The grandeur that surrounded NAFTA certainly gave a convincing promise: the opportunity to expand an ever-growing U. S. economy, strengthen ties with neighboring countries, and campaign for the freedom of democracy in capitalism throughout North America. Even after the immediate redistribution of jobs leaving the United States and giving Mexico a new-found job market to feed the rampant unemployment that weaved throughout cities large and small, hope still found its way into the hearts of Americans.
They were praying for a turn of the tide in the trade agreement that promised so much but had delivered so poorly. Given the prior trade agreement between the U. S. and Canada, Mexico, the only country still developing, became the center of attention. As of 2010, nearly 700,000 jobs had moved from the United States to Mexico since NAFTA was enacted in 1994 (NAFTA, 20 Years Later: Do the Benefits Outweigh the Costs? (2014, February 19)). The major sector affected by the trade agreement was the automotive industry, which lost 350,000 jobs, a third of the entire U. S. utomotive industry (Mcbride, J. , & Sergie, M. A. (2017, January 24)). While American institutions such as the U. S. Chamber of Commerce claim that 14 million new jobs have been created, Robert Scott, chief economist at the Economic Policy Institute in Washington, D. C. , counters saying those counts “are based on disingenuous accounting, which counts only jobs gained by exports but ignores jobs lost due to growing imports. ” He adds. “The U. S. economy has grown in the past 20 years despite NAFTA, not because of it” (NAFTA, 20 Years Later: Do the Benefits Outweigh the Costs? 2014, February 19)). To add insult to injury, American workers took pay cuts for lower paying positions.
Because these jobs were leaving the U. S. and the bulk of the workers held only a high school degree, they were forced to look for jobs that paid between 15 and 20% lower than the jobs these workers previously held (Scott, R. , Salas, C. , & Campbell, B. (2006, September 28)). After 20 years of these jobs not being available to U. S. workers and workers settling for lower paying jobs, one could only imagine the wealth missed out on due to Mexico. Along with the fact that U. S. orkers had lost their jobs to Mexican workers and had taken pay cuts too, Mexican worker’s wages did not increase. While the fact that jobs were being lost to Mexico was apparent, not as many people focused on the type of jobs that were lost, which was arguably as big of a concern. Many supporters firmly believed that NAFTA would decrease poverty and increase wage rates for Mexican workers. This has not been the case, but economists cannot be sure of why due to the multiple factors affecting the U. S. and Mexican economies like the Tequila Crisis, two U. S. recessions, and the drug cartel war.
Economists Davide Gandolfi, Timothy Halliday, and Raymond Robertson sought to understand the relationship between wages in the United States and Mexico from 1987 to 2013. They concluded that while wages had increased, the increases were relative and the difference between them remained the same over the years of the study (Clemens, M. (2015, March 17)). The argument also stands that Mexico would have still developed over time into an industrialized country, NAFTA just quickened the process. Given the detriments to the U. S. economy to simply speed up the industrialization of Mexico, it is difficult to say that the benefits outweigh the costs.
Not only did job loss and wage stagnation occur, but the trade balance also shifted. In 1993, the U. S. had a $1. 7 billion trade surplus, but in 2013, trade had shifted to benefit Mexico in the amount of $54 billion (Mcbride, J. , & Sergie, M. A. (2017, January 24)). Along with the trade deficit, immigration from Mexico to the United States has become a severe problem due to high unemployment rates. Though illegal immigration has not been as rampant in recent years, over half a million Mexican workers without a job migrated to the United States after NAFTA was enacted (Mcbride, J. , & Sergie, M. A. 2017, January 24)).
After twenty years of seeing the effects of the trade agreement, experts have been able to formulate several proposals regarding reforming NAFTA, repealing and replacing NAFTA, and completely doing away with NAFTA all together. Policy Alternatives NAFTA Alternative 1 Possibly the most sensible alternative to the current arrangement would be to renegotiate the terms of NAFTA. Article Il of the U. S. Constitution allows the President to negotiate with foreign countries. Possible changes could include tariff modification, basic and specific rules of origin, and customs provisions (Faux, J. 2013, December 9)). This would be the easiest from the U. S. standpoint, since the President is able to make such changes with ease, but would require careful consideration into labor laws, immigration laws, trade restrictions, trade provisions, and the individual economies of the three countries. NAFTA Alternative 2 Lawmakers could choose to repeal NAFTA all together. Built into NAFTA is an option for each country to opt out at any time. This would not be the simplest alternative; however, due to how long NAFTA has been in effect.
According to Jeff Faux from the Economic Policy Institute, “The problem is that by now the three countries’ economies and populations have become so integrated that dis-integration could cause widespread dislocation, unemployment, and a substantial drop in living standards” (Faux, J. (2013, December 9)). NAFTA Alternative 3 Another possibility would be to go in a completely different direction with an international trade agreement. Elaine Bernard from Harvard Law School provides one possible agreement that falls into this category. One of the first requirements that Bernard would institute is to follow U. S. rade law, which requires a labor advisory committee to be consulted during trade negotiations (Bernard, E. (n. d. )).
The lawmakers drafting NAFTA did not follow this law, and Bernard would enforce this law along with including environmental and consumer concern advisory committees. Considering the belief that lawmakers enacted NAFTA behind closed doors, these committees would serve in a productive, supportive role as opposed to being treated as a box to be checked off. These committees and their new purpose would allow for more of an inclusive process that considers not only trade and investment, but also communities and social aspects.
Next, Bernard believes that a debt relief plan should be provided to Mexico, which is the second largest debtor nation in the developing nation (Bernard, E. (n. d. )). Income disparity in Mexico has been a direct result of the International Monetary Fund and World Bank encouraging Mexico to emphasize an economy built on exports and privatizing resources that should be public. Bernard specifically calls for a debt restructuring plan that assures that “debt reduction payments are reinvested in Mexico through a development fund administered by nongovernmental organizations” (Bernard, E. n. d. )). Because NAFTA ignores the income inequality between the U. S. and Mexico, there is no provision to assist the poorer nation and contributes to the common practice of the rich getting richer and the poor getting poorer. Bