights and condoned lax environmental enforcement. By increasing the power and mobility of U.S. corporations, NAFTA would increase the ability of U.S. firms to spread sweatshops and child labor in the U.S. And chip away at U.S. labor protections. (Anderson, Cavanagh, and Landau, "North American…," ¶ ¶ 4-5)

NAFTA

Initial negotiations for NAFTA to enhance the process of goods and services passing between Canada, the U.S. And Mexico started in June 1991. NAFTA took effect on January 1, 1994, after Congress approved it in November 1993, following a pungent public campaign, pitting a number of unions, environmentalists, family farmers, human rights advocates, and consumer groups, against Fortune 500 corporations, which were allies with numerous environmental groups, various Latino organizations, as well as members of the business and academic communities. During 2005, in the article, "NAFTA at eleven: Despite growing pains, it's still seen by some as a valuable tool for Canadian business," John Cooper, an Ontario-based freelance writer, argues that perceptions regarding NAFTA depend upon the one reviewing its performance (¶ 1). At the11-year-mark in 2005, Cooper recounts, NAFTA posed more questions than answers. The future prospect for NAFTA during 2005, according to Cooper, in spite of continuing disputes, appeared primarily positive.

Promises NAFTA had not reportedly been kept, Cooper related, included easing the passage of goods and ensuring fairer labor practices. In addition, concerns erupted, such as in the one instance between Canada and the U.S., involving softwood lumber, when the U.S. refused to accept the August ruling the NAFTA Extraordinary Challenge Committee (ECC) ordered, and Americans were accused of not following the rules. The NAFTA ECC had found that not enough evidence existed to support a U.S. claim of injury or threat by Canada's softwood industry (Cooper). Nevertheless, observers purported that NAFTA worked as it permitted major parts of the tariff wall to be dissolved. NAFTA also shaped an environment for active dialogue and legal interpretation regarding trade matters (Cooper).

Cooper presented the following fact regarding trade between the U.S. And Canada during 2005:

NAFTA is the largest trade agreement in the world;

96% of Canada-U.S. trade is hassle-free;

One in three Canadian jobs is linked to trade, and NAFTA supports 5.2 million U.S. jobs;

A truck crosses the Canada-U.S. border every two seconds; more than 300,000 people cross the border every day;

Every day, more than $1.9 billion exchanges hands between the U.S. And Canada -- that's $1 million every 15 minutes;

More than 39 U.S. states have Canada as their primary market; and Canada imports more goods from the U.S. than from any other country -- more than all of the European Union members combined. (Cooper, ¶ 6)

Myths vs. Facts Regarding NAFTA

In the article, "First NAFTA, Now CAFTA?..," Stephanie White cites Sarah Massey, a spokesperson for the AFLCIO Americas Union Movement, to purport that when the U.S. government passed NAFTA, it promised the agreement would promote jobs. In reality, according to Massey, NAFTA "lowered wages, heightened unemployment and increased pollution" (Massey, as cited in White, ¶ 1). In their Web publication, "NAFTA Facts, NAFTA -- Myth vs. Facts," the Office of the United States Trade Representative counters claims such as those by Massey, as it relates a number of myths have evolved regarding NAFTA. They include, but may not be limited to the following:

Myth #1: After 14 years, we know NAFTA has not achieved its core goals of expanding trade and investment between the U.S., Canada, and Mexico.

Fact: From 1993 to 2007, trade among the NAFTA nations more than tripled, from $297 billion to $930 billion. Business investment in the United States has risen by 117% since 1993, compared to a 45% increase between 1979 and 19931. ("NAFTA -- Myth…," ¶ 1)

Figure 1 portrays the increase in Business investment in the U.S. attributed to NAFTA. Figure 1: Rise in the Business Investment (adapted from "NAFTA -- Myth…," ¶ 1).

Myth #2: NAFTA has cost the U.S. jobs.

Fact: U.S. employment rose from 110.8 million people in 1993 to 137.6 million in 2007, an increase of 24%. The average unemployment rate was 5.1% in the period 1994-2007, compared to 7.1% during the period 1980-1993. ("NAFTA -- Myth…," ¶ 2)

Figure 2 reflects U.S. Employment Increases related in response to Myth #2.

Figure 2: U.S. Employment Relating to NAFTA (adapted from "NAFTA -- Myth…," ¶ 2).

Myth #3: NAFTA has hurt America's manufacturing base.

Fact: U.S. manufacturing output rose by 58% between 1993 and 2006, as compared to 42% between 1980 and 1993. Manufacturing exports in 2007 reached an all time high with a value of $982 billion. ("NAFTA -- Myth…," ¶ 3)

Figure 3 portrays the increases relating to the U.S. manufacturing output.

Figure 3: U.S. Manufacturing Output (adapted from "NAFTA -- Myth…," ¶ 3).

Myth #4: NAFTA has suppressed U.S. wages.

