The Negative Effects of the North American Free Trade...

The Negative Effects of the North American Free Trade Agreement In January 1994, the United States, Mexico, and Canada implemented the North American Free Trade Agreement (NAFTA), forming the largest free trade zone in the world. The goal of NAFTA is to create better trading conditions through tariff reduction, removal of investment barriers, and improvement of intellectual property protection. NAFTA continues to gradually reduce tariffs on set dates and aims to eliminate all tariffs by the year 2004. Before NAFTA was established, investing in Mexico was a difficult process. Investors needed the Mexican Governments approval and were also required to meet specific investment guidelines. These requirements necessitated†¦show more content†¦This extensive growth is accredited primarily to the reduction of tariffs. As tariffs were lowered, U.S. goods became cheaper and more competitive in Mexican and Canadian markets, and at this lower price level the quantity demanded of U.S. goods increased. Therefore it becomes less expensive for U.S. fir ms to supply goods to Canada and Mexico as the supply curve shifts upward. In order to meet the new demand, the firms must hire new workers and increase investment. Between 1994 and 1997, 90 to 160 thousand jobs were created in the U.S. due to the increase of trade with Mexico, and 2.4 million jobs were dependent upon trade with Mexico and Canada (Harbrecht 12). The increase in employment and investment then leads to increased national income. The work of NAFTA has also served to benefit Mexicos economy; in accordance with the United States economy, Mexicos exports have increased, more than doubling since 1993. The elimination of investment barriers has caused a dramatic rise in foreign investment from four billion in 1993 to ten billion dollars in 1998. NAFTA has enabled Volkswagen, IBM, and the textile industry to seek labor and materials in Mexico. In 1994, a Canada-based entrepreneur invested four million dollars in a metal-stamping plant. The plant is now a major material suppler for Volkswagen although it was originally intended to employ only 130 people. The plant currently employs 1,300 workers and generates 57 million dollars inShow MoreRelatedFree Trade : U.s. A And Canada1373 Words   |  6 PagesFREE TRADE BETWWEN U.S.A AND CANADA The first thing we should understand is what is what is FREE TRADE or the meaning of FREE TRADE The definition which I can think of is Free trade is international policy where governments doesn’t create any restriction and on goods and other materials to import or export smoothly and no heavy taxes are applied so that both countries can operate smoothly and gain profit. OR The treaty in which 2Read MoreThe North American Free Trade Agreement. 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