Trump s Renegotiation of NAFTA

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Maximillian Patterson
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Trump s Renegotiation of NAFTA By: Lauren James The North American Free Trade Agreement (NAFTA) is a pact between Canada, the United States, and Mexico that was enacted on

1 Trump s Renegotiation of NAFTA By: Lauren James The North American Free Trade Agreement (NAFTA) is a pact between Canada, the United States, and Mexico that was enacted on January 1, It instantly eliminated tariffs on over half of Mexico and Canada's exports to the U.S., and thus created one of the largest free trade zones in the world.

2 Recently, NAFTA has been threatened. Donald Trump s campaign on making America great again focuses on reducing national debt. Trump promises to achieve this by bringing industrial jobs back to the United States. As such, many American manufacturing companies have been prompted to outsource to Mexico due to the lack of trading restrictions and cheap labor. Currently, approximately 18,000 companies with U.S. investment operate in Mexico, contributing to a trade deficit of $60.7 billion in goods with Mex ico, as illustrated in the graph. The Economic Policy Institute approximates that this trade imbalance has cost the U.S. about 3.4 million jobs, with roughly 60% of them being manufacturing ones. Image: U.S. Census Bureau To combat this issue, Trump plans to renegotiate the NAFTA. Robert Lighthizer, the US Trade Representative, said that the pact fundamentally failed many, many Americans at the initial

3 round of NAFTA talks. While the primary target is Mexico, Lighthizer also noted that the U.S. has a significant trade deficit with Canada as well. Under the Trump administration, central portions of the 23-year-old agreement will be revised, including access to federal government contracts and minimum local-sourcing requirements. Furthermore, Trump has suggested a 20% tax on imports from Mexico. These restrictions will be put in place with the aim of incentivizing manufacturing companies to return to America. While it is not unreasonable to understand that the job market expands or shrinks depending on the labor demand and supply within the economy, a country can expand its job market by appealing to manufacturing companies. Furthermore, there are other factors to be considered when evaluating a successful economy. This leaves open the possibility that there may be many notable benefits in keeping the NAFTA intact. One indication of the success of an economy is its unemployment rate. As illustrated in the graph below, the unemployment rate has not drastically increased between 1970 till the present day (note: the graph ends in July 2007, the peak of the recession, since which the unemployment rate has dropped to 5%). This ultimately suggests that while many manufacturing jobs may have been lost to Mexico, American citizens are finding work in other industries. Furthermore, significantly more Americans are attending college, and thus the need for manufacturing jobs has decreased. This shift away from manual labor may be seen as a sign of progress. Consequently, placing restrictions on trade as a means of bringing back manufacturing jobs may not be the ideal solution.

4 It is also important to consider that the average salaries for Mexican manufacturing workers is under a tenth of that of the average U.S. manufacturing worker, according to the Bureau of Labor Statistics. By moving back to the U.S., manufacturing companies would be burdened with considerably higher costs. Furthermore, purchasing a manufacturing space in the U.S. is extremely costly. In addition to rental costs, other costs such as insurance, utilities, and maintenance are often cheaper in countries with devalued currencies. Due to these reasons, firms may be incentivized to raise the prices of their goods and services. And so, having manufacturing facilities in places like Mexico may not be beneficial only for the manufacturing companies, but also for the average American consumer.

5 If the prices of products were to actually skyrocket, Trump s plan to alter the NAFTA to minimize the U.S. trade deficit with Mexico may not be a beneficial measure for the U.S economy, and may give birth to an array of new problems. References US-Mexico Trade. Mexico United States Trade Representative, Executive Office of the President, Sept. 2017, ustr.gov/countries-regions/americas/mexico. The Growing Trade Deficit with China Cost 3.4 Million U.S. Jobs between 2001 and Economic Policy Institute, 31 Jan. 2017, -and-2015/. Wroughton, Additional Lesley, and Karl Plume. U.S. Talks Tough on Trade Deficit as NAFTA Discussions Begin. Reuters, Thomson Reuters, 16 Aug. 2017, in US-Mexico Trade. Mexico United States Trade Representative, Executive Office of the President, Sept. 2017, ustr.gov/countries-regions/americas/mexico.

Neo-Liberal Policy & the Feminization of Labor

Neo-Liberal Policy & the Feminization of Labor The Affects of NAFTA in Mexico Presented by Ivette Ale Neo-Liberalism Refers to a set of economic policies that include: 1. Limiting state involvement in