NAFTA reduced tariffs, increased economic output, created job positions, subsequently lowered prices, supported government spending, and encouraged foreign direct investments. However, NAFTA had a substantial negative impact on the agricultural sector and the environment of Mexico.
Explanation:
The North American Free Trade Agreement established the biggest free trade area in the world that covers Mexico, Canada, and the United States of America. In gross domestic product, these countries generate more than $20 trillion due to NAFTA. However, this agreement is highly controversial, and the prevalence of its advantages over disadvantages remains unclear. The act minimized and eliminated tariffs of tripled trade between the members of the agreement. This trade substantially increased economic output even if the evaluation of NAFTA impact is currently challenging.
It goes without saying that economic growth provided by NAFTA created new job positions. Free trade agreements of the United States encouraged the creation of 5.4 million jobs. Moreover, NAFTA promoted lowered prices due to the limitation of tariffs between the countries of the agreement. For instance, the U.S. reduces prices for Mexican oil imports; lower oil prices promote the reduction of gas prices and transportation costs. In addition, NAFTA increased competitiveness and lower costs for all member countries. National contracts became immeasurably available for suppliers, and government spending became supported. Finally, foreign direct investment in member countries was encouraged and tripled.
Talking about the disadvantages of NAFTA, it is highly essential to notice the paradoxical job losses together with new positions. In 2011, the Economic Policy Institute report recorded a loss of almost 700,000 job positions, especially in the industrial manufacturing sector of Texas, New York< Michigan, and California. Other segments of the industry, such as textile, automotive, electrical appliance, and computer industries, were additionally impacted. With the reduction of working places, wages were suppressed as well due to labor migration. Unfortunately, a substantial number of companies traditionally encouraged the workers’ inability to join unions as in unions, employees could request respectable wages.
NAFTA had the most negative impact on Mexican farmers as it allowed the government of the United States to import American farm products. Mexican farmers could not successfully compete with low subsidized prices and were forced to quit their business and illegally cross the Mexican-American border on a job search. That is why NAFTA potentially increased the number of illegal Mexican immigrants in the territory of the United States. In addition, unemployed Mexican farmers were forced to work under low-standard conditions when the United States companies employed workers from Mexico near the border to manufacture products for the Americans.
The abusive American policy against Mexican farmers resulted in the destruction of the Mexican environment. In order to keep prices achievement-oriented and low, Mexican agricultural business had to use fertilizers and other hazardous chemicals that increased pollution. Deforestation rates were additionally increased as farmers were frequently forced to use marginal land. It goes without saying that environmental contamination in Mexico substantially contributed to climate change and global warming. However, Mexican trucks that did not correspond with the American standards of safety had a negative influence on the environment of the United States as well. The access for them in the territory of the country was allowed due to NAFTA.