How NAFTA Benefited Mexico - Essay Sample

Introduction

North American Free Trade Agreement often abbreviated as (NAFTA) is a trade agreement that was signed between Mexico, the United States and Canada. It was signed to foster trade between the three countries and improve their diplomatic relations between them. At the time the agreement was signed, Mexico was an emerging economy while Canada and the United States were already significant economies. The two had previously signed a bilateral trade agreement, which Mexico later joined in 1994 (Salvatore, 2007). NAFTA had more benefits in the life of Mexicans than it had in the United States and Canada. The deal improved the living standards of Mexicans while lowering those of the middle-class Americans.

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NAFTA provided many job opportunities for Mexicans. This came as a result of the industrialization of Mexico after the removal of trade barriers and increased foreign direct investment. Foreign investors from USA and Canada flooded Mexico and invested in new industries while at the same time upgrading the old pre-existing ones. These industries were mainly manufacturing dealing with textiles, agricultural products, and automobiles (Prina, 2013). The industries required human labor and not necessarily trained. This was an open opportunity for the low and middle-class Mexicans to work for the industries which in turn offered them a salary. Movement of industries from the united states, on the other hand, had a negative impact on the country's middle-class citizens. Emergence and implementation of the NAFTA agreement reportedly rendered more than 700,000 Americans jobless (Prina, 2013). These were mostly the unschooled Americans who worked as manual laborers in the manufacturing industries. The Americans who remained employed were poorly paid due to the emergence job competition which denied them bargaining rights. Employees were easily replaced if they showed signs of incompetence or if they questioned the management. The Americans had to persevere poor working conditions and poor pay which in turn lowered their living standards.

The maquiladora program ensured that no Mexicans were left without jobs. Those who lost their jobs due to the competition of subsidized goods from the united states were mainly farmers. These farmers were provided with labor as service providers in the industries near the border (Prina, 2013). Although these employees were poorly paid, the system ensured that they remained with at least a means of earning income. This meant that even the low-income earners in Mexico were not living as poorly as the unemployed in the United States.

Poverty was realty reduced after the implementation of the NAFTA. Mexicans were able to trade freely with the other two countries involved in the agreement. Although Mexico faced many problems in the attempt to alleviate poverty, they managed to bring down the poverty level through improved education, healthcare and increased job opportunities which enabled many families to meet their basic needs (Waldkirch, 2010). With eliminated poverty, Mexicans were able to improve their living standards. On the other hand, most middle-class Americans who were jobless could not meet their educational, medical and other family needs and therefore they lowered their living standards.

Industrialization of Mexico and de-industrialization of the United States meant a transfer of knowledge and skills to the Mexicans. They learned business techniques including manufacturing using technological discoveries and other uses of technology. These skills helped young entrepreneurs grow their industries to compete with the American businesses (Waldkirch, 2010). The improvement in return helped them raise the living standards to match and sometimes surpass the Americans.

Another way in which NAFTA improved the lives of the Mexicans came as a result of improved infrastructure. The improvement was due to the industrialization of Mexico whereby, the means of transport communication and other infrastructural facilities had to be upgraded to ensure a smooth running of businesses. Improved infrastructure ensured timely arrival of raw materials and delivery of finished products. It also provided clear communication with potential customers regarding product specifications, delivery, payments among other issues (Salvatore, 2007). Besides serving the intended businesses, the improved infrastructure improved the standards of living of the people of Mexico. The shift of business from the United States left their base underdeveloped and therefore hardening their living standards.

Conclusion

Finally, industrialization led to the availability of goods and services to the people of Mexico. In most cases, they received first-hand products and did not have to pay the import taxes as the products were readily produced in their own country. The Mexicans got first-hand quality products before they can be exported for sale in other countries (Waldkirch, 2010). On the contrary, Americans do not receive as quality products as Mexicans do, and they pay for the products at a higher price than Mexicans do. This means that Mexicans' lives are improved while those Americans are deteriorated.

Although NAFTA has had its drawbacks on Mexicans such as increased immigration to other countries and alleged loss of jobs for farmers, it has had is significant benefits on the people especially regarding their living standards. The improved living standards are noted in the Gross Domestic Product per person in the years that NAFTA has been in operation (Prina, 2013). The Free Trade Agreement has also raised concerns among the Americans with claims that it has lowered their living standards. These claims have raised concerns especially with the current president who has severally claimed to withdraw the USA from NAFTA.

References

Prina, S. (2013). Who Benefited More from the North American Free Trade Agreement: Small or Large Farmers? Evidence from Mexico. Review of Development Economics, 17(3), 594-608. doi:10.1111/rode.12053

Salvatore, D. (2007). Economic Effects of NAFTA on Mexico. Global Economy Journal, 7(1). doi:10.2202/1524-5861.1244

Waldkirch, A. (2010). The Effects of Foreign Direct Investment in Mexico since NAFTA. World Economy, 33(5), 710-745. doi:10.1111/j.1467-9701.2009. 01244.