6 Problems With NAFTA

NAFTA's 6 Negative Effects

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Juliana Cruz Cruz, (front row left to right) Gracia Cruz Martinez and Ester Cruz Cruz dig and break apart clay that they use to make pottery and sell in the market on February 22, 2008 in Tlacolula. Photo: Dana Romanoff/Getty Images

Disadvantages of NAFTA

NAFTA has received a lot of criticism for taking U.S. jobs. While it has also done good things for the economy, the North American Free Trade Agreement has six weaknesses. These disadvantages had a negative impact on both American and Mexican workers and even the environment. Among the agreement’s critics is Donald Trump, who promised to renegotiate or withdraw from NAFTA

1. U.S. Jobs Were Lost

Since labor is cheaper in Mexico, many manufacturing industries withdrew part of their production from the high-cost United States.

Between 1994 and 2010, the U.S. trade deficits with Mexico totaled $97.2 billion. In the same period, 682,900 U.S. jobs went to Mexico. But 116,400 of those jobs were displaced after 2007. The 2008 financial crisis could have caused them instead of NAFTA.

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

2. U.S. Wages Were Suppressed

Not all companies in these industries moved to Mexico. Some used the threat of moving as leverage at union organizing drives, though. When it became a choice between joining the union or losing the factory, workers chose the plant. Without union support, the workers had little bargaining power.

That suppressed wage growth. Between 1993 and 1995, 50 percent of U.S. manufacturing companies in industries that were moving to Mexico used the threat of closing the factory. By 1999, that rate grew to 65 percent. (Source: Kate Bronfenbrenner, "Uneasy Terrain: The Impact of Capital Mobility on Workers, Wages, and Union Organizing," Cornell University, September 6, 2000.)

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 percent of net farm income. When NAFTA removed trade tariffs, companies exported corn and other grains to Mexico below cost. Rural Mexican farmers could not compete. At the same time, Mexico reduced its subsidies to farmers from 33.2 percent of total farm income in 1990 to 13.2 percent in 2001. Most of those subsidies went to Mexico's large farms. These changes meant many Mexican farmers were outcompeted by highly subsidized American farmers. (Sources: "Exposing the Myth of Free Trade," International Forum on Globalization, February 25, 2003. "Tariffs and Tortillas," The Economist, January 24, 2008.)

4. Maquiladora Workers Were Exploited

NAFTA expanded the maquiladora program by removing tariffs. Maquiladora is where United States-owned companies employ Mexican workers near the border. They cheaply assemble products for export back into the United States. The program grew to employ 30 percent of Mexico's labor force. The workers had "no labor rights or health protections," according to Continental Social Alliance. In addition, the "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." (Source: "Lessons of NAFTA," Worldpress.org, April 20, 2001.)

5. Mexico's Environment Deteriorated

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

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

Another agreement within NAFTA was never 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 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. U.S. truckers' organizations and companies opposed it because they 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 have allowed unlimited access for U.S. vehicles throughout Mexico. A similar arrangement works well between the other NAFTA partner, Canada. But U.S. trucks are larger and carry heavier loads. They violate size and weight restrictions imposed by the Mexican government. 

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