The Effects That NAFTA Has Had On North American Economy (Essay Example)

📌Category: Americas, Economics, World
📌Words: 838
📌Pages: 4
📌Published: 19 February 2022

Since january 1, 1994, NAFTA has been in effect which eliminates tariffs on goods imported from the United States and Mexico. NAFTA has changed the North American economy for the better. NAFTA has opened up many job opportunities, made prices cheaper and even increased the share price of FDI stocks.  

NAFTA was built and based off of  the success of the CUSFTA (Canada U.S. free trade agreement) that started in 1989 NAFTA and created millions of job opportunities all over North America1. It is also the world's largest FTA (free trade agreement) which has also boosted the economy in all three of the countries involved in the agreement. The purpose of NAFTA was to eliminate tariffs (the tax on imported goods) on traded goods and to encourage economic activity between Canada, Mexico  and the United States.2 Resources traded from Canada and the United States became duty free on January 1, 19983. Highly valued commodities such as crude oil, machinery, gold, vehicles, fresh produce, livestock, and processed foods.4 As a result, the NAFTA agreement opened up around 14 million jobs in the United states alone. By 1995, NAFTA had opened up over 200,000 jobs in the United States. Since NAFTA’s enactment, the United States’ working force has been increased by well over 14 million jobs.5  NAFTA has also helped boost the United States economic growth. It has increased their economy by as much as 0.5% annually.6 In Canada, 1.9  million jobs were supplied to the working force. 7 There have also been some extremely positive changes that include even a substantial decrease in grocery prices. Since tariffs were eliminated, all of the countries involved in the agreement do not have to worry about paying that money back. As a result, the price of groceries has seen a significant decrease compared to what they were valued at prior to the agreement. Canada has also seen strong border gains from cross border investments. Canada's FDI (Foregin Direct Investment) has increased substantially. It has gone from 70 billion Canadian Dollars in 1993 all the way to 368 billion in 2013.8 Also in Canada, a much larger variety of foods were being imported as a result of the agreement. Some foods cannot grow in Canada. This is due in part to the harsher climate during the winter. In essence, the cold weather combined with heavy precipitation prevents the growth of tropical crops. For example, the weather in Canada would likely kill the plants that grow these fruits. For example in Mexico, it is warm enough to grow bananas, avocados, and even melons.9 If farmers tried to grow these precious commodities in Canada, their attempts would be largely unsuccessful because it is simply too cold for them to grow unless they are grown indoors. For example, an avocado tree will not survive if the temperature is sub-zero degrees Celsius.10 Seeing as an avocado usually takes around 12-18 months to grow and to be ripe to eat11 (requiring that the avocado must be grown in the winter months). This would mean that the avocado cannot grow outside because the winters in Canada are simply too cold for them to grow. But, if the avocado grows in Mexico, it is warm enough for it to grow outside and they can grow outside all year round. The average temperature in Mexico is between 50OF and 90OF. 12   In Mexico, there has been an increase in farm exports. Another major benefit of NAFTA was that gas prices were much lower than they would have been if there were still tariffs. They can now be lower because we do not need to make up for enough money to pay off the existing tariffs as well as pay for the cost of having actual gas imported from other countries.  As a whole, Mexico has also reaped the benefits of this agreement by becoming more productive as an economic power, but has also seen lower gas prices. Mexico's Foregin Direct Investment has also dramatically increased. This has gone from 15 billion Mexican Pesos all the way to 107.8 billion in 2014. 13  NAFTA has opened up hundreds of thousands of auto manufacturing career opportunities.  NAFTA remained in effect until it became USMCA (United States Mexico Canada Agreement) in 2020.  

NAFTA has provided many benefits for all three countries involved in it. It has opened up new job opportunities, more food variety, strong gains in cross border investment and lower priced items. 

Work cited 

1 "North American Free Trade Agreement (NAFTA) - Resources". GAC, 2021, https://www.international.gc.ca/trade-commerce/consultations/nafta-alena/toolkit-outils.aspx?lang=eng.

2  "Suggested Search - North American Free Trade Agreement (NAFTA)". Federal Register, 2021, https://www.federalregister.gov/north-american-free-trade-agreement-nafta-#:~:text=The%20agreement%20came%20into%20force,United%20States%2C%20Canada%20and%20Mexico. 

3  "North American Free Trade Agreement (NAFTA) - Resources". GAC, 2021, https://www.international.gc.ca/trade-commerce/consultations/nafta-alena/toolkit-outils.aspx?lang=eng. 

4 "North American Free Trade Agreement (NAFTA)". Investopedia, 2021, https://www.investopedia.com/terms/n/nafta.asp. 

5  "NAFTA’S Impact On The U.S. Economy: What Are The Facts? - Knowledge@Wharton". Knowledge@Wharton, 2021, https://knowledge.wharton.upenn.edu/article/naftas-impact-u-s-economy-facts/. 

6    "6 Hidden Benefits Of NAFTA". The Balance, 2021, https://www.thebalance.com/advantages-of-nafta-3306271. 

7 "North American Free Trade Agreement (NAFTA) - Resources". GAC, 2021, https://www.international.gc.ca/trade-commerce/consultations/nafta-alena/toolkit-outils.aspx?lang=eng. 

8  "NAFTA And The USMCA: Weighing The Impact Of North American Trade". Council On Foreign Relations, 2021, https://www.cfr.org/backgrounder/naftas-economic-impact. 

9  2021, https://www.ers.usda.gov/webdocs/outlooks/40425/15579_wrs0406f_1_.pdf?v=3215. 

10 stancliffe, george. "THE B.C. AVOCADO PROJECT". Medium, 2021, https://georgestancliffe.medium.com/the-b-c-avocado-project-670ed22a74d7#:~:text=There%20are%20no%20Avocado%20trees,t%20survive%20below%2Dfreezing%20weather. 

11 "California Avocado Trees, Avocado Flowers In Bloom | California Avocados". California Avocados, 2021, https://californiaavocado.com/seasonal-updates/californias-avocado-flowers-in-bloom/. 

12   "Climate In Mexico". Live And Invest Overseas, 2021, https://www.liveandinvestoverseas.com/country-hub/mexico/climate-in-mexico/. 

13  "NAFTA And The USMCA: Weighing The Impact Of North American Trade". Council On Foreign Relations, 2021, https://www.cfr.org/backgrounder/naftas-economic-impact.

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