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NAFTA

North American Free Trade Area. It comprises Canada, United States and Mexico. It would result in a gradual reduction of tariffs on trade between the members, creating a huge trading area, similar to the European free market area but without the institutions of the EU. Thus there are no institutions for allowing free movement of people, but only of capital and goods. As a result it is a source of constant tension with illegal immigration into the United States, and a lowering of wage levels.

Can the two northern countries, generally regarded as developed (members of OECD), compete with a developing country, Mexico, without losing jobs or reducing wages to the level of the lowest? So far it has only reached the preliminary stages but there are signs of northern industries locating on the Mexican border area where they can pay low wages with no unions or pollution controls.

Mexicans hope that their standards will rise and, as a country with rapidly increasing population, needs the extra jobs. The general effect might be to reduce consumption in the north, which would benefit the world as a whole. It seemed possible that the Clinton presidency would renegotiate the agreement to require higher standards from Mexico but the US Congress showed signs of not wanting to pass the legislation, after pressure from Trade Unions on the grounds that wages would be pressed down to compete with Mexico's.

However, neither of these happened. Congress passed it with no change. Will the effects predicted by Ross Perot happen - a sucking sound as the industrial jobs move south? The jobs went to China instead.

The operation of NAFTA is one of the grievances of the mainly Maya rebellion in the Mexican state of Chiapas.

Probably the main effect of the NAFTA agreement has been to show big business the way to export jobs further to China and other low wage areas.

Last revised 16/10/09


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