N A F T A

Promises and Consequences…

MD Siyam HossainBangladesh Institute of Business & Technology

Narayangonj,DhakaDhaka,Bangladesh

Overview

Tarun Biju – Introduction Indranil Dutta – Opposition

– Impacts on Canada Nola Lamoureux – Ross Perot’s Prediction

– Impacts on USA Arpan Munier – Renegotiation

– Impacts on Mexico Tarun Biju – Conclusion

MD Siyam Hossain

NAFTA - Introduction

Each NAFTA country retains its external tariffs vis-à-vis non-members' goods

Levies a lower tariff on the goods "originating" from the other NAFTA members

Differences in the sizes of the 3 participating nations – USA (88.4% ~ US 10.4 trillion), Canada(6.2%) and Mexico(5.4%) of NAFTA area GDP

Phasing out of tariffs over a period of 14 years since its inception on 1st January 1994.

Individual companies can sue countries in case of legislation that hamper outcomes from their investments

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Some of the promises

Freer access to new markets (e.g. US agriculture)

Creation of new jobs Increase in the standard of living (especially in

Mexico) Improved environmental conditions

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Opposition

Labour Unions in US and Canada loss of jobs to Mexico

Politicians fear of ‘branch plant’ economy

Farmers in Mexico agricultural subsidies in US

Environmental and social justice organizations adverse environmental impacts loss of control over domestic policy making

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Impacts on Canada

Canada – US: (1989 – 2002) US exports to Canada – 100%(↑) US imports from Canada – 133% (↑)

Canada – Mexico: (1989 – 2002) Canadian exports to Mexico – $3.2 billion Canadian imports from Mexico – jumped five

fold to $13.2 billion.

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Impacts on Canada

6% growth in bilateral trade with a 40% appreciation to CDN$

Trade & linkages growth Force companies to improve to compete in North

America, therefore they are better able to compete globally

Border problems and unfinished business (softwood lumber) ~ capped to 34%

Canadian farmers effected by lower prices

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Perot’s predictions

No SUCKING sound! Jobs were created in Mexico, but there was

no net loss of jobs in the US. Many jobs moved, but many jobs were

created. E.g. Michigan the unemployment rate was

3.2% in Aug 1999.

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Impacts on the U.S. Relaxed investment restrictions Helped US deal with European competitors in

Mexico Manufacturing jobs in the US declined

Wages remain stagnant US workforce shifting from manufacturing to service jobs Increased differences in income

Weakening of unions Increase in competition Strengthening of multinational companies Increase in insecurity

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Impacts on the U.S.

Certain industries (automobiles) benefited greatly.

US Independent Truckers are opposed to giving Mexican truckers greater access to the US. (Aug 2006)

Agribusinesses (ADM, Cargill) benefited over independent farmers. Volume of trade has increased Prices paid to farmers decreased

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Renegotiation

Lopez Obrador rejects the opening of Mexico’s corn & bean markets to US exports.

Transition has been slow so he is trying to convince people to go back to the old ways, a centrally planned economy.

Appeals to rural Mexicans who did not benefit from NAFTA

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Impacts on Mexico

Success of Mexican “maquiladoras” Labour intensive units, imports inputs from the US, processes

them for re-export. Increased employment for Mexicans, increased supply for the

US, ensuring lower prices

For Mexico : “trade without development” (Wise and Gallagher)

Foreign investment increased, exports grew, employment rose Crowding to urban areas, adverse environmental effects Companies shifting to Asia to lower costs, manufacturing sector

in decline. Cannot fight poverty by trade alone.

MD Siyam Hossain

Impacts on Mexico

Migration of Mexicans campesinos to the US due to loss of farming income Remove quotas and price floors. Loss in biodiversity due to the monoculture nature of

agribusiness.

MD Siyam Hossain

References http://www.dfait-maeci.gc.ca/eet/research/nafta/nafta-en.asp#part http://www.citizen.org/trade/nafta/ http://www.dollarsandsense.org/archives/2003/0103dollar.html http://www.yaleeconomicreview.com/issues/spring2005/nafta.php http://www.citizen.org/documents/NAFTA_10_ag.pdf http://www.citizen.org/documents/NAFTA_10_mexico.pdf http://www.citizen.org/documents/NAFTA_10_jobs.pdf Border conflict, Keane, A.. Journal of Commerce. New York:Aug 7, 2006. p. 33 Mexican Watershed, Wall Street Journal. (Eastern Edition ). New York:Jun 29, 2006. p. A.14 Jesse vs. the Sour Grapes, Wall Street Journal. (Eastern Edition ). New York:Sep 20, 1999.

p. A28 NAFTA at eleven, Cooper, J. CMA Management. Hamilton:Oct 2005. Vol. 79(6), p. 52-53

(3 pp.) World economy: Not all Nafta foes are Perot followers, but their opposition runs just as deep

Keatley, R. Wall Street Journal. (Eastern Edition ). New York,:Nov 12, 1993. p. PAGE A11 Nafta's Birthday Party, O'Boyle, M. Business Mexico. Mexico City:Feb 2004. Vol. 14(2), p. 28-33

(6 pp.) Why labor hates NAFTA, Richman, L. Fortune. New York:Nov 15, 1993. Vol. 128(12), p. 28

(1 pp.) NAFTA and illegal immigration, Field, A. Journal of Commerce. New York:May 22, 2006. p. 1

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