Question

In the 2016 presidential campaign, Donald Trump said that the United States should reconsider its trade agreements, including the North American Free Trade Agreement (NAFTA).

To complete the Discussion activity, write a post that answers the following questions:

• Find out why President Trump proposed renegotiating NAFTA. Provide two arguments for doing so.
  • Analyze these arguments using the concepts of absolute advantage, opportunity cost, and comparative advantage.
  • Do you think comparative advantage and absolute advantage are the best reasons for seeking trade with others? Why or why not?
• Post your response to the discussion board.
• Cite all sources used.

Answer 1

One of the major mottoes at the time of the presidential election was the renegotiation of free trade agreements, including NAFTA. Trump said that NAFTA is the ever worst trade agreement in the country. The NAFTA is the free trade agreement between the countries like the US, Canada and Mexico. It was established under the leadership of Ronald Regan. This agreement eliminates all the trade barriers. Trump believed that this agreement is the major reason for job losses in the US. He said that jobs in the US are wiped out, and the manufacturing industries are moved their factories into Mexico where the labor get a cheaper rate.

In the case of Mexico, they got a major boost in their farm-related exports. Also, the automobile sector developed and created millions of jobs in this sector because Mexico has an absolute advantage in the labor force compared the other two countries. Productivity also raised in Mexico. The Mexican investment in Canada boosted up Canadian manufacturing, agriculture and also the manufacturing jobs. Moreover, Canada has a comparative advantage in the labor force to the US economy.

The countries trade because of unavailability domestic resources. The trade creates low cost based on the absolute and comparative advantage between the nations. Countries can get resources cheaply from their trading partners.