NAFTA
Have you ever thought about making money? I have a friend who, when she was 7,
wanted to start a lemonade stand. Her mom wanted to teach her the value of a dollar and
told her that to sell lemonade she would have to buy the lemons and pay for the sugar.
Well, soon my friend figured out that if she sold water and the wild onions from her yard
instead, she wouldn't have to pay her mom for the supplies. This way, any money she
made from her sales was strictly profit. That's pretty good business sense even for a 7
year-old. Determining where you'll get your goods and services, how you'll pay for labor,
and to whom you'll sell your product may be simple when you're just talking about a
lemonade stand. But nowadays, American companies cross borders, sail over seas and
mix in politics to help create what is now called "a global economy."
There are many ways in which countries do business with one another. Using taxes on
imported goods and services (called tariffs), governments and large corporations impact
their economies, employ their citizens and establish partnerships with other countries. In
1994, the Unites States, Mexico and Canada enacted the North American Free Trade
Agreement (NAFTA), one such "partnership" that opened up trade between these three
countries. With NAFTA, the tariffs (and other trade barriers) have gradually been taken
away since 1994. It sounds simple, but the effects on employment, culture, the
environment and the future of the global economy are vast. And whether you believe in
NAFTA or are opposed to it, the idea of free trade seems like it is here to stay.
NAFTA opponents - including labor, environmental, consumer and religious groups argued that NAFTA would launch a race-to-the-bottom in wages, destroy hundreds of
thousands of good U.S. jobs, undermine democratic control of domestic policy-making
and threaten health, environmental and food safety standards.
NAFTA promoters - including many of the world’s largest corporations - promised it
would create hundreds of thousands of new high-wage U.S. jobs, raise living standards in
the U.S., Mexico and Canada, improve environmental conditions and transform Mexico
from a poor developing country into a booming new market for U.S. exports.
Trade relations in North America were happening long before NAFTA. In the 1970s,
Mexico opened up its trade with the United States, which made it easier for foreign
investors to come into the country and use workers, who cost less than those in the U.S.
Foreign businessmen also took advantage of the environmental laws of Mexico, that are
less strict than those in America. These advantages enable the global economy to take
shape. By taking its factory to Mexico, an American company pays lower wages because
the minimum wage in Mexico is lower than in the U.S. They can then offer lower prices
to us, the consumers. Because Americans want the best quality products for the cheapest
prices, we benefit from the cheaper labor of these set-ups.
But all is not as good as it may sound with this scenario. Both Mexico and the U.S. felt
some negative effects of these early free trade agreements. Workers in the U.S. lost their
jobs as factories began moving south. Big American corporations were buying out the
businesses that were once Mexican-owned because they could no longer compete.
Mexican workers were forced to move north to the border where they could find work.
As a result, many Mexican citizens have grown poorer and poorer (having to accept
lower wages), while American corporations continue to grow richer and more powerful.
NAFTA seems to be encouraging these trends. This has been especially true for the
companies that make clothes. Businesses like Sun Apparel (who makes the Polo brand)
headed to Mexico and shut down factories in El Paso, Texas. Not only does such an
action mean that many Americans lose their jobs, but working conditions sometimes also
get worse. The companies that have gone to Mexico do not always have policies that
require humane factory environments or fair wages. According to an expert on these
work sites, most do have safety equipment for their workers and, while the pay rate is
lower than here in America, most meet the wage standards set by the Mexican
government. But the fact still remains that there are many companies who do not abide by
the regulations. As a result, workers suffer while the leaders of these big companies get
rich.
Be able to answer the following questions:
1.
What does NAFTA stand for? __________________________________________
2.
What three countries formed NAFTA? ___________________________________
3.
What is another name for one of the trade barriers that were taken away? ________
4.
When did Mexico initially open up trade with the U.S.? ______________
5.
Why did American business take their factories to Mexico? __________________
____________________________________________________________________
6.
What happened to U.S. workers after U.S. businesses were taken to Mexico?
__________________________________________________________________
7.
How did moving factories to Mexico affect us, the consumer? ________________
___________________________________________________________________
8.
What is one argument opponents have had against NAFTA? _________________
___________________________________________________________________
9.
NAFTA promoters include many of the world’s largest ______________________.
10. T
or
F
Companies that have gone to Mexico always have policies to pay fair
wages.