Canada And Mexico example essay topic

On January 1, of 1994 a new approach to trade amongst North American countries took effect. With the aid of the United States Congress, President Bill Clinton was able to form a contract between The North American Countries of Canada, Mexico, and The United States of America. This contract, known as the North American Free Trade Agreement (or Nafta for short) was designed with many economic results in mind. Hopes were that not only would trade be easier, cheaper, and more abundant for all countries evolved, but economic wealth and growth would follow. Support for Nafta was split among most citizens of this country. One side seeing the proposal as having the potential for great economic success in each country involved.

The other announcing that this plan would prove to be terribly detrimental to United States employment. Nearly six years after coming into effect the question still remains Is Nafta in the best interest of the United States? And what can we expect of it in the future? Since the implication of free trade between the three countries of North America back in 1994 the effects of that agreement are just now becoming apparent, both short term and long term. There was little doubt as to how both Canada and most definitely Mexico would benefit from Nafta.

What was yet to be seen was the impact it had on previous concerns of the United States. (Contesting Globalization) Most economists and even ordinary citizens could understand Canada and Mexico's enthusiasm when free trade, destroying tariffs, was proposed. After all, the United States has long been the major consumer of exported goods in both countries. No longer having to pay taxes on goods imported into the United States meant larger sales and more profits for all Canadian and Mexican businesses. These profits were foreseen as perpetual economic boosts in their respective country. These boosts created opportunities for more workers to be hired, lowering unemployment and helping to improve the quality of life of citizens in both countries.

Not only did removing the tariffs make it possible for companies and manufacturers of Canada and Mexico to increase profits it also lowered to price of foreign goods. These new lower prices were now able to compete with the domestic products in the United States. Although usually slightly lower in quality the products made up for their lacking by holding a lower price tag. In Canada most of the predicted effects occurred as suspected.

The exports in Canada rose significantly, far out performing exports to the United States and Mexico than in any year previous. Thanks to the economic boom thousands of new jobs were created and filled by unemployed Canadians. More companies then saw opportunity in Canada and opened new plants and factories to take advantage of what is showing to be the healthiest economy Canada has ever experienced. Mexico, like Canada saw results that were similar to what had been expected.

Many companies and manufactures saw great economic opportunity in Mexico more so than in Canada. In a country where the government had no set minimum wage rate and a high unemployment rate, factors were perfect for these businesses to make huge profits, never having to worry about filling positions. In Mexico employers could build the same plant as they would have in the United States and fill it with employees making as little as a dollar or less per hour. Union comparisons show jobs paying $10.12 an hour in the U.S. are going for $1.51 in Mexico.

(NAFTA Small-Town Impact) These wages and job opportunity are welcomed with open arms money to the unemployed citizens of a poverty stricken country like Mexico. Large businesses are seeing savings of six to ten dollars per hour. That figure times the number of employees it takes to run one of these factories translates into huge profits. Cheaper production was the drive behind many companies relocating to Mexico. Because of this exports from Mexico have skyrocketed.

Companies were turning over huge profits and looking towards expansion to capitalize even more on the new trade agreements. Agricultural, Textile, and Automotive you name it, these new companies were producing it. Mexico had never seen better times for businesses. The country of Mexico itself was benefiting greatly from Nafta. Not only were the businesses that migrated to Mexico doing very well but also the standard of living began to rise with more income coming to the country.

(Contesting Globalization) Less unemployment to worry about meant Mexico could now look forward to becoming an industrialized country in due time. As for the United States the effects were somewhat as predicted still having many supporters and many doubters. Regardless of what stance one took the economic effects of Nafta came to all three countries. Most assumed since both Canada and Mexico went up in exports than the United States imports had to rise. This assumption was correct.

As a matter of fact Mexican imports to the U.S. were up 113 percent alone. (NAFTA Works) This statistic frightened many economist that the United States would not be able to compensate for the surge of imports under Nafta. This, however, was not so. United States in the first four years of Nafta had its highest ratio of exports to imports for Canada and Mexico than ever before.

Meaning the United States sold more exports to its neighboring countries than imports in any previous year. The United States exploded earning over $53.3 billion dollars more in 1998 than in 1994. This fact plus our renewed interest in trades with China and Germany meant the United States was going to see some outstanding figures. (NAFTA Works) With some American businesses opting to go to Mexico rather than come or remain in the U.S. the unemployment level did rise for a period of time. This bump confirmed the fears of most economists that because of cheaper labor many U.S. workers would find themselves without jobs.

In the short run aspect this was true, but in a few years the economic effects of Nafta began to change all of that. Because Mexico and Canada were now experiencing better times they were able to buy more imports from the U.S. than ever. (U.S. Agriculture) The U.S. having already been the major importer to both countries now seemed to have a greater impact on their economy. The United States now has, because of Nafta, a market 108 million people larger than by itself. (NAFTA Works) And as previously mentioned U.S. exports far outweighed all Nafta foreign imports. Leaving the United States with incredible earnings, these profits symbolized the good economic time of our country and were the motivation of many companies to build plants, factories, and plan industries in the U.S. After all the jobs that the U.S. lost to lower wages we made up for and then some. According to the Department of Labor Studies, 210,000 American workers have lost jobs in the last five years due Nafta.

