Regional Paper

Regional Paper

10/29/07

Regional Paper

When it was first being debated, NAFTA's effect on its member countries was anticipated to be enormous. Advocates said that it would create hundreds of thousands of jobs for the United States due to vastly increased exports to member countries. Opponents claimed that NAFTA would destroy jobs rather than create them, due to a massive influx of imports and an exodus of United States firms to Mexico to take advantage of lower wages. In actuality, although NAFTA has had undisputed effects on all member countries, these changes have come nowhere close to where it was predicted. (Griswold, 2002)

NAFTA has accomplished its main objective of more trade. Trade between the United States and Canada has increased to twice the rate as before NAFTA. Trade has grown three times as fast between the U.S and Mexico. The trade of services has not grown at such an exponential rate, but has contributed about two-thirds of the total increase between the United States and the rest of the world. (Garten, 2003) In fact, Canada and Mexico are now the United States’ number one and two trading partners, respectively. Japan follows in a distant third. (Griswold, 2002)

While NAFTA has had an amazing positive financial effect on Mexico and Canada, foreign policy was the primarily concern for the United States, rather than domestic economy. The largest benefit to the United States has been to help move Mexico away from centralized protectionism and towards democratic capitalism. Mexico has continued to make drastic changes in its political and economic policies. For the first time since the 1970s, Mexico avoided an economic crisis due to the election cycle and has successfully moved beyond the traditional boom-and-bust, high-inflation, and debt-ridden model that characterized it as well as much of South America until the debt crisis of the 1980s. In addition, freer trade has resulted in a freer political system. After NAFTA was passed, Vicente Fox became the first president belonging to a party other than the Institutional Revolutionary Party, which had been in power for 71 years. (Griswold, 2002)

NAFTA had and still has many opponents. Before the passage of the agreement, many claimed that NAFTA would be a bane to the United States economy, taking jobs to Mexico, where wages are traditionally lower. Ross Perot predicted that, "you're going to hear a giant sucking sound of jobs being pulled out of this country." (Griswold, 2002) However, the point of trade agreements is not about more jobs, but rather about better ones. While competition from Mexico may have moved some factories out of the United States, this increase in the efficient use of resources has helped American companies to become more competitive on a global scale, in addition to allowing them to expand higher paying, management and skilled positions here in the United States due to these increased efficiencies. (Griswold, 2002)

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