The North American Free Trade Agreement (NAFTA) was developed in 1994 to encourage the United States to improve trade relations with Mexico and Canada. Mainly, NAFTA incorporated liberalized approaches to trade whereby tariffs were removed to encourage the three nations to increase both domestic and cross-national trade. Particularly, the agricultural and automobile industries benefited from the liberal trade features. NAFTA endorsed trade by establishing safeguards for the industries involved as well as ensure that intellectual property was protected. Moreover, strategies were developed to ensure effective dispute resolution was implemented to address the complexities of cross-national trade.
NAFTA was implemented to improve regional trade and to discourage trends such as increasing illegal immigration from Mexico to the United States. However, the trade policy had several implications to a variety of industries, favoring others while some suffered from increased competition. Critics of NAFTA claim that the trade policy undermined manufacturing jobs within the United States. Essentially, the trade policy which was developed based on noble intentions resulted in wage stagnation within the United States. For instance, in 1993 before NAFTA was implemented, an assessment of the trade balance shifted from a surplus of $1.7 billion to a significant deficit of approximately $54 billion within a 22-year period (McBride & Sergie 1).
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"Impact of Policy Changes".
Therefore, while NAFTA influenced the creation of approximately 200,000 jobs aimed at export-related venture, there was need for certain policy changes aimed at addressing the unintended consequences of the trade agreement. The Trump administration negotiated some changes to NAFTA with the member countries, influencing policy changes that would generate a revised version of the policy, U.S.-Mexico-Canada Agreement (USMCA) (McBride & Sergie 1). The changes aimed at targeting industries that had negatively been affected by influences of low-wage competition whereby U.S based companies shifted operations to regions such as Mexico that offered lower production costs.
Notably, experts such as Cathleen Cimino-Isaacs claim that while the trade agreements may result in reduced jobs, particularly, in export-related industries due to increased import opportunities, the overall result would favor the U.S economy (McBride & Sergie 1). Therefore, competition influenced by imports would lead to a reduction in the price of commodities within the United States. For instance, a research conducted by the Peterson Institute for International Economics indicated that an annual decline of fifteen thousand jobs is balanced by economic gains of approximately $450,000 due to competitive elements that motivate key industrial players to enhance innovative systems that would translate to lower prices for commodities within the United States (McBride & Sergie 1).
Moreover, economists such as Gordon Hanson claim that significant declines in manufacturing jobs within the United States were not influenced by NAFTA. A decline of approximately 6 million jobs from 2000 to 2010 was influenced by increased trade between the United States and China, as well dynamic technological advancements affecting manufacturing protocols (McBride & Sergie 1). Therefore, the changes introduced to NAFTA should prioritize effects on the U.S economy caused by such bilateral arrangements (McBride & Sergie 1). Ultimately, integration of industries within the three NAFTA member countries counters the negative implication of U.S-China trade relations on manufacturing jobs, particularly, in the Automobile industry.
The changes introduced to the trade policy are likely to influence a greater economic growth for Canada’s FDI investments which have risen by approximately $298 billion from 1993 to 2013 (McBride & Sergie 1). Notably, gaps in income levels within Mexico are projected to increase largely due to increasing income-levels for citizens working in U.S and Canada, while local unemployment rates continue to rise. Arguably, Mexican farmers have been exposed to unfavorable competition influenced by U.S farmers who receive subsidized farming features. Ultimately, policy interventions within the United States should utilize evidence-based approaches such as wage insurance to mitigate the negative outcomes of the trade agreement.
