NAFTA stands for North American Free Trade Association. NAFTA is an agreement that created a free trade area among the United States, Canada and Mexico. NAFTA was started 20 years ago and signed January 1, 1994 by George Bush, Mexican President Salinas and Canadian Prime Minister Brian Mulroney. NAFTA reduced trading costs, increased business investment and helped North America be more competitive in the global marketplace. NAFTA was signed to eliminate barriers to trade and facilitate the cross-border movement of goods and services, promote conditions of fair competition, increase investment opportunities, provide protection and enforcement of intellectual property rights and lastly create procedures for the resolution of trade disputes. Although NAFTA was created for positive enforcement it did not always positively effect everyone.
NAFTA has many disadvantages and negative effects. First and foremost, is that NAFTA made it possible for many U.S. manufacturers to move jobs to lower-cost Mexico. The manufacturers that remained, lowered wages to compete in those industries.The second disadvantage was that many of the Mexican farmers were put out of business by United States subsidized farm products. NAFTA provisions for Mexican labor and environmental protection were not strong enough to prevent those workers from being exploited. Since labor is cheaper in Mexico, many manufacturing industries moved part of their production out of the high-cost U.S. states. Between 1994 and 2010, the U.S. trade deficits with Mexico totaled $97.2 billion, displacing 682,900 U.S. jobs. Nearly 80% of the losses were in manufacturing. California, New York, Michigan and Texas were hit the hardest because they had high concentrations of the industries that moved plants to Mexico. These industries included motor vehicles, textiles, computers, and electrical appliances. United States wages were also suppressed. Not all of the companies in these industries moved to Mexico. Some companies used the threat of moving during union organizing drives. When it became a choice between joining the union or losing the factory, workers often chose the factory. Without union support, the workers had little bargaining power, this caused suppressed wage growth. Between 1993 and 1995, 50% of all companies in the industries that were moving to Mexico used the threat of closing the factory. Mexico’s farmers were also put out of business. Thanks to NAFTA, Mexico had lost 1.3 million farm jobs. The 2002 Farm Bill subsidized U.S. agribusiness by as much as 40% of net farm income. When NAFTA removed tariffs, corn and other grains were exported to Mexico below cost. Rural Mexican farmers could not compete. At the same time, Mexico reduced its subsidies to farmers from 33.2% of total farm income in 1990 to 13.2% in 2001. Most of those subsidies went to Mexico’s large farms, anyway. Maquiladora workers were exploited. NAFTA expanded the maquiladora program, in which U.S.-owned companies employed by Mexican workers near the border to cheaply assemble products for export to the U.S. This grew to 30% of Mexico’s labor force. These workers have “no labor rights or health protections, workdays stretch out 12 hours or more, and if you are a woman, you could be forced to take a pregnancy test when applying for a job,” according to Continental Social Alliance. Mexico’s environment began to deteriorate. In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers expanded into more marginal land, resulting in deforestation at a rate of 630,000 acres per year. NAFTA then called for free access to Mexican trucks. Another agreement within NAFTA has not been implemented. NAFTA would have allowed trucks from Mexico to travel within the United States beyond the current 20-mile commercial zone limit. A demonstration project by the Department of Transportation (DoT) was set up to review the practicality of this. In 2008, the House of Representatives terminated this project, and prohibited the DoT from allowing this provision of NAFTA to ever be implemented without Congressional approval. Congress was concerned that Mexican trucks would have presented a road hazard. They are not subject to the same safety standards as U.S. trucks. In addition, this portion of NAFTA was opposed by the U.S. truckers’ organizations and companies, who would have lost business. Mexican trucks had to stop at the 20-mile limit and have their goods transferred to U.S. trucks. There was also a question of reciprocity. The NAFTA agreement would also have allowed unlimited access for U.S. trucks throughout Mexico. A similar agreement works well between the other NAFTA partner, Canada. However, U.S. trucks are larger and carry heavier loads. This violates size and weight restrictions imposed by the Mexican government.