NAFTA

Negotiations began in?

1991

China?

Many think that Mexico is not the cause for lost jobs, but rather competition with China in the time since they joined the WTO in 2001

Effects of NAFTA?

Regional trade increased over the treaty's first two decades, from $290 billion in 1993 to more than $1.1 trillion in 2016. Cross-border investment has also surged, with U.S. foreign direct investment (FDI) stock in Mexico increasing in that period from $15 billion to more than $100 billion

Who called NAFTA a "giant sucking sound"?

Ross Perot

How can NAFTA change to better accommodate small business? (Etsy, Amazon, etc.)

Simplifying customs paperwork and raising the threshold for the value of shipments before they face customs revisions, known as de minimis, would boost U.S. small business exports to our neighbors. Congress passed legislation to raise the U.S. de minimis value to $800 dollars in 2016. Mexico and Canada, each of which require customs processing for signi cantly lower value shipments, should reciprocate.

Why was there opposition?

The per capita income in Mexico was 30% that of the US, so many believed that it would cause many jobs to leave the US and instead travel to Mexico

How many jobs rely on trade with Canada and Mexico?

14 million

What can make up for these lost jobs?

As the economy loses jobs, we gain productivity and lower consumer costs

Implemented by?

Bill Clinton

What is the Precursor to the WTO?

GATT (General Agreements on Tariffs and Trade)

Negotiated by?

George H W Bush

What do critics say?

Jobs have moved to Mexico, the deal is resulting in wage stagnation due to competition and the trade deficit

What was the goal?

Liberalization of trade in agriculture, textiles, and automobile manufacturing was a major focus. The deal also sought to protect intellectual property, establish dispute-resolution mechanisms, and, through side agreements, implement labor and environmental safeguards.

How to help those who have lost their jobs?

Many cite expansion of TAA (Trade Adjustment Assistance) which helps workers pay for education and training to find new jobs

What did NAFTA pioneer?

NAFTA created a new rush of FTAs (free trade agreements) which are very helpful because larger WTOs (world trade organizations) have stagnated. NAFTA was the first FTA to incorporate labor and environmental regulations. It was also the first FTA to join developed and developing countries

Why has Mexico had such varied results?

NAFTA drove the growth of foreign investment, high-tech manufacturing, and rising wages in the industrial north, while the largely agrarian south remains detached from this new economy

How has NAFTA helped Mexico?

NAFTA gave a major boost to Mexican farm exports to the United States, which have tripled since NAFTA's implementation. Hundreds of thousands of auto manufacturing jobs have also been created in the country, and most studies have found that the pact had a positive impact on Mexican productivity and consumer prices.

What's next for NAFTA?

NAFTA is undergoing renegotiations by the Trump administration, which began in August 2017 and are set to end in early 2018

How has NAFTA hurt Mexico?

NAFTA put an estimated 2 million small scale Mexican farmers out of business by exposing them to the heavily subsidized US farming industry, and after 1994, Mexican emigration (both legal and illegal) doubled, peaking in 2007 (though this was likely a result of the peso crisis, as emigration rates lowered drastically after 2007)

The Peso Crisis?

Occurred in 1994, just as NAFTA was being implemented, causing NAFTA to get off to a rocky start and this beginning the trade deficit

Original Free Trade Agreement?

Only with Canada, 1988

Trump's opinion?

Thinks jobs are moving to Mexico, entered into negotiations to alter NAFTA

What is TPP?

Trans-Pacific Partnership, a trade deal involving the US, Canada, Mexico, and other countries that hopes to deepen North American economic integration

How should we update NAFTA for the modern day?

Issues such as cross-border data flows and exports of digital products ought to be included in any update for the agreement, as should innovative products that did not exist in the early 90s

How did NAFTA help Canada?

It boosted trade with the US, even more than CUSFTA (Canada-US Free Trade Agreement) did, which was the original FTA btw Canada and the US, with agriculture especially getting a big boost

North American Agreement on Labor Cooperation?

This is an agreement to maintain specific standards of labor and workers rights, which is in conjunction with NAFTA, however it is weak and does not include provisions for what will be done if one party does not comply

What is TPA?

Trade Promotion Authority

What is TTIP?

Transatlantic Trade and Investment Partnership

How did NAFTA affect energy in the US?

We now get a larger portion of our energy from Canada, making the US less dependent on overseas energy sources and increasing regional energy independence

How do the US and Mexico work together in manufacturing?

a complex chain of manufacturing between both companies that combines each country's comparative advantage to make the region more competitive on the world stage

Zapatista Rebellion?

a rebellion started on January 1, 1994 in Mexico to protest NAFTA and the Mexican governments apparent favoritism towards the northern more industrial areas of Mexico

Manufacturing wages in US vs Mexico?

$19.50 an hour in the US vs $4.50 an hour in Mexico

How many FTAs does the US have?

20

What is NAFTA?

The North American Free Trade Agreement, am agreement between the US, Canada, and Mexico, that entered into force in January 1994

Why add Mexico?

The US and Canada hoped that integration of a developing country like Mexico would increase their economic growth, thus creating more jobs and reducing illegal immigration. Mexico was also seen as a promising low cost trade partner that would help US and Canadian companies be more competitive

Automobile Industry?

the US automobile industry has lost 350,000 jobs since 1994 (1/3 of the industry) while Mexico has more than quadrupled their automobile industry. this affects non-college educated workers most, who face more competition from low wage workers in Mexico

Comparative Advantage?

the ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity

According to PIIE, this is the reason for the trade deficit with Mexico

the growing imbalance between income and spending within the United States

What are rules of origin?

these set the threshold for the amount of regional content needed to qualify for NAFTA's tariff benefits. for example a car must have been manufactured at least 62.5% in North America to apply for NAFTA benefits