Question

Discuss the pros and cons of NAFTA from a US perspective.

Answer 1

Introduction:-

The NAFTA as it is abbreviated for the term North American Free Trade Agreement is one of the largest setups which created huge possibilities for the countries that chose to be a part of the same. The agreement was implemented between 3 participating nations of United States, Mexico and Canada respectively.

Up until the year 2018, when the UMSCA or United States Mexico Canada Agreement came into existence it was NAFTA that had existed and laid down rules for trade among participating nations. It connected more than 45 Million People and saw trade volumes of $20.8 Trillion in Gross Domestic Product

Case Specifics:-

All trade agreements like others, have its own Pros and Cons for different countries. The NAFTA is no such exception. The Pros and Cons that NAFTA allowed for therefore are as follows:-

Pros:-

• The Agreement allowed for easier trade to be conducted by the United States with the neighboring and participating nations of Mexico and Canada. So much so that it rose to $1.14 trillion in 2015.

• Most Industries such as agriculture, automotive and health and financial services grew for the United States and boosted the US economy by as much as 0.5 percent on an average a year in the 24 years of its implementation

• Foreign direct investment more than tripled during the time and U.S. businesses invested about $452 billion in the countries of Mexico and Canada. On the other hand companies in those two countries invested as much as $240.2 billion in the United States. That helped U.S. insurance, banking and core manufacturing industries.

• The Exports for the United States grew, and thus helped in creating as many as 5 Million new jobs for the country in the production sector.

• The reduction of tariffs among the countries helped in lowering prices of food and other essential items since, the cost of procuring fuel for the United States declined. This fuel is primarily used in cost of logistics which once declined meant that products could be shipped at lower cost easily.

Cons:-

• While, the NAFTA created indeed jobs for the United States in the short run, it gave an opportunity for Mexico and Canada to grow as well which created equal jobs and in the long run, the United States has started losing out on the cheaper availability of manpower in these countries.

• Further, the fact that companies threatened to move to Mexico and Canada hindered employee welfare since wages began declining in the United States, and even when people saw larger employment opportunities the amount of money which they earned declined.

• The U.S. trade deficit grew as a result of reduced manufacturing since this shifted primarily to the cheaper manpower available nations of Mexico and Canada.

• Considering the drug menace in Mexico, NAFTA is often blamed for illicit drug trafficking into the United States and thus posed a challenge to overall National Security.

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