Negative Effect Of Free Trade Agreement

The good thing about a free trade area is that it promotes competition, which increases a country`s efficiency in being on the same account of its competitors. The products and services will then be of better quality without being too expensive. In fact, most U.S. exports to Mexico are parts and components shipped to Mexico and assembled into finished products that are then returned to the United States. The number of products that Mexico assembles and exports – such as refrigerators, televisions, cars and computers – has increased under NAFTA. Many of these products are manufactured in maquiladora export zones in Mexico, where parts have been entered duty-free and re-exported to the United States in assembled products, with tariffs applying only to value added in Mexico. The share of U.S. exports to Mexico, represented by maquiladora imports, increased from 39% of U.S. exports in 1993 to 61% in 2002.2 The number of such facilities increased from 2,114 in 1993 to 3,251 in 2002 (INEGI 2003a, 2003b). The main conditions of free trade agreements and free trade zones are as follows: extensive and growing research has shown that expanding trade is lowering the prices of competing import products and lowering the real wages of the workers who make these products. However, trade is also expected to increase the wages of exporters, but growing trade deficits have resulted in the number of workers affected by imports exceeding the number of exports.

Given that the United States tends to import products that make extensive use of the skills of less educated workers in production, it is not surprising that the increasing openness of the U.S. economy to trade has reduced the wages of less educated workers compared to other workers in the United States.7 , and standard of living: a free trade area deals with the abolition of tariffs and trade measures applied to Member States. This means that there are no common policies that apply to all members and that each country in the free trade area imposes its own tariffs and quotas. Others agree that the environment is a new victim of free trade. To simplify, you can`t have free trade and “save the planet,” says Alf Hornborg, a professor of human ecology at Lund University in Lund, Sweden, noting that despite all the benefits of a free trade area, there are also some drawbacks, including: NAFTA advocates often claim the benefits of exports while remaining silent about the effects of rapid import growth (Scott 2000). Former President George H.W. Bush, whose administration negotiated NAFTA, recently stated that “two million NAFTA-related jobs have been created in the United States since 1993” (Bush 2002). However, any assessment of the impact of trade on the domestic economy must include the effects of both imports and exports. When the United States exports 1,000 cars to Mexico, many American workers are employed in their production.

However, if the U.S. imports 1,000 cars from Mexico instead of building them domestically, a similar number of Americans who would otherwise have been employed in the auto industry will have to find other jobs. While NAFTA is not responsible for all the problems in the U.S. labor market, it has contributed significantly to the state of the U.S. economy, directly and indirectly. Continued integration of North American markets will threaten the prosperity of a growing share of the U.S. workforce, without significant changes to NAFTA to address uneven levels of development and enforcement of labour rights and environmental standards. The extension of NAFTA, such as the free trade agreement proposed by the United States, will only exacerbate these problems. Past experience shows that workers have good reason to be concerned when NAFTA enters its second decade.