presented by shrikumar H D MBA section D presidency college Bangalore

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 WageMexico - $3.40 per day vs. US - $5.15 per

hourExample: Hourly compensation costs for

production workers in manufacturingMexico - $1.21 vs US - $17.70

(Global Trade Watch, The NAFTA Index, October 1, 1998)

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 StatesThey 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?