Tuesday, March 12, 2013

NAFTA and the Evolution of the World Economy


North American Free Trade Act

Is NAFTA a success or failure?

There are many views and opinions on weather NAFTA is a success or failure. While researching the content for this paper I came across many opinions about its success or failure. What I found is that both statements are true with regard to success or failure. The act has been successful for agriculture and a failure for manufacturing yet successful for profits for manufacturing corporations. There is a two to one ratio. Is the ultimate question about the world economy evolving to the point that we have easier trading among companies trough out the world. This is still unfolding as there are presently dozens of trade treaties among countries of the world for easier for companies to export and import goods and services. The overwhelming opinion is that these treaties are working and expanding. Is the lost of manufacturing jobs the product of evolution among trade partners with the USA? Yes, apparently so, according to the numbers of lost jobs in which no one is arguing the point of manufacturing jobs lost. While the world evolves to a world economy the old way of thinking rejects NAFTA and other trade treaties. The new way of a new world order with regard to a world economy is currently unfolding, stay tuned. If the United States evolves as the management branch of a world economy, NAFTA will be in history the beginning treaty that started the view of a world economy.

NAFTA officially began on January 1, 1994 and over the course of 15 years has been implemented. NAFTA is not an overnight thought but an organized implementation of agreements between the United States, Mexico and Canada. As stated in article 102 of NAFTA agreement outlines its purpose. The purpose of NAFTA is as follows: To promote fair competition among companies of other Nations, increase investment opportunities, protect intellectual property, create procedures that resolve disputes over trade, also to establish frame work for further trilateral, regional and multilateral cooperation among NAFTA participants. The one agreement that receives the most headlines has to do with conditions of fair competition. The one country that seems to benefiting the most has been Canada. Their exports have almost doubled in recent years. The arguments arise from supporters of manufacturing job loss here in the United States. Between 1994-2010 the United States has lost 682, 000 plus jobs with 80% being from manufacturing sector. The industries most hit are motor vehicles, textiles, computers and electrical appliances that were once made here in the United States. The lower wages in Mexico is the main factor for the movement of manufacturing.

Mexico has been hardest hit by farm jobs lost, 1.3 million jobs. Interestingly the lost has been by imports from the United States and subsidized farming has been able to sell produce for under cost to produce. Odd, because one of the reasons NAFTA is established is not to allow unfair competition. Yet the same could be said for lower wages of the Mexican work force. The work force in the United States cannot compete with the wages in Mexico. The average worker earns $3.50 per hour while in the United States the minimum wage is currently at $7.25. It is impossible to compete with a $5.00 difference. There is talk of raising the minimum wage in which I support but also wonder if this will further hurt the manufacturing worker. With an increase in the minimum wage further job loss is eminent. In order for survival at current rates with regard to rent and food basic survival, a minimum wage increase has to happen. One cannot survive with wage alone at $7.25 per hour without help from the federal government. An increase in Federal minimum wage would decrease someone need for Federal support. The give and take affect never ends.

This chart clearly indicates the difference in wages between countries. I added other countries because more trade agreements are in the works. The decisions among law makers is one of sacrifice or are they willing to further sacrifice further manufacturing jobs for corporate profits as the 99% protesters lend to believe or are we as a country in the process of evolving to a world economy? In my opinion we are evolving and I feel it is important to evolve in the name of progress.

This evolving world economy with treaties such as NAFTA has increased exports and benefited countries of Canada, Mexico and United States. Canada and Mexico exports have increase over 400 billion in 13 years. The United States exports of agriculture to Canada and Mexico have increased from 22% to 30% of total farm exports. Business investments have grown here in the United States from Mexico and Canada by 117% in 15 years since NAFTA began as compared to 1979 to 1993 45% increase. Trade among the trilateral agreement has grown from 297 billion to 930 billion. U.S. corn exports to Mexico have increased 175%. Exports of fruits and vegetables to Canada have increased 45%. The benefits to the United States poultry market has increased to Mexico by 60% and to Canada by 100%.

As indicated most of the successes of NAFTA for the United States are in the agriculture and livestock markets. Thirty years ago prior to NAFTA these markets were depressed in the U.S.. NAFTA has and is continuing to improve these markets. Agriculture is part of the back bone of the economy in the U.S.. Manufacturing has declined as the U.S. becomes managers in the world market and countries such as Mexico become the producers/ manufactures with the help of treaties such as NAFTA. At one time I was against treaties such as NAFTA until I have recognized the evolving economics that theses treaties have caused. I once was part of the manufacturing industry namely research and development, which I spent my first 18 year working career and have begun the process of retooling with the help of Manchester Community College in seeking a degree in HVAC (heating, ventilation and air conditioning). Recognizing trends and changes is important in staying with the curve of society and becoming a part of rather than rejecting, change.

Creative Commons Copyright by Dess Dermondy

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