NAFTA, the North American Free Trade€¦ · Mexico - $3.40 per day vs. US - $7.25 per hour Example: Hourly compensation costs for production workers in manufacturing Mexico - $1.21

NAFTA, the North American Free Trade

Agreement, was signed by the United

States, Canada, and Mexico.

NAFTA was signed

in 1993 and went

into effect on

January 1, 1994.

NAFTA was written to create a Free Trade Area in North America.

“Free Trade” means that countries may freely trade goods with each other without having to pay a tariff (tax) on those goods.

In other words, “free trade” means no trade barriers.

The purpose of the agreement is to:

Allow free movement of goods and services among the countries.

Promote competition in the free trade areas.

Protect the property rights of people and businesses in each country.

Be able to resolve problems that arise among the countries.

Encourage cooperation among countries.

Most economists agree that the agreement

has been good for the countries involved.

Free trade increases sales and profits for Mexico, Canada and the U.S.A., thus strengthening their economies.

Lack of tariffs has allowed Mexico to sell its goods in the USA and Canada at lower prices. This makes Mexican products more competitive in these markets and increases Mexico’s profits as it tries to develop its economy.

Free trade is an opportunity for the U.S. to provide financial help to Mexico by making jobs available in factories located there.

a. “NAFTA Members

Prepare for Picnic!”

b. “NAFTA Members

Graciously Share

Business Ventures!”

c. “NAFTA Members

Cover Up

Conspiracy!”

d. “NAFTA Members

Vie For Business!”

Free trade has caused more U.S. jobs

losses than gains, especially for higher-

wage jobs.

›Factories, called

Maquiladoras, are

built on the Mexican

border and workers

are hired there to

make goods at a much

lower wage than

workers would be paid

in the U.S.A.

Minimum Wage

Mexico - $3.40 per day vs. US - $7.25 per

hour

Example: Hourly compensation costs for

production workers in manufacturing

Mexico - $1.21 vs US - $17.70

These factories make many types of

products.

3 Day Blinds

20th Century Plastics Acer Peripherals Bali Company, Inc. Bayer Corp./Medsep BMW Canon Business Machines

Casio Manufacturing Chrysler Daewoo Eastman Kodak/Verbatim Eberhard-Faber Eli Lilly Corporation

Ericsson Fisher Price Ford Foster Grant Corporation General Electric Company JVC

GM Hasbro Hewlett Packard Hitachi Home Electronics

•Honda

•Honeywell, Inc. •Hughes Aircraft •Hyundai Precision America •IBM •Matsushita •Mattel

•Maxell Corporation •Mercedes Benz •Mitsubishi Electronics Corp. •Motorola •Nissan •Philips

•Pioneer Speakers •Samsonite Corporation •Samsung •Sanyo North America •Sony Electronics •Tiffany

•Toshiba •VW •Xerox •Zenith

United States

They can move their factories to Mexico and ship the goods to the US with no tariffs.

They would not have to pay the workers in Mexico as much as in the United States.

They would be able to sell their product for cheaper, but still make a good profit

Many American factory workers lose their jobs because the owners move the factories to Mexico. American factory workers cannot move to Mexico to keep their jobs.

Goods made in Mexico would cost a lot less because labor is cheaper there.

Mexico

They would not like foreign owned factories because they would create competition and hurt Mexican owned businesses.

Maquiladoras would provide jobs for Mexicans, but the profit made by maquiladoras would go back into the US economy, not into Mexico’s

It would provide a job in a country where there are not enough jobs

However, the wages are very low and the working conditions are not good

Building factories creates pollution. An environmentalist would want to make sure that Mexico had laws to protect the environment.

Good or Bad?