Fact: U.S. business sector real hourly compensation rose by 1.5% each year between 1993 and 2007, for a total of 23.6% over the full period. During1979-1993, the annual rate of real hourly compensation rose by 0.7% each year, or 11% over the full 14-year period. ("NAFTA -- Myth…," ¶ 4)

Figure 4 portrays the annual rate of real hourly compensation disputing Myth #4.

Figure 4: Annual Rate Hourly Compensation (adapted from "NAFTA -- Myth…," ¶ 4).

In his lecture, "Why This Conservative Favors This NAFTA," given shortly after Congress approved NAFTA in November 1993, Dick Armey, then a conservative representative, predicted that NAFTA would create the largest free trade zone in the world. "One of these lessons [in history] is that free trade leads to a prosperous world. Another is that protectionism leads to poverty (Armey, ¶ 13). Armey predicted that abandon the "winning formula" of NAFTA would not only damage the conservative party, but ultimately the U.S. In the future.

Significant Events/Dates

The following dates reflect significant events and/or dates related to NAFTA

November 13, 1979: While a candidate for President, Ronald Reagan proposed a "North American Agreement," purporting to produce a North American where the goods and people of the U.S., Canada and Mexico could more freely cross boundaries.

January 1981: President Ronald Reagan proposed that a North American common market be created.

October 9, 1984: The U.S. Congress adopted the Trade and Tariff Act; passed

October 30, 1984: The Act notably extended the U.S. president's powers to concede trade benefits and enter into bilateral free trade agreements.

December 10, 1985: President Reagan informed Congress that, under the authority of trade promotion, he intended to negotiate a free trade agreement with Canada.

October 3, 1987: The Canada-U.S. Free Trade Agreement (FTA) concludes in Washington.

January 1, 1989: The FTA is authorized.

November 6, 1987: A framework agreement between the U.S. And Mexico is signed.

August 21, 1990: President Salinas proposes that a free trade agreement between Mexico and the U.S. be negotiated.

June 12, 1991: Trade negotiations initiated between the U.S., Canada, and Mexico.

December 17, 1992: Brian Mulroney, Canadian Prime Minister, George Bush, U.S. president, and Carlos Salinas de Gortari, Mexican president, officially signed NAFTA. NAFTA would be effective with final approval from the federal Parliaments of the three countries.

January 1, 1994: NAFTA, along with the two agreements on labor and the environment, officially take effect.

December 9 to 14, 1994: At the Miami Summit, the U.S.,. Canada, and Mexico officially invite Chile to subscribe to NAFTA as a contractual party of the agreement.

1995: Disagreements continue between the U.S. Congress and the White House regarding the content of the free trade agreement with Chile. Consequently, Chile attempts to negotiate separate free trade agreements with Canada and Mexico.

December 29, 1995: Chile and Canada commit to negotiate a bilateral free trade agreement.

July 4, 1997: The Canada-Chile free trade agreement comes into effect.

1997: The U.S. presidency proposes applying NAFTA parity to Caribbean countries.

August 1, 1999: The Chile-Mexico free trade agreement comes into effect.

November 27, 2000: Trade negotiations resume between the U.S. And Chile for Chile's possible entry into NAFTA (NAFTA Timeline).

Benefits and Consequences

In the article "Should NAFTA be revisited? If you had to do it all over again, would you as President of the United States Support NAFTA -- the North American Free Trade Agreement-As Implemented?," Chuck Grassley, United States Senate (R-/A), asserts that Prior to NAFTA, the U.S. applied an average overall tariff of approximately 2% on Mexican imports. Simultaneously, Mexico applied an average tariff of approximately 12% on U.S. exports. When NAFTA dropped the tariff to zero on both sides of the border, it helped level the playing field for U.S. exporters. When NAFTA was implemented, Canada had begun to phase out its tariffs on U.S. imports under the U.S. 1988 bilateral trade agreement. Since NAFTA's implementation, U.S. merchandise exports to Canada and Mexico more than doubled ("Should NAFTA be…."). Conclusion

As noted at the start of this paper, trade liberalization, according to supporters of NAFTA, would occur as NAFTA would contribute to a net increase of good U.S. jobs; spurring U.S. exports to Mexico and Canada in high-wage industries. In addition, some proponents contended, NAFTA would help Mexico develop a stronger democracy and build a more contemporary economy (Anderson, Cavanagh, and Landau). On the other side of the NAFTA issue, opponents of the act argued "the trade pact would undermine U.S. jobs and wages by providing extra incentive for U.S. corporations to move to Mexico to take advantage of high unemployment, low wages, and rising productivity" (Anderson, Cavanagh, and Landau, ¶ 4).

In time, 15 years after the official adoption of NAFTA, opponents of the act may subscribe to the report by Malkin, arguing that NAFTA's promise has not been fully kept. Others, albeit, who support the act, may ascribe to the account by the Office of the United States Trade Representative, which claims assertions by Malkin, Massey and other opponents of NAFTA are not valid. Despite the passing of time, the reported "living, breathing, evolving" document, the researcher asserts, continues to contribute to pungent public discussions. Not only does the act continue to contribute to counter claims regarding past progress, it also influences future considerations for the business communities in the U.S. Canada, and Mexico (Cooper).