History and Debate of NAFTA
The North American Free Trade Agreement (NAFTA), a trade agreement between the governments of the United States, Canada and Mexico, took effect on January 1, 1994. The objective of NAFTA was to essentially create a free trade zone in North America by eliminating barriers to investment and trade among the three signatory nations. As soon as NAFTA took effect, the tariffs on a majority of the goods produced by the three nations were eliminated. For instance, tariffs on more than one-third of the goods exported by the United States to Mexico and on more than one-half of the goods exported by Mexico to the United States were eliminated. Furthermore, the majority of the remaining barriers to the movement of services and goods and to cross-border investment among the United States, Canada and Mexico were eliminated gradually over a period of 15 years.
NAFTA Debate Controversy
From its inception, NAFTA was controversial. When the three signatory nations entered into NAFTA, however, they believed that the ostensible benefits of NAFTA would outweigh any downsides. Whether this has, in fact, been the case remains a matter of some debate.
One of the areas of controversy arising from NAFTA is the effect that NAFTA has had on employment in the United States. Pointing to the increase in United States employment from 110.8 million people to 137.6 million people over the period from 1993-2007, proponents of NAFTA assert that NAFTA has resulted in an increase in the number of jobs in the United States. Opponents of NAFTA, on the other hand, contend that NAFTA has actually weakened the United States job market in part due to the United States' increasing trade deficits with Canada and Mexico. Adherents of this position argue that this growing trade deficit has caused the dislocation of domestic production within the United States labor market to other nations with cheaper labor resulting in a loss of 879,280 jobs in the United States.
Opponents of NAFTA also contend that regardless of the total number of jobs that may have been created due to NAFTA, the quality of jobs available in the United States has been negatively impacted by the trade agreement. They assert that approximately 78% of the net job losses since the implementation of NAFTA have been in relatively high-paying manufacturing jobs. Opponents also argue that the ability of firms to more easily relocate from the United States to a nation, such as Mexico, that offers cheaper labor and less resistance from workers with respect to employment conditions and benefits, has ultimately resulted in American workers settling for lower pay and fewer benefits just in order to keep their jobs.
The NAFTA debate also continues to rage about what effect, if any, NAFTA may have on the environment in the United States. Although NAFTA proponents contend that it includes requirements that will prevent any erosion in environmental protection, many environmentalists worry that NAFTA will ultimately result in the weakening or repeal of environmental protection laws because they will be seen as trade barriers between the three signatory nations. Regardless of their points of contention, both proponents and opponents of NAFTA agree that it is unique because it is the first regional trade agreement between two developed nations and a developing nation. They also generally agree that NAFTA's full impact has not yet been determined.