Impact of NAFTA on Jobs in the U.S. The Impact of NAFTA on Jobs in the United States

This paper will discuss the possible impact of the North American Free Trade Agreement upon employment in the United States. The paper will examine the effect of NAFTA on the number of jobs in the U.S., particularly looking at the charges that it will result in a transfer of jobs from the U.S. to Mexico. According to most independent studies, NAFTA will not result in a large exodus of jobs from the U.S., but will probably result in an increase.

The North American Free Trade Agreement (NAFTA) is designed to create an open and common trading zone between the United States, Mexico, and Canada. The United States and Canada already have such a zone under the U.S.-Canada Free Trade Agreement (CFTA), which went into effect in 1989. Under NAFTA, all three countries will have to phase out tariffs and other trade barriers over a period of fifteen years. 99% of these tariffs will be eased out during the first ten years, while tariffs on politically sensitive products will be eliminated by the end of the fifteen year period. Almost all import quotas and licensing requirements will be eliminated and all three countries will be forced to give equal treatment to each other's agricultural products when establishing marketing orders. Consequently, U.S. restrictions on apparel and Mexican limits on imported cars and trucks will fall, while bilateral free trade will be created in most farm products (Morici, 1993, p. 50).

The biggest controversy concerning NAFTA is over its effect on

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TA, said that while short term gains in jobs should be realized, these gains may evaporate after twenty years; they also admitted that such very long term projections are unreliable (Bradsher, 1993, February 22, p. D1). The expectations of both the Bush and Clinton administrations concerning NAFTA are based upon the expected expansion of exports to Mexico. Prior to the election of President Carlos Salinas de Gortari in 1988, Mexico had maintained very high tariffs and other import restrictions in order to protect Mexican-owned industry. President Salinas realized that U.S. investment was needed to remedy the ailing Mexican economy, so he began the reduction of import barriers and looked to U.S. investors for capital (Elliott, 1993, November 15, pp. 29-30). As a result, U.S. exports into Mexico dramatically rose during the late 1980s and early 1990s (Darling, 1993, November 11, p. A1; Lazzareschi & Lee, 1993, November 11, p. D1). The rising U.S. trade surplus with Mexico even has some Mexicans worried that NAFTA will only lead to a drastic decrease in Mexican jobs. These individuals say that Mexican operations cannot compete with U.S. operations in terms of productivity; thus, manufacturing will actually be reduced in Mexico

Category: Economics - I