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?