The North American Free Trade Agreement

1
The North American
Free Trade Agreement
Katy Haas Coordinator, Alianzas www.alianzas.us
2
Index

• Why Enter a Free Trade Agreement?
• What is NAFTA?
• Background of NAFTA
• Reaction after Implementation
• The Mexican Peso Crisis
• What about Americas Farmers?

3

• Impact on
• Employment
• Immigration
• Environment
• Trucking industry
• Missouris role
• NAFTAs future
• Conclusion

Mexico is the most important country to the
United States in the 21st century
--President George W. Bush
Sept. 5, 2001
4
Why Enter a Free Trade Agreement?
5
Levels of Economic Integration

• If the policies are not just harmonized by
  separate governments, but have a unified
  government with binding commitments on all
  members, then you reach political integration and
  have full economic integration.

6
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.
7
Background of NAFTA

• An Introduction

Zedillo
Clinton
Salinas
Marcos
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Expectations and Goals
MEXICO Lower inflation and foreign debt create
more well-paying jobs for Mexicans, thus
producing less incentive for Mexicans to work
illegally in the U.S. Mexico would become a
richer market for American exporters.
UNITED STATES Would solidify an expanding trade
relationship, which would spur job creation at
home and help to continue the revolutionary shift
throughout Latin America away from state
controlled markets toward freer markets.
Would exert presidential authority, improve
inter-American relations and advance the cause of
global trade liberalization.
9
Reaction After Implementation

• How the Countries Were Affected Immediately
• How They Are
• Affected Now

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Top U.S.
Exports
Imports
and
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
1. Motor Vehicles 2. Oil/Natural Gas 3. Motor
Vehicle Parts 4. Semiconductors 5. Electronic
Parts
11
NAFTA Pros

• Goods/Services at lower cost
• Most underdeveloped countries gain the most (i.e.
  standards of trade increased)
• Tariffs reduced
• Jobs created
• Mexicos economy is growing again

12
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

13
The Mexican Peso Crisis

• Was NAFTA to Blame?
• Wages in United States and Mexico

14
What about Americas Farmers?

• BENEFITS More export opportunities. Since NAFTA
  was approved in 1993, U.S. agricultural exports
  to Mexico have nearly doubled.

DISADVANTAGES Face regulations that increase the
costs of production while foreign competitors
gain from cheap production and labor.
15
Impact onEmployment

• Was U.S. workers loss Mexican workers gain?
• Maquiladora - Primarily foreign-owned assembly
  plants
• Jobs lost to Mexico vs. Jobs supported by exports
  to Mexico and Canada

16
Impact onImmigration

• In the 1990s, U.S. population grew 13.2, with
  60 growth of Mexican immigrants.
• Among Latinos nationwide, 26 are between the
  ages of 25-40.
• Remittances from Mexicans working in the U.S.
  6.65 billion (for 2001 through 3rd quarter)
• Increase in Mexican migrants led to increase in
  Border Patrol staff

17
Impact onEnvironment

• NAFTA Environmental Agreements

North American Agreement on Environmental
Cooperation (NAAEC) - commission to enforce
environmental law. Border Environment
Cooperation Commission and the North American
Development Bank - commission to address
pollution problems along the U.S.-Mexican border
18
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.
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Missouris Role
20
Missouris Role (continued)
Between 1994 and 1999, Missouri exports to NAFTA
partners increased 63.4.
Canada and Mexico are Missouris first- and
second-largest export markets, respectively,
accounting for 50.5 of Missouris total exports
1999.
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• Mid-Continent
• International
• Trade Corridor

1. A trade pattern 2. A system of connecting
highways and rail routes 3. An
opportunity to strengthen economic
development in a region
22
Missouri and Employment
23
The Missouri-Mexico Partnership

• The Missouri Department of Economic Development
  moved its hub to Monterrey
• Branch office in Guadalajara
• For the past 12 years, the Missouri Department of
  Agricultures headquarters has been in Guadalajara

24
NAFTAs Future

• Where is it going and what effects will it have?

U.S.-Central American Free Trade Agreement Free
Trade Area of the Americas (FTAA)
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Conclusion
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