The North American Free Trade Agreement ( Nafta ) Essay

786 Words Oct 26th, 2016 4 Pages
In 1994, the North American Free Trade Agreement (NAFTA) came into effect, creating one of

the world’s largest free trade zones and laying the foundations for strong economic growth and

rising prosperity for Canada, the United States, and Mexico. Since then, NAFTA has

demonstrated how free trade increases wealth and competitiveness, delivering real benefits to

families, farmers, workers, manufacturers, and consumers.

NAFTA has both a positive and negative impact on the trade patterns around the globe. It started

off when United States transferred its facilities to Mexico in search of lower wages and less

stringent environmental and labor laws. Since Mexico was a developing country and United

States was a developed one, it established its trading grounds in Mexico and exploited the laws

there. Eclection Paradigm by Dunnings suggests that there are certain location specific

advantages of significant importance while making direct foreign investments. This was the

major cause that led to the beginning of NAFTA. NAFTA made it possible for the US

manufacturing industries to move part of their production facilities to Mexico because of the

cheap labor resulting in job loss in US. Nearly 80% of the losses were in manufacturing. The

hardest-hit states were California, New York, Michigan and Texas. They had high concentrations

of the industries that moved plants to Mexico. This trade agreement adversely affected Mexico

as well. Mexican farmers were put out of…

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