Discuss the positive and negative effects of the North American Free Trade Agreement on the United States. Support your conclusions with examples and evidence.

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Pros:

  • Increased economic growth. It has been estimated that NAFTA has increased the growth of the US economy by as much as 0.5% a year.
  • Increased foreign direct investment. Under NAFTA direct investment in the United States has increased by over 1200%; from Canada over 900%.
  • NAFTA has considerably lowered prices. The chief purpose of the agreement was to facilitate free trade between the United States, Canada, and Mexico by the removal of trade barriers and tariffs. Their removal has led to lower prices, especially in imports of Mexican oil. In turn, this had made the United States less reliant on imports of oil from the Middle East.

Cons:

  • Huge job losses. Large swathes of American manufacturing industry have been destroyed by NAFTA as many manufacturers to Mexico in order to take advantage of lower wages and conditions. A 2011 report from the Economic Policy Institute estimated that somewhere in the region of 700,000 American jobs had been lost under NAFTA. Other experts have concluded that the damage has been, if anything, even greater.
  • Increased illegal immigration. By allowing US government-subsidized farm produce to enter into Mexico, NAFTA has put many Mexican farmers out of business. (Something like 1.3 million of them according to the Economic Policy Institute.) In turn, this has led to many of them to cross the border illegally in search of work.
  • Suppressed wages. NAFTA has allowed American companies to use the threat of relocation to Mexico as a way of damping down the demand for higher wages. This has had the effect of discouraging American workers from joining labor unions to improve pay and conditions.
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