NAFTA
shutterstock 222561730

Law and Politics

NAFTA

The North American Free Trade Agreement

WHAT IT IS

  • NAFTA (the North American Free Trade Agreement) created a trilateral trade bloc between the United States, Mexico, and Canada.1

  • President Trump believes NAFTA is hurting the U.S. economy2 and workers and has started renegotiations with Canada and Mexico.20

  • It remains unclear if NAFTA will survive.

97fc7bd9 1121 4f2c b8e2 a58ddef82509
  • NAFTA was signed into law under the Clinton administration in January 1994.3

  • It linked over 450 million people through trade opportunities. 

NAFTA ensured:5

  • Free trade

  • No tariffs

  • Protection of intellectual property rights

  • Tougher health, safety, and industrial standards

WHY IT MATTERS

 

Trade deals often benefit large corporations, not individuals.6 Some believe the statistics show that trade is positive on a larger scale, but that you need to dig deeper to see the impact on communities that depend upon blue collar jobs.7

PRO NAFTA

More exports, more money

Since NAFTA was signed in 1994, U.S. trade has more than tripled with its North American neighbors. Canada and Mexico are the two largest importers of U.S. products.8 

 

No other two countries conduct as much trade as the U.S. and Mexico, who completed $480 billion last year.9 This all could change if NAFTA ends.

 

 

More jobs

NAFTA increased U.S. gross domestic product (GDP) by adding up to $80 billion to the economy. Some economists estimate that nearly 14 million jobs rely on NAFTA-created trade agreements.10

 

 

Lower prices

With no tariffs on goods, Americans were able to purchase items at a lower price. For example, gas prices were lower for Americans since it was less expensive to purchase oil from Mexico.

ANTI NAFTA

Not buying American 

There was an imbalance between the countries. Americans bought $55.6 billion more goods and services from Mexico than Mexico bought from the U.S.11

 

 

Fewer jobs

Some argue that NAFTA led to a loss of manufacturing jobs across the U.S. According to the Council on Foreign Relations (CFR), the U.S. automotive sector lost roughly 350,000 jobs between 1994 and 2016. Many of those jobs were taken by workers in Mexico, where the auto sector added over 400,000 jobs in the same period.12

 

 

More competition

Some see NAFTA as the reason some companies exported jobs, which put non-college educated workers in direct competition with lower-paid workers from other countries, such as Mexico.13

WHERE WE ARE NOW

 

June 2018: President Trump imposed tariffs on the European Union, Japan, Canada, and Mexico. This violated the NAFTA agreement.14

  • President Trump created a 25% steel tariff and 10% aluminum tariff on those countries. 
  • Mexico retaliated by imposing $3 billion worth of tariffs on American pork, steel, cheese, and other goods.15
  • Canadian Prime Minister (PM) Justin Trudeau stated he would retaliate by placing Canadian tariffs on American-made goods, and has recently rejected revised NAFTA terms from the Trump administration.
  • Steelworkers are pleading with President Trump to end the tariffs.16

 

THINGS TO THINK ABOUT

  • Learn more about manufacturing and how NAFTA may not have caused the decline.17

  • Read more expansive studies on NAFTA and its impact on the U.S. from The Review of Economic Studies18 and the Congressional Research Service.19

Key Vocabulary