The North American Free Trade Agreement was initially started with a pact between the United States and Canada in early 1989. Soon there after a pact between the United States, Canada, and Mexico combined to make up the second-largest free trade zone in the world. The largest being the European Economic Area. The pact between the United States, Canada, and Mexico called the North American Free Trade Agreement (NAFTA) started on January 1, 1994 with much opposition here in the United States. Many environmental groups, labor unions, and parts of the United States government had strong feelings both for and against the implementation of NAFTA. This will be the area of discussion for this paper. We will discuss the pros and cons of NAFTA.
Employment is one of the hottest debated topics of NAFTA. There are numerous documented cases of Americans losing their jobs due to the agreement. Manufacturers such as Zenith Television, JVC, and Thompson Consumer Electronics have all closed down American plants and opened new ones in Mexico since NAFTA's inception in 1994. With an estimate of over 350,000 jobs lost in the first three years alone, we can see how this is a delicate subject for those who oppose NAFTA. This along with more and more articles being published about jobs being lost due to NAFTA has led to a very negative public perception of NAFTA. What most people do not understand is that as countries engage in trade and as resources and labor shift from one industry to another some jobs disappear and others are created. For instance, the United States is a leader of importing advanced computer components for some of the world's most advanced computers made here in the USA. Importing low-tech circuit boards to produce higher-tech finished products allows companies to direct labor, capital, and other resources toward the higher-end advanced processes involved in production. Free trade therefore maximizes a company's ability to produce better products by leaving the production of minor components to countries that do not have high-end manufacturing capabilities. This division of labor has paid off in many high tech industries here in the United States. For example the US produces more technology for the worldwide Internet network and the hardware to access it than any other country. We also lead the world in accessing the Internet. The pure volume differences are amazing (Chart 1). With this said critics still claim that NAFTA is hurting both the United States and Mexico. Critics claim that the only people who benefit from NAFTA is the multinational companies operating in Mexico. These companies use the cheap labor and the relaxed laws to manufacture or produce their products at extremely low overhead and then send these same items to the United States and other areas for top shelf price. These companies do this without doing much for vast majority of poor citizens in Mexico. This takes us into our second...