Do you realize NAFTA has been in existence for 20 years? Don’t know what NAFTA is and why it’s important? NAFTA stands for North American Free Trade Agreement. This was a treaty signed by three North American nations that linked them together into an economic union in 1994. Tariff barriers were cut between the three nations to encourage trade. This agreement came as a reaction to the creation of the European Economic Union and the euro in 1993.
The United States was concerned about being shut out of Europe’s new expanded economic union; so, together with Canada and Mexico, it formed its own economic union, NAFTA. Based upon three articles in the January/February 2014 Foreign Affairs, the 20-year-old agreement has been a boon to all three countries to varying degrees.
NAFTA from the U.S. perspective (Carla A. Hills, “NAFTA’s Economic Upsides”): Approximately 6 million U.S. jobs have been created in a $19 trillion market for 470 million people. All tariffs on industrial goods and unfettered agricultural trade have become the norm. Patents, copyrights, trademarks and trade secrets are better protected. The benefits of NAFTA for the U.S. have been enormous. Canada sends 98 percent of all of its energy exports to the U.S. Mexico ranks No. 2 as the U.S.’ export market.
Not only do the U.S., Canada and Mexico buy and sell things to each other, companies make more together. Since 1994 the U.S. has invested $310 billion in Canada, while Canada has reciprocated with $200 billion invested into the U.S. Mexico has also invested a great deal in its northern neighbors in products like retail, bread, dairy and cement. NAFTA has, according to Hill’s article, “made the region one of the most competitive on the planet.”
Travel between the three countries also has increased. Twelve million Americans have made trips to Canada, while 21 million Canadians have visited the U.S. Additionally, 13 million Mexicans have taken trips to the U.S. Thirty-four million Mexicans now live in the U.S., two-thirds who were born here. Most who become U.S. citizens vote Democratic, part of the reason why the U.S. House Republicans resist immigration reform.
Clearly, NAFTA has been a boon to the U.S. economy.
“NAFTA’s Unfinished Business: The View From Canada”: The author of this article, Michael Wilson, states, “Few dispute that NAFTA has produced large and measurable gains for Canadian consumers, workers, and businesses.” Since 1993, 4.7 million Canadian jobs have been created. Especially in auto and beef production, there has been a great deal of integration between the three countries. In regard to beef, animals are raised in one country and slaughtered in another. Additionally, 2.3 million barrels of Canadian oil, or 98 to 99 percent of Canada’s oil exports, cross the U.S. border each day.
There have been some downsides for Canada, though. According to Wilson, many Americans are skeptical of free trade. The events of 9/11 also put a crimp in U.S. to Canada border crossings, falling from 25.3 million in 2001 to less than 2.2 million in 2012. Cross-border security is a major concern. The Canadian and U.S. governments are working together to check Canadian ports of entry from overseas before the goods cross the U.S./Canada border.
Overall, Canada has benefited greatly from NAFTA.
From Jorge G. Castañeda’s, “NAFTA’s Mixed Record: The View From Mexico”: “Viewed exclusively as a trade deal, NAFTA has been an undeniable success story for Mexico, ushering in a dramatic surge in exports.” Mexico’s exports jumped from $60 billion in 1994 to $400 billion by 2013. Additionally, imports have reduced prices for consumer goods, “from shoes to televisions to beef,” making Mexico a middle class country.
NAFTA, according to the author, also changed attitudes, helping Mexico get over its feeling of victimhood over the U.S. taking half its nation in the Mexican-American War of 1846-48.
NAFTA also was supposed to have ended Mexico’s export of its people to the U.S. but in that regard it has failed, since an estimated 12 million Mexicans now live in the U.S., up from 6.2 million in 1994.
In general, while there have some improvements, the Mexican government must develop more proactive policies to benefit from NAFTA, according to the author.
In summary, all three countries have benefited from the creation of NAFTA 20 years ago, but the U.S. and Canada have benefited the most, with Mexico finding itself in the third-place position.
One of the major principles of capitalism is that trade creates wealth. Could it be that sometimes government does things right?