Katy Haas

Coordinator, Alianzas
www.alianzas.us
 Index
• Why Enter a Free Trade Agreement?
• What is NAFTA?
• Background of NAFTA
• Reaction after Implementation
• The Mexican Peso Crisis
• What about America’s Farmers?
• Impact on:
– Employment
– Immigration “Mexico is the most
– Environment
important country to the
• Trucking industry
• Missouri’s role
United States in the 21st
• NAFTA’s future century”
• Conclusion
--President George W. Bush
Sept. 5, 2001
 Why Enter a Free Trade
M e x ic o p ro d u c tio n
Agreement?

9
(in to n s )

6
Corn
Sugar
3

0
3 5 7 9
United States production
(in tons)
 Levels of Economic Integration
Free Movement of Factors Harmonization* of All
Free Trade Common
of Production (Example: Economic Policies - Fiscal,
Type of Bloc among the External
free labor movement Monetary, etc. (Example:
Members Tariffs
between countries) common currency)
Free-trade 
area
Customs  
union
Common   
market
Economic    
union

*If the policies are not just harmonized by separate governments, but have a
unified government with binding commitments on all members, then you reach
political integration and have “full economic integration”.
What is NAFTA?
Effective as of January 1, 1994

A trade agreement between

CANADA, MEXICO, and the
UNITED STATES which
provides for the elimination of
tariffs on North American goods
shipped among the three
countries.
 Background of NAFTA

An Introduction

Salinas Clinton Zedillo Marcos

 Expectations and Goals
MEXICO: Lower inflation and foreign debt; create more well-
paying jobs for Mexicans, thus producing less incentive for
Mexicans to work illegally in the U.S.; Mexico would become
a richer market for American exporters.

UNITED STATES: Would solidify an expanding trade

relationship, which would spur job creation at home and help to
continue the revolutionary shift throughout Latin America
away from state controlled markets toward freer markets.

Would exert presidential authority, improve inter-American

relations and advance the cause of global trade liberalization.
Reaction After Implementation

How the Countries

Were Affected
Immediately

How They Are

Affected Now
 Top U.S.
and

1. Motor Vehicles 1. Aircraft

2. Oil/Natural Gas 2. Electronic Computing Equipment
3. Motor Vehicle Parts 3. Motor Vehicle Parts
4. Semiconductors 4. Motor Vehicles
5. Electronic Parts 5. Semiconductors
6. Aircraft/Space/Missile Parts
7. Chemicals
8. Plastics
9. Airplane Engines/Parts
10. Refined Petroleum Products
 NAFTA Pros
+ Goods/Services at lower cost
+ Most underdeveloped countries gain the
most (i.e. standards of trade increased)
+ Tariffs reduced
+ Jobs created
+ Mexico’s economy is growing again
 NAFTA Cons
– Fuel for peso crisis
– Benefits Mexico more than the U.S.
– U.S. deficit with trading partners
– Loss of low-wage American jobs to Mexico
– Environmental problems
– Traffic congestion and delays along the borders
The Mexican Peso Crisis

Was NAFTA to Blame?

Wages in United States and Mexico

 What about America’s
Farmers?
BENEFITS: More export opportunities. Since
NAFTA was approved in 1993, U.S. agricultural
exports to Mexico have nearly doubled.

DISADVANTAGES: Face regulations that

increase the costs of production while foreign
competitors gain from cheap production and
labor.
 Impact on:
Employment
• Was U.S. workers’ loss Mexican workers’
gain?
• Maquiladora - Primarily foreign-owned
assembly plants
• Jobs lost to Mexico vs. Jobs supported by
exports to Mexico and Canada
 Impact on:
Immigration
• In the 1990s, U.S. population grew 13.2%, with
60% growth of Mexican immigrants.
• Among Latinos nationwide, 26% are between the
ages of 25-40.
• Remittances from Mexicans working in the U.S.:
$6.65 billion (for 2001 through 3rd quarter)
• Increase in Mexican migrants led to increase in
Border Patrol staff
 Impact on:
Environment
NAFTA Environmental Agreements:

North American Agreement on Environmental

Cooperation (NAAEC) - commission to enforce
environmental law.
Border Environment Cooperation Commission
and the North American Development Bank -
commission to address pollution problems along
the U.S.-Mexican border
 Trucking Industry
The areas of concern
include: vehicle safety,
driver training,
environmental issues and
possible illegal drug
trafficking.

A recent investigation determined that the average 18-wheeler in

Mexico is 40% overloaded, carrying a gross vehicle weight of
more than 120,000 pounds. If U.S. truckers operated at a
similar overcapacity, interstate highways would have a life span
of 14 years, as opposed to their 40-year design life.
 Missouri’s Role

Missouri's Exports Under NAFTA

3500
3000
Millions of
Dollars

2500
2000
1500
1000
500
0
1993 1994 1995 1996 1997 1998 1999
Mexico Canada
 Missouri’s Role (continued)

Between 1994 and 1999, Missouri exports to NAFTA

partners increased 63.4%.

Canada and Mexico are Missouri’s first- and second-

largest export markets, respectively, accounting for
50.5% of Missouri’s total exports 1999.
Mid-Continent
International
Trade
Corridor
1. A trade pattern
2. A system of connecting
highways and rail
routes
3. An opportunity to
strengthen economic
development in a
region
 Missouri and Employment

Unemployment Rate in Missouri,

1993-1999
8 6.5
7
6 4.9 4.8
Percent

4.6 4.2 4.2

5 3.4
4
3
2
1
0
1993 1994 1995 1996 1997 1998 1999
 The Missouri-Mexico
Partnership
• The Missouri Department of Economic
Development moved its hub to Monterrey
• Branch office in Guadalajara
• For the past 12 years, the Missouri
Department of Agriculture’s headquarters
has been in Guadalajara
 NAFTA’s Future
Where is it going and what effects will it have?

U.S.-Central American Free

Trade Agreement
Free Trade Area of the Americas
(FTAA)
Conclusion
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