Negative Effects of NAFTA in the U.S.
While NAFTA shows many benefits on a national level, it has a negative impact on wages and unemployment rates. Unskilled workers in California, New York, Michigan, and Texas were specially affected as companies moved to Mexico due to cheaper labor (Amadeo, 2017). It is estimated that between 500,000 and 750,000 U.S. jobs were lost in the automotive, textile, computer, and electrical appliance industries [See Apendixes 1 and 2] (Amadeo, 2017). Furthermore, wages of the remainder workers in these industries were suppressed as companies threatened to move operations to Mexico if employees demanded higher wages (Amadeo, 2017).
Studies done by Kate Bronfenbrenner at Cornell University showed the effects of plants threatening to move to Mexico and Canada because of NAFTA (see table 1). NAFTA has also contributed to growing income inequality and to the declining relative wages of U.S. workers without college degree, who made up 72.1% of the workforce in 2001 (Mishel et al. 2003, 163). NAFTA and other sources of growing trade deficits caused a shift in workers from manufacturing to other sectors and, frequently, from good jobs to low-quality, low-pay work. Additionally, some argue that U.S. wages have suffered due to increased immigration of unskilled workers from Mexico. However, the reason behind the wave of Mexican immigrants to the U.S. after 1995 was NAFTA. U.S agricultural exports to Mexico doubled from 1992 to 2008 (Bacon, 2011). Since the corn industry is highly subsidized in the U.S., Mexican farmers would not compete with U.S. agricultural imports (corn was no longer subsidized in Mexico after NAFTA went into effect). As a result, NAFTA destroyed over 120,000 jobs in Mexico in the farming and farm-supporting sectors (Bacon, 2011). To make matters worse, U.S.-based Union Pacific purchased the main north-south rail in Mexico and discontinued all passenger service, which lowered employment in the rail industry from 90,000 to 36,000 (Bacon, 2011). The …show more content…
Unfortunately, a beneficial renegotiation seems unlikely under the Trump administration, which has insulted Mexican immigrants and demanded that Mexico pay for the wall. The reality is that no renegotiation of the NAFTA can achieve this administration’s main goal, which is to bring factory jobs back to the U.S. and reduce the merchandise trade deficit with Mexico (“The pitfalls of renegotiating NAFTA, 2017).
On the other hand, Eugene Beaulieu, economics professor at the University of Calgary, argues that NAFTA should not be renegotiated. Beaulieu claims that while NAFTA did cause the loss of jobs in some industries, it created jobs in other industries. More importantly, NAFTA did not increase U.S. unemployment in the long run, but it did increase productivity (Beaulieu, 2017). He concludes that renegotiating the agreement would be a very long process that would cause great uncertainly in all countries involved, and create the risk of having one of the countries walk away all together (Beaulieu, 2017).
Withdraw from …show more content…
Unfortunately, NAFTA’s Article 2205 allows any party to withdraw from the agreement within six months of providing written notice (Luhby, 2016). The actual effect of withdrawing from NAFTA is ambiguous as the U.S. has not withdrawn from a trade agreement since 1886 (Luhby, 2016). However, one of the possible outcomes from pulling out of NAFTA is a trade war with Mexico and Canada (Luhby, 2016), which would be very damaging to the U.S. economy considering export to Mexico and Canada account for one-third of total U.S.
While NAFTA shows many benefits on a national level, it has a negative impact on wages and unemployment rates. Unskilled workers in California, New York, Michigan, and Texas were specially affected as companies moved to Mexico due to cheaper labor (Amadeo, 2017). It is estimated that between 500,000 and 750,000 U.S. jobs were lost in the automotive, textile, computer, and electrical appliance industries [See Apendixes 1 and 2] (Amadeo, 2017). Furthermore, wages of the remainder workers in these industries were suppressed as companies threatened to move operations to Mexico if employees demanded higher wages (Amadeo, 2017).
Studies done by Kate Bronfenbrenner at Cornell University showed the effects of plants threatening to move to Mexico and Canada because of NAFTA (see table 1). NAFTA has also contributed to growing income inequality and to the declining relative wages of U.S. workers without college degree, who made up 72.1% of the workforce in 2001 (Mishel et al. 2003, 163). NAFTA and other sources of growing trade deficits caused a shift in workers from manufacturing to other sectors and, frequently, from good jobs to low-quality, low-pay work. Additionally, some argue that U.S. wages have suffered due to increased immigration of unskilled workers from Mexico. However, the reason behind the wave of Mexican immigrants to the U.S. after 1995 was NAFTA. U.S agricultural exports to Mexico doubled from 1992 to 2008 (Bacon, 2011). Since the corn industry is highly subsidized in the U.S., Mexican farmers would not compete with U.S. agricultural imports (corn was no longer subsidized in Mexico after NAFTA went into effect). As a result, NAFTA destroyed over 120,000 jobs in Mexico in the farming and farm-supporting sectors (Bacon, 2011). To make matters worse, U.S.-based Union Pacific purchased the main north-south rail in Mexico and discontinued all passenger service, which lowered employment in the rail industry from 90,000 to 36,000 (Bacon, 2011). The …show more content…
Unfortunately, a beneficial renegotiation seems unlikely under the Trump administration, which has insulted Mexican immigrants and demanded that Mexico pay for the wall. The reality is that no renegotiation of the NAFTA can achieve this administration’s main goal, which is to bring factory jobs back to the U.S. and reduce the merchandise trade deficit with Mexico (“The pitfalls of renegotiating NAFTA, 2017).
On the other hand, Eugene Beaulieu, economics professor at the University of Calgary, argues that NAFTA should not be renegotiated. Beaulieu claims that while NAFTA did cause the loss of jobs in some industries, it created jobs in other industries. More importantly, NAFTA did not increase U.S. unemployment in the long run, but it did increase productivity (Beaulieu, 2017). He concludes that renegotiating the agreement would be a very long process that would cause great uncertainly in all countries involved, and create the risk of having one of the countries walk away all together (Beaulieu, 2017).
Withdraw from …show more content…
Unfortunately, NAFTA’s Article 2205 allows any party to withdraw from the agreement within six months of providing written notice (Luhby, 2016). The actual effect of withdrawing from NAFTA is ambiguous as the U.S. has not withdrawn from a trade agreement since 1886 (Luhby, 2016). However, one of the possible outcomes from pulling out of NAFTA is a trade war with Mexico and Canada (Luhby, 2016), which would be very damaging to the U.S. economy considering export to Mexico and Canada account for one-third of total U.S.