Facts About NAFTA: Statistics and Accomplishments

Fast Facts About the World's Largest Trade Agreement

The North American Free Trade Agreement was created 20 years ago to expand trade between the United States, Canada and Mexico. Its secondary purpose was to make these countries more competitive in the global marketplace. It has been wildly successful in achieving this. NAFTA is now the largest free trade agreement in the world. 

Why, then, is NAFTA so severely criticized? This success has come at a cost. One of the problems with NAFTA is that it's reduced U.S. jobs. A second disadvantage is that it has exploited Mexico's farmers and its environment. Find out more about the how and why was NAFTA created, and whether it has successfully fulfilled its purpose. 

What Happens If Trump Dumps NAFTA?

Donald Trump near Mexico
Donald Trump listens as Laredo City Manager Jesus Olivares, center, and Laredo mayor, Pete Saenz, right, talks to the media along the U.S. Mexico border during his trip to the border on July 23, 2015 in Laredo, Texas. Photo by Matthew Busch/Getty Images

President Donald Trump signed an executive order on January 23, 2017, to renegotiate NAFTA. He would require Mexico to end its value-added tax (VAT) on U.S. companies. He claims it acts as a tariff on U.S. exports to Mexico. Trump would ask Mexico to end the Maquiladora program. The program undercut American workers by sending jobs to Mexico.

If Mexico doesn't agree, Trump threatened to withdraw from NAFTA. He would impose a 35 percent tariff on Mexican imports.  More

History and Purpose of NAFTA

NAFTA's goal was to improve trade and compete with the European Union. Photo: Chris Hondros/Getty Images

It took three U.S. Presidents more than a decade to get NAFTA off the ground. President Ronald Reagan conceived of a North American trade agreement to compete with the Treaty of Rome, later to become the European Union. In fact, NAFTA and the EU's Treaty of Maastricht were both signed in 1993.  More

NAFTA Pros and Cons

NAFTA remains very controversial. Photo: Getty Images

NAFTA is highly controversial. American workers that lost jobs protest outsourcing to Mexico, and that makes sense. On the other hand, everyone benefits from lower-cost gas and food prices. They probably have no idea it's because of NAFTA. To answer the question "Do the pros outweigh the cons?" depends on who you are and how you've been affected. More

Advantages of NAFTA

Oil Refinery
NAFTA gained cheap access to Mexico's and Canada's oil. Photo: Roger Tully/Getty Images

By easing trade between 450 million people in three countries, NAFTA more than quadrupled trade in 20 years. This boosted economic growth in all three countries. It also led to lower-priced groceries and oil in the United States. Here's the latest trade figures. More

Disadvantages of NAFTA

Growth comes with costs, and NAFTA was no exception.  NAFTA is criticized for destroying half a million American jobs and lowering U.S. wages. In addition, NAFTA increased the U.S. trade deficit.

How did NAFTA contribute to these problems? First, NAFTA cost jobs when manufacturers moved to Mexico to take advantage of lower labor costs. The four states that suffered the most were California, New York, Michigan and Texas. They had had a high concentration of motor vehicles, textiles, computers, and electrical appliances industries. Those were the industries most likely to move to Mexico.

Lower wages in Mexico reduced U.S. wages and benefits. That's because workers in the remaining U.S. factories could not bargain for higher wages. Companies could now threaten to move to Mexico if labor unions negotiated too hard.

Others accuse NAFTA of exploiting Mexico's workers, destroying its farms, and polluting its environment. Rural Mexican farmers could not compete with U.S. low-cost corn and other grain exports. That's because the federal government subsidized U.S. farm corporations. NAFTA put more than a million Mexican farmers out of business. The ones that remained were forced to use more fertilizers and farm marginal land to survive. That created more pollution and deforestation.

Labor was cheap in Mexico because they had no labor rights or health protection. Thanks to NAFTA, nearly a third of Mexico's labor force were in this "maquiladora" program.

One NAFTA disadvantage was prevented. NAFTA called for unlimited transportation between the three member countries. This would have created a dangerous situation, since Mexican trucks were not up to U.S. safety standards, and Mexican roads could not have carried the heavier U.S. trucks. This problem was averted in 2008, when Congress prohibited this portion of NAFTA from ever being carried out. More

U.S. Regional Trade Agreements

Food prices are not included in the core inflation rate. Next time you go to the store, notice how much of your produce comes from Chile. Photo: Monashee Frantz/Getty Images

Whenever other regional trade agreements are being proposed or negotiated, the facts about NAFTA are brought up over and over again. Here's how NAFTA fits within the context of other U.S. regional trade agreements, such as CAFTA, FTAA, and MEFTI. More

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