Yet because of an incredible economic period? which Nafta can take some credit for, these officials say? 260,000 new jobs were created last November alone. (NAFTA Small-Town Impact) Another plus to the new trade agreement was the effect that it would have on immigration. How? One might ask.

Well look at it from the perspective of poverty stricken unemployed Mexican. With nothing in the foreseeable future to look forward to America is seen as his / her only opportunity to have a successful life. The choice of most Mexicans in this situation is to hop across the border to the "Land of Plenty? and let the government of our great nation improve their standard of living. On the other hand, given that Nafta has the potential to strengthen the Mexican economy and improve living conditions, as well as offers new jobs.

Many would-be illegal immigrants could see it to be a worthwhile decision to stay in Mexico and take advantage of what it has to offer. This being the case the U.S. would have more of its own money to spend on its citizens than caring for the fence hoppers of another. As mentioned there were and still are many people who oppose the implement of Nafta into our foreign policy. Many of the arguments come from members of towns across the United states that have lost jobs to Mexican wages, or are the product of disbelieves in a foreign trade that could weaken the United States's else of Nationalism. The largest concern among these is of lost jobs. Small towns across America are witnessing the loss of jobs by the hundreds to factory relocations to Mexico.

Few of these towns are ever able to recover from the devastation. The trend is to believe that once town after town loses industries, that workers will lose the determination to seek other employment in a town whom is suffering. After this continues towns across the country will begin to fail and unemployment will shoot through the roof. (Contesting Globalization) Other concerns include the fear that the low prices of Mexican goods with out tariffs will begin to out sell and take the place of its American competitor. With American companies having to meet a minimum wage rate they are not able to sell products as cheaply as some Mexican producers are. Some economists see this as a threat to the future of many American textile and agricultural industries.

Along with the fear of Mexican producers out performing American, is that along with lower prices come lower product standards. One economist Richard E. Blackborough said, "If this trend continues, it is highly possible that the American consumers disregard for origin and presumed quality in order to save a few pennies could run many American businesses down and out. Leaving only a lesser standard of living available.? Newsweek) The meat industry is one of the largest concerns in this regard. A fear that Mexico could one day produce meat near the rate of America and cause prices to fall which could force Americans out of the market. If the lower prices prevail Americans may be subject to not only eating meat of less standard but of which may not be safe.

Mexican cattle which is notorious for disease, could potentially be the main source of beef in our country. (ADM) It is not certain that the FDA and others could keep all bad meat from entering the United States. What is aware to most economists and the believers of Nafta is that Americans have an advantage when it comes to manufactured goods. The fear of American businesses losing out to the low prices of Mexico is seemingly as far-fetched to these people as one could imagine. Simply put, Americans do not shop blind folded, that is to say a smart consumer does not look strictly at price when deciding on the product. The everyday consumer often takes into account the quality of a product, as well as reputation of its manufacturer, and makes his / her decision on which is most practical.

Although labor comes cheap in Mexico, quality however does not. That is not to say all Mexican made goods are poor quality. This is only to show that the old saying of you get what you pay for still holds true. Mexican goods made by low paid Mexican workers have the tendency to be of a lower quality. On the other end its American competitor, although more expensive to produce, usually far exceeds the Mexican in level of quality.

A good example of this would be if you were and American shopping for a new vehicle. You look at an upper level model of a make manufactured in Mexico. It is a decent car with a low sticker price that makes it somewhat feasible. On the other hand you have a mid-range American vehicle that is affordable but not cheap, well equipped and desirable. Although the price of the American vehicle is more than that of the Mexican, most Americans will buy American because of reputation for being a good buy and for getting your money's worth. In response to the fear of Mexican agriculture taking over that of the United States, there is actually nothing to worry about.

Due to the poverty of Mexico there is no possible way for the people of that country to afford the technology and equipment to produce what Americans can. America has the capability to produce ten times over what Mexico could in its best year. (ADM) With these fears put aside, it seems the gamble of the last six years has not proven to be the blunder it was once perceived to be. In fact being the moderate success it has shown to be short-run, and assuming no problem long-term will arise, there is talk to expand Nafta to include transatlantic countries as well. This proposal would allow mostly English speaking countries to trade along the same lines of Canada and Mexico. This agreement is being pushed by businessman and publisher Steve Forbes with hopes of not only strengthening economies globally but also improving relationships in NATO.

This could certainly change Americas look towards the future and who knows what opportunities the current Nafta policy could hold.

Bibliography

Work Cited Newsweek: NAFTA Nasties, by Blackborough, Richard E. Copyright 1998.
U.S. Agricultural and the North American Free Trade Agreement", by Schuh, G. Edward. Minnesota, Minneapolis. CC 1993-1.
Contesting Globalization: Organized Labor, NAFTA, and the 1997 and 1998 Fast-track Fights, ? by Shock, James.
Columbia, South Carolina Copyright February 1999.
NAFTA Works? by John S. McClenahen Written January 1999.