A Study of North American Free Trade Agreement

Prepared by:to:Joshi Parth (12031) Joshi Odedra Ajay (12002)

Submitted Dr. Y. C.

G.H.Patel PG Institute of Business Management Vallabh vidyanagar Bench year:- 2012-2014

Introduction of North American Free Trade Agreement

North American Free Trade Agreement is an agreement among such countries which are united state of America, Maxico, Canada. NAFTA involves such agreement related to international trade in endangered species of wild found and flora, protocol on substance that deplete the ozone layer, Basel convention on the control of trans boundary movement of hazardous waste and their disposed. The agreement came into force on January 1, 1994. North American Free Trade Agreement include such agreement on trade such that common currency implementation, same generally Accepted Accounting Principles, Removal of custom duty among the member countries. NAFTA has two supplements, the North American Agreement on Environmental cooperation (NAAEC) and the North American On labor cooperation (NAALC). When NAFTA was passed, many people feared the worst. The results have indeed been disastrous: 1) The trade deficit with Mexico has exploded 2) Mexican wages remain nearly as low as they were prior to NAFTA and are still a small fraction of our average wages. 3) Wealth and power has not filtered to the people. Most of Mexico is still controlled by less than 100 corporations in Mexico. 4) Many of our other trading partners have relocated facilities to Mexico to circumvent other trade agreements with the US. 5) American manufacturing has lost 3 Million jobs in the past 10 years as U.S. companies have also moved to Mexico f or lower wages and lax regulations On the basis of the one-sided disastrous results over the past 15 years, whoever advocated NAFTA seems to be either grossly negligent of their duty of representing their constituents or is simply working contrary to the best interest of this country.

American workers are now forced to compete directly with Mexican workers who, on average, makes just $3 per hour. Their American counterparts make $18 per hour. Why would any manufacturer want to produce here in America and pay $18-20 per hour when the same product can be produced right across the border in Mexico f or just $3 per hour and then shipped back to the U.S. duty and restriction free? We had a small trade surplus with Mexico in 1993 before signing onto NAFTA. By 2007, 14 years after signing NAFTA, that surplus turned into a $91 billion deficit with Mexico.

The combined deficit with Canada and Mexico together increased to $190 billion an astounding 691 percent increase. Illegal immigrants in the U.S. have increased to 12 million today from 3.9 million in 1993, accounting for an overall increase of over 300 percent. Since NAFTA was implemented, 300,000 American family farms have been put out of business. Overall, net farm incomes are down 13 percent. Obviously NAFTA has not been very beneficial to the US.

In all reality, the trade pact has been an abject failure. The cruel reality of NAFTA is that it does not benefit the American worker. In fact, it encourages our jobs to leave the country in pursuit of lower wage rates, non-existent environmental standards and trade without restrictions. The nations continued participation in NAFTA results in fewer manufacturing jobs and an influx of foreign produced goods. Our citizens lose good jobs while Mexico reaps the benefits of this trade bloc.

 Some feature of NAFTA:1) TEMPORARY ENTRY FOR BUSINESS PERSONS:Article 1601 General principles: - Further Article 102(objective)

Review of literature:-

This essay is updated from an article with the same title that appeared in the Melbourne Review (Jeffrey J. Schott and Gary Clyde Hufbauer, "NAFTA Revisited," Melbourne Review, May 2006 2: no. 1). The authors were assisted by Claire Brunel, a research assistant at the Institute. Opinions expressed are the views of the authors and not necessarily the views of the Peterson Institute or its staff. See also related online discussion, "What Should the Next President Do on NAFTA?", with Jeffrey J.Schott, Peterson Institute, and The M. Lee, policy director for the American Federation of Labor and Congress of Industrial Organizations. At the end of 2006, the North American Free Trade Agreement (NAFTA) covered a combined economy of more than $14 trillion and a population of about 435 million people. Throughout its duration, NAFTA has been hailed by some and derided by others. Proponents laud the pacts contribution to regional trade and investment and argue for an acceleration of the integration process.

Critics focus on NAFTA's impact on wages and jobs because of growing competition and immigration; some fear that increased cooperation will lead to a loss of sovereignty. Labor unions continue to attack trade pacts using their old rallying cry, "No More NAFTAs." In the presidential pre-primaries in 2007, the leading Democratic contenders (Clinton, Obama, and Edwards) all voiced skepticism about trade pacts and globalization, echoing the anti-NAFTA rhetoric of the past. Thirteen years after NAFTA entered into force, the political debate remains confused and divisive. Why confused? Much of what was promised from NAFTA could never be achieved solely through a free trade deal; much of what has occurred since NAFTA cannot be attributed to the agreement.

Trade pacts create opportunities; they dont guarantee results. Why divisive? The fractious NAFTA ratification debate has had lingering effects, as evidenced by dwindling Democratic support for major trade bills over the past decade in response to constituent pressures and in retaliation for the highly partisan tactics of the Republican leadership during the period 19942006. Ironically, NAFTA critics devote less attention to the pact's most glaring shortcomings. Energy and border security have captured the political spotlight, yet minimal progress has been achieved on both files.

Additionally, Mexican GDP growth has averaged only 3 percent per annum since 1993. The record for 2006 and 2007 might reach 4 percent, still well below Mexico's potential and a far cry from Asian growth rates. The Mexican political system has not delivered the tax and energy reforms that would generate new resources to fund investments in physical infrastructure, social services, and education. Mexico has neither rousted the drug lords nor eradicated the corruption mentality. These factors have limited Mexico's ability to take full advantage of NAFTA and indeed have put Mexican industries at a competitive disadvantage, particularly against Chinese firms. Meanwhile, the Canadian dollar has strengthened from $US 0.77 in 1993, and a low of $US 0.63 in 2002, to a robust $US 0.95 in July 2007. The Canadian pay packet now buys almost 50 percent more in US dollar terms than it did in 2002. However, the good fortunes of the Canadian economy owe much to the global resource boom and little to NAFTA. Assessing NAFTA's First Decade:- A trade agreement can be assessed against many standards. We apply a straightforward test: How well did the three countries meet the objectives set out in NAFTA Article 102, namely to: Promote trade and investment Increase employment and improve working conditions and living standards Manage trade relations and disputes Strengthen and enforce labor and environmental laws and regulations Cooperate in regional and multilateral trade forums

Our bottom line: NAFTA succeeded in advancing economic integration and achieving the goals agreed to in the pactthough not in reaching the inflated promises of politicians when the pact entered into force. While the pact is comprehensive compared to other trade agreements, in some areas its footprint is small. For example, NAFTA has no rules on subsidies, nor on antidumping or countervailing duties; its side pacts on labor and the environment are limited in scope and not backed by meaningful funds; and Mexico avoided significant obligations in the energy sector.