Understanding NAFTA

WHAT IT IS

  • The North American Free Trade Agreement (NAFTA) is a free trade deal between Mexico, Canada and the United States that was struck in 1994.
  • NAFTA’s cut to tariffs have caused substantial trade growth between the three countries, but some areas are seeing job loss.
  • NAFTA and other free trade deals have become political footballs used by politicians campaigning for office.

WHY IT MATTERS

With the U.S. having already withdrawn from the Trans-Pacific Partnership (TPP) free trade agreement, leaving NAFTA could signal a real shift away from free trade that the U.S. has long championed. The U.S. could be shifting towards a more protectionist, nationalist economic policy.

  • PRO-NAFTA: “Share the love!”

    • Support system: Free trade through NAFTA with Mexico and Canada supports more American workers than it hurts.
    • Lower prices: Lower tariffs with Canada and Mexico under this agreement have lead to lower prices for common goods and raised the standard of living in the U.S.
    • Compounding factors: While there have been localized job losses, it is mainly due to the impact of China as a world power.
  • ANTI-NAFTA: “USA! USA!”

    • Jobs are fleeing: Between 1997 and 2013, it is estimated that NAFTA resulted in the United States losing 800,000 jobs.
    • Deficits: NAFTA has increased the trade deficit with Mexico substantially, which will eventually be unsustainable for the U.S. economy.
    • Wage War: Industries are moving companies to Mexico due to lower wages than the U.S.

WHERE WE ARE NOW

THINGS TO THINK ABOUT

  • Are the positives or negatives only perceived effects of a rapidly changing, up and down world economy?
  • Are localized job losses worth long-term, broad reaching economic growth?
  • Could President Trump’s trade policies splinter the Republican party, with mainstream moderates favoring free trade and NAFTA?
  • If the U.S. withdrew from NAFTA, would it’s consumers be okay with an increase in prices for everyday goods?