The North American Free Trade Agreement (NAFTA) among the United States, Canada and Mexico was passed by Congress amid much controversy. Opponents of the agreement felt that it would take jobs away from Americans and move them to Mexico, where labor rates are far less. Proponents of the measure felt that it would create jobs and be good for the American economy because it would make it easier for American goods to be exported to Canada and Mexico. This research examines the preliminary results of NAFTA by examining the negative and positive effects it has had on two of the three participants, the United States and Mexico.
NAFTA is expected to lead to greater trade between the United States and Mexico in part through the removal of trade barriers. Mexico lifted many of its barriers, including significantly reducing its tariff rates, during the 1980s, but NAFTA is expected to remove remaining barriers. The removal and reduction of tariffs makes American products more competitive in Mexico due to lower prices, which results in greater market opportunities for American companies.
In addition to the reduction of tariffs, NAFTA is also designed to enhance trade among its participants by facilitating transportation of participating countries' goods within other countries. In this way, American goods should be able to move easily through Mexico and Canada, as Mexican goods should flow without difficulty within the United States. This is expected to benefit a wide variety of industries, including the American mining industry. American mining companies are expected to take on the financial risk of operating in Mexico since they will be able to transport their goods across the border more easily and at less expense than they could prior to NAFTA's implementation.
One of the major American companies to benefit from NAFTA is Caterpillar, which saw its exports to Mexico increase 77 percent in the first six months of 1994 when comp...