8 Biggest NAFTA Advantages and Disadvantages
NAFTA, which is the North American Free Trade Agreement, came into effect in 1994. It is an agreement between the United States, Canada, and Mexico that created one of the world’s largest free trade zones and set the foundations for economic growth in the involved countries. The agreement lifted the tariffs on goods being imported and exported between the countries, as well as loosening the regulations on international businesses. While it may seem like NAFTA has only had good outcomes, there have definitely been some negative consequences felt in all countries.
Advantages of NAFTA
1. Reduction of Taxes
The main goal and purpose of NAFTA was to reduce the taxes on goods imported and exported among Mexico, United States, and Canada. It successfully did this, and completely eliminated taxes in many cases.
2. Increased Wages
Another one of the marked effects of the North America Free Trade Agreement is the fact that it caused a pretty dramatic wage increase in all three countries. The United States enjoyed a 0.17 percent increase, Canada a 0.96 percent, and an impressive 1.3 percent increase in Mexico.
3. Lowered Costs
Since the competition was increased greatly when NAFTA was implemented, companies where forced to lower their prices to keep up and stay relevant. This was a huge benefit to the consumers in these countries because it meant that the prices of agriculture goods stayed low.
4. Job Creation
Large companies now have the ability to create branches in different countries with little restrictions. This is a great thing because it created a large amount of jobs in areas that desperately needed them. The poverty levels dropped and employment levels increased greatly due to the North American Free Trade Agreement.
5. Access To New Products
Things that would normally only be available in one country became available to the people of all three. Specialty things, especially when pertaining to agriculture, became available. One wonderful example of this is pure maple products from Canada being available to the Mexican people.
Disadvantages of NAFTA
1. Mexico Suffered Greatly
Over a million farming jobs where lost in Mexico due to the North American Free Trade Agreement. Since the tariffs on exportation of good where gone, it became much cheaper and more profitable for people to send crops to Mexico. They where able to do this at prices much lower than the Mexican farms could offer them, and put a huge chunk of Mexico’s farming industry completely out of business.
2. The Environment Negatively Impacted
Large corporations where able to move factories and processing centers in areas where they did not exist before. This introduced negative impacts into the environment. These factories produce green house gases and contribute to global warming. In addition, the waste from these production companies have caused negative problems in the environment and soil.
3. Exploitation Of Labor
People in countries such as Mexico, are wiling to work in labor positions for much cheaper than developed countries like the United States. This caused a chain of companies moving their production to Mexico in order to take advantages of the people there. The working conditions have been very poor, because there is not nearly as much regulation on those types of things as there are in the United States or Canada. Overall, the North American Free Trade Agreement has been very negative for Mexico as a whole.