Is NAFTA as bad as Donald Trump says it is ?

The popular media in America, as well as the entire world, have been consistently projecting Donald Trump as a Joker. His comments were maligned and his opinions were dismissed as being crazy. However, despite the increasingly significant efforts to keep him away from the top spot, Donald Trump has emerged the winner in the Presidential polls. He apparently touched a cord or two with the voters, who despite great media propaganda voted him into power.

One of his main criticisms of the Clinton’s was the fact that they signed into existence the North American Free Trade Agreement (NAFTA). Trump has dubbed it as being the most horrendous deal ever. Trump believes that this deal has set back American taxpayers and workers by millions of dollars. Trump, who is a self-proclaimed world class deal-maker was dismissed as being outright ridiculous. However, was it is so? What caused Donald Trump to make such comments and is there an element of truth to them.

In this article, we will understand what North American Free Trade Agreement (NAFTA) is and why it is said to have had horrendous consequences on America.

What is NAFTA ?

The North American Free Trade Agreement (NAFTA) is an agreement made between America, Canada, and Mexico to increase free trade in the region. This meant that all countries would allow duty-free imports and exports of products from other participating countries. It was claimed that this would create thousands of jobs on both sides of the border. The rhetoric was pretty powerful. Bill Clinton had himself sponsored the bill and was able to gain bipartisan support from both the Republicans and the Democrats.

The Real Purpose of NAFTA

Donald Trump and many other critics of North American Free Trade Agreement (NAFTA) believe that its real purpose was never to create more jobs. Rather, it was a sinister bill created to benefit the multi-national corporations that have been benefactors of these politicians.

The idea was to create a framework wherein no single government can impose legislation on the corporations. For instance, America has been imposing increasingly strict labor laws to protect its workforce from unfair practices. However, since American Corporations can simply shift jobs to Mexico, the legislations become meaningless. If the rules are not for the corporations, they simply move their jobs overseas.

This is what has frequently been done by mega corporations like Ford Motors which manufactures a sizeable number of its vehicles in Mexico as well as Carrier air-conditioners who eliminated close to 2000 jobs as they moved production to Mexico.

North American Free Trade Agreement (NAFTA) has been under heavy attack from many critics. However, the lobbyists always blame the lack of talent and suitable human resource in the United States to justify the implementation of the NAFTA.

What are Negative Effects of NAFTA ?

  • Lost Jobs: The biggest adverse effect of NAFTA is that Americans have lost a lot of jobs. As Donald Trump reportedly stated in his Presidential debates, cities like Detroit have been ruined as production has been moved to Mexico. American corporations ship spare parts to Mexico to utilize their dirt cheap labor. Mexico is where the assembly happens, and the finished product is shipped back to the US. No duty is paid whenever the goods cross borders! American corporations have been pushed by competitive forces to ship jobs overseas to satiate the shareholder's demand for more and more profits.

  • Increased Trade Deficits: 15 years ago, America and Mexico enjoyed a balanced trade relationship. However, ever since NAFTA was passed the relationship has been heavily in favor of Mexico. It is exporting more and more and importing less and less, leaving the United States indebted. Trump wants to get rid of the NAFTA to rectify this situation.

  • Exploitation of Mexican Laborers: While Trump may have you believe that Mexicans are gaining at the expense of Americans in the NAFTA arrangement, the reality is very different. Mexicans are as annoyed with NAFTA if not more. This is because, after NAFTA, globalization has set in.

    The factories in Mexico are always under threat from low-cost locations such as China. Hence, they need to keep the labor cost abysmally low to stay in business. This has led to exploitation of Mexican workers who have to work in dangerous environments with very little pay.

The Argument for NAFTA

  • Competition: The argument cited for NAFTA is that low-cost production had become a reality. America had to wake up to it or go under. If American companies didn’t move production overseas, they would face competition from companies that did! Hence, the NAFTA agreement kept American companies in business and had managed to keep save jobs in the United States which would have been lost to foreign competition. The lobbyists claim that there is no use being protectionist in an increasingly globalized world.

  • Inflation: The lobbyists also argue that buying Mexican imports has allowed US corporations to keep prices low. In the absence of NAFTA, the increasing labor costs would have led to price rises which would have made life difficult for the Fed, which has to keep the interest rates close to zero for an extended period of time in order to recover from the crisis.

To sum it up, North American Free Trade Agreement (NAFTA) has been a huge failure. The supposed positives, if any, are too small to make up for all the negatives that this arrangement has created.

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