Regional Integration For And Against NAFTA Essay

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Global Business Strategies

Regional Integration For and Against NAFTA


March 9, 2015

North American Free Trade Agreement (NAFTA) has several advantages when conducting business with a regional integration such as the Caribbean regions. NAFTA give foreign countries and the United States the ability import and export goods without paying a high tariff barrier (NAFTA Works, 2010). “NAFTA is a treaty between Canada, Mexico, and the United States that was designed to foster greater trade between the three countries. NAFTA has been in effect since 1 January 1994. It has since been updated with two major additions, the North American Agreement for Economic Cooperation (NAAEC) and the North American Agreement for Labor Cooperation (NAALC). A very recent addition was the Security and Prosperity Partnership of North America, designed to foster cooperation on issues of national security.” The advantages of NAFTA in Mexico is the ability to import and export goods without a high tariff barrier. NAFTA gives Mexico and other countries the opportunity to accept more products from other countries. Mexico also has the advantage of selling the product for less, which will encourage people to choose that particular product over another product that would be price higher because of tariff barriers in other countries. America benefits from NAFTA because of the low cost of exporting goods to Mexico. Because of the low cost in exporting goods to Mexico, Mexico is can purchase more goods, which puts America in a lucrative financial position. The last advantage of NAFTA is the increase in irrigation. Over the past few years the Unites States had a significant increase in Mexican citizens and seasonal farm workers. This gives Mexican citizens’ the opportunity to provide for their family and fill job positions some Americans prefer not to fill.
By creating the largest free trade area in the World, NAFTA has benefitted over 450 million people within its borders. The Gross Domestic Product (GDP) measures its benefit as $20.08 trillion to classify it as an economic powerhouse. That can be attributed to the combined economies of Canada ($1.518 trillion), Mexico ($1.845 trillion) and the United States ($16.72 trillion). The three fold trade area by comparison exceeds the economic output of all the European Union’s combined 28 countries (NAFTA Works, 2010). NAFTA has many disadvantages. NAFTA is the primary factor enabling various U.S. manufacturers to transplant their jobs to Mexico at a lower-cost. The consequence for the manufacturers that remained stateside were forced to lower job wages in order to remain competitive in the industry. It became fat too logical for manufacturing industries to transplant a portion of their production to the cheaper labor force of Mexico than high production costs of the U.S. The U.S. has carried a $97.2 billion trade deficit between the years of 1994 and 2010. The result was 682,900 displaced U.S. jobs. Manufacturing experienced 80% in losses with the majority of that being felt in New York, California, Texas and Michigan. Those areas had the highest concentration of industries lost to plants in