Detroit — The Epicenter of NAFTA’s failure?
The North American Free Trade Agreement (NAFTA, 1996) is a bipartisan agreement intended to allow Mexico operational jurisdiction within the existing bilateral Free Trade Agreement (FTA) with the United States and Canada. The addition of a less developed country was considered unprecedented at the time. And with Mexico as NAFTA’s newlywed beneficiary, the trilateral trade blocs rooted itself in a regional trade agreement poised to remove market restrictions including the WTO’s patchwork of tariffs and government-imposed regulation.
A noteworthy achievement of the NAFTA agreement is the net increase of regional trade activity and the flow of raw materials- in terms of quantity- respective to Mexico’s labor market demand. The newfangled trade agreement emphasized on environmental sustainability, auto manufacturing regulation, and laissez-faire economics. And by upending existing barriers with laissez faire principals, when marshalled- the agreement championed a symbiotic relationship intended to close the economic disparity between the tri-lateral states.
Inexpensive labor from Mexico’s developing economy was leveraged on the basis of economic parity. This in turn, created a passageway encouraging the free flow of goods, information, and labor. With the exception to corn, NAFTA boosted Mexican farm exports to the United States. Though a contested sentiment (with subsidized exports corn being the crux of the argument), most economists agree this reinvigorated Mexico’s agricultural market and economy.
The NAFTA agreement introduced protectionist legislation to address concerns that were privy and pervasive to free-economic cynics: the United States looming economic fallout from an eviscerated labor market. To counteract apprehensions, protectionist measurements were earmarked into NAFTA’s agreement. One such stipulates 62.5% of a vehicles net cost must originate domestically to have duty-free access to the United States. Prior to the USMCA, NAFTA’s protectionist provision is the highest requisite imposed for motor vehicles in any U.S. trade agreement.
In attempting to safeguard domestic industries, the protectionist provisions in NAFTA inadvertently marginalized low-skill auto manufacturing jobs. Based on the failed attempt to placate auto workers woes, and the misconceived notion of economic failure, the United Auto Workers union is lobbying for higher standards in duty-free imports- a provision later secured in the USMCA. They demand for a higher aggregate percentage of parts originating from North America, as seen with the USMCA.
Though seemingly altruistic, NAFTA is not free from imputation and bears many unintended consequences. Despite efforts to develop an egalitarian economic system, the U.S. Autoworker still remains victim of the tide winds fomented by NAFTA’s trade creation. Once considered a coveted impetus to upward mobility, American blue-collar manufacturing workers now struggle to find work. U.S. autoworkers have reached the crux of their economic woes and scapegoat todays industrial glut on NAFTA’s free trade edict. Critics of NAFTA argue the trade bloc provisions- respective to Mexico’s inexpensive labor market- precipitated an imprudent flow of resources downward- IE- to Mexico. Some argue the government should institute a labor price floor to protect the industry, while others demanded executive action.
Question: Research and post at least one area or industry (Auto, Trucking, Intellectual Property etc.) in the United States that has been hurt since the inception of NAFTA in 1994. (You can also address how the middle class or small businesses have been adversely impacted.) What changes can the current administration make to NAFTA to rectify the matter and improve the US economic situation? You can reference the USMCA.