Disadvantages of NAFTA

6 Negative Effects of NAFTA

Mexican Farmer Driving a Tractor
NAFTA put many Mexican farmers out of business.. Randy Plett/The Image Bank/Getty Images

Disadvantages of NAFTA

NAFTA has six disadvantages. First and foremost, is that NAFTA made it possible for many U.S. manufacturers to move jobs to lower-cost Mexico. The manufacturers that remained reduced wages to compete in those industries.

The second disadvantage was that many of Mexico's farmers were put out of business by U.S.-subsidized farm products. NAFTA provisions for Mexican labor and environmental protection were not strong enough to prevent those workers from being exploited.

1. U.S. Jobs Were Lost

Since labor is cheaper in Mexico, many manufacturing industries moved part of their production from high-cost U.S. states. Between 1994 and 2010, the U.S. trade deficits with Mexico totaled $97.2 billion, displacing 682,900 U.S. jobs. However, 116,400 occurred after 2007, and could have been a result of the financial crisis.

Nearly 80% of the losses were in manufacturing. California, New York, Michigan and Texas were hit the hardest because they had high concentrations of the industries that moved plants to Mexico. These industries included motor vehicles, textiles, computers, and electrical appliances. (Source: Economic Policy Institute, "The High Cost of Free Trade," May 3, 2011)

2. U.S. Wages Were Suppressed

Not all companies in these industries moved to Mexico. The ones that used the threat of moving during union organizing drives. When it became a choice between joining the union or losing the factory, workers chose the factory.

Without union support, the workers had little bargaining power. That suppressed wage growth. Between 1993 and 1995, 50% of all companies in the industries that were moving to Mexico used the threat of closing the factory. By 1999, that rate had grown to 65%.

3. Mexico's Farmers Were Put Out of Business

Thanks to NAFTA, Mexico lost 1.3 million farm jobs.

The 2002 Farm Bill subsidized U.S. agribusiness by as much as 40% of net farm income. When NAFTA removed tariffs, corn and other grains were exported to Mexico below cost. Rural Mexican farmers could not compete. At the same time, Mexico reduced its subsidies to farmers from 33.2% of total farm income in 1990 to 13.2% in 2001. Most of those subsidies went to Mexico's large farms. (Source: International Forum on Globalization, Exposing the Myth of Free Trade, February 25, 2003. The Economist, Tariffs and Tortillas, January 24, 2008)

4. Maquiladora Workers Were Exploited

NAFTA expanded the maquiladora program, in which U.S.-owned companies employed Mexican workers near the border to cheaply assemble products for export to the U.S. This grew to 30% of Mexico's labor force. These workers have "no labor rights or health protections, workdays stretch out 12 hours or more, and if you are a woman, you could be forced to take a pregnancy test when applying for a job," according to Continental Social Alliance.

(Source: Worldpress.org, Lessons of NAFTA, April 20, 2001)

5. Mexico's Environment Deteriorated

In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers expanded into more marginal land, resulting in deforestation at a rate of 630,000 hectares per year. (Source: Carnegie Endowment, NAFTA's Promise and Reality, 2004)

6. NAFTA Called for Free U.S. Access for Mexican Trucks

Another agreement within NAFTA has not been implemented. NAFTA would have allowed trucks from Mexico to travel within the United States beyond the current 20-mile commercial zone limit. A demonstration project by the Department of Transportation (DoT) was set up to review the practicality of this. In 2008, the House of Representatives terminated this project. It prohibited the DoT from implementing it without Congressional approval.

Congress worried that Mexican trucks would have presented a road hazard. They are not subject to the same safety standards as U.S. trucks. It was opposed by the U.S. truckers' organizations and companies, who would have lost business. Currently, Mexican trucks must stop at the 20-mile limit and have their goods transferred to U.S. trucks.

There was also a question of reciprocity. The NAFTA agreement would also have allowed unlimited access for U.S. trucks throughout Mexico. A similar agreement works well between the other NAFTA partner, Canada. However, U.S. trucks are larger and carry heavier loads. That violates size and weight restrictions imposed by the Mexican government. 

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