Katy Haas
Coordinator, Alianzas
www.alianzas.us
Index
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•
•
•
•
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Why Enter a Free Trade Agreement?
What is NAFTA?
Background of NAFTA
Reaction after Implementation
The Mexican Peso Crisis
What about America’s Farmers?
• Impact on:
– Employment
– Immigration
– Environment
•
•
•
•
Trucking industry
Missouri’s role
NAFTA’s future
Conclusion
“Mexico is the most
important country to the
United States in the 21st
century”
--President George W. Bush
Sept. 5, 2001
Mexico production
(in tons)
Why Enter a Free Trade
Agreement?
9
6
Corn
Sugar
3
0
3
5
7
9
United States production
(in tons)
Levels of Economic Integration
Type of Bloc
Free-trade
area
Customs
union
Common
market
Economic
union
Free Trade
among the
Members
Common
External
Tariffs
Free Movement of Factors
of Production (Example:
free labor movement
between countries)
Harmonization* of All
Economic Policies - Fiscal,
Monetary, etc. (Example:
common currency)










*If the policies are not just harmonized by separate governments, but have a
unified government with binding commitments on all members, then you reach
political integration and have “full economic integration”.
What is NAFTA?
Effective as of January 1, 1994
A trade agreement between
CANADA, MEXICO, and the
UNITED STATES which
provides for the elimination of
tariffs on North American goods
shipped among the three
countries.
Background of NAFTA
An Introduction
Salinas
Clinton
Zedillo
Marcos
Expectations and Goals
MEXICO: Lower inflation and foreign debt; create more wellpaying jobs for Mexicans, thus producing less incentive for
Mexicans to work illegally in the U.S.; Mexico would become
a richer market for American exporters.
UNITED STATES: Would solidify an expanding trade
relationship, which would spur job creation at home and help to
continue the revolutionary shift throughout Latin America away
from state controlled markets toward freer markets.
Would exert presidential authority, improve inter-American
relations and advance the cause of global trade liberalization.
Reaction After Implementation
How the Countries
Were Affected
Immediately
How They Are
Affected Now
Top U.S.
and
1. Motor Vehicles
2. Oil/Natural Gas
3. Motor Vehicle Parts
4. Semiconductors
5. Electronic Parts
1. Aircraft
2. Electronic Computing Equipment
3. Motor Vehicle Parts
4. Motor Vehicles
5. Semiconductors
6. Aircraft/Space/Missile Parts
7. Chemicals
8. Plastics
9. Airplane Engines/Parts
10. Refined Petroleum Products
NAFTA Pros
+ Goods/Services at lower cost
+ Most underdeveloped countries gain the
most (i.e. standards of trade increased)
+ Tariffs reduced
+ Jobs created
+ Mexico’s economy is growing again
NAFTA Cons
– Fuel for peso crisis
– Benefits Mexico more than the U.S.
– U.S. deficit with trading partners
– Loss of low-wage American jobs to Mexico
– Environmental problems
– Traffic congestion and delays along the
borders
The Mexican Peso Crisis
Was NAFTA to Blame?
Wages in United States and Mexico
What about America’s
Farmers?
BENEFITS: More export opportunities. Since
NAFTA was approved in 1993, U.S. agricultural
exports to Mexico have nearly doubled.
DISADVANTAGES: Face regulations that
increase the costs of production while foreign
competitors gain from cheap production and
labor.
Impact on:
Employment
• Was U.S. workers’ loss Mexican workers’
gain?
• Maquiladora - Primarily foreign-owned
assembly plants
• Jobs lost to Mexico vs. Jobs supported by
exports to Mexico and Canada
Impact on:
Immigration
• In the 1990s, U.S. population grew 13.2%,
with 60% growth of Mexican immigrants.
• Among Latinos nationwide, 26% are between
the ages of 25-40.
• Remittances from Mexicans working in the
U.S.: $6.65 billion (for 2001 through 3rd
quarter)
• Increase in Mexican migrants led to increase
in Border Patrol staff
Impact on:
Environment
NAFTA Environmental Agreements:
North American Agreement on Environmental
Cooperation (NAAEC) - commission to enforce
environmental law.
Border Environment Cooperation Commission
and the North American Development Bank commission to address pollution problems along
the U.S.-Mexican border
Trucking Industry
The areas of concern
include: vehicle safety,
driver training,
environmental issues and
possible illegal drug
trafficking.
A recent investigation determined that the average 18-wheeler in
Mexico is 40% overloaded, carrying a gross vehicle weight of
more than 120,000 pounds. If U.S. truckers operated at a
similar overcapacity, interstate highways would have a life span
of 14 years, as opposed to their 40-year design life.
Missouri’s Role
Millions of
Dollars
Missouri's Exports Under NAFTA
3500
3000
2500
2000
1500
1000
500
0
1993 1994 1995 1996 1997 1998 1999
Mexico
Canada
Missouri’s Role (continued)
Between 1994 and 1999, Missouri exports to NAFTA
partners increased 63.4%.
Canada and Mexico are Missouri’s first- and secondlargest export markets, respectively, accounting for
50.5% of Missouri’s total exports 1999.
Mid-Continent
International
Trade Corridor
1. A trade pattern
2. A system of connecting
highways and rail
routes
3. An opportunity to
strengthen economic
development in a
region
Missouri and Employment
Percent
Unemployment Rate in Missouri,
1993-1999
8
7
6
5
4
3
2
1
0
6.5
4.9
4.8
4.6
4.2
4.2
3.4
1993 1994 1995 1996 1997 1998 1999
The Missouri-Mexico
Partnership
• The Missouri Department of Economic
Development moved its hub to Monterrey
• Branch office in Guadalajara
• For the past 12 years, the Missouri
Department of Agriculture’s headquarters
has been in Guadalajara
NAFTA’s Future
Where is it going and what effects will it have?
U.S.-Central American Free
Trade Agreement
Free Trade Area of the Americas
(FTAA)
Conclusion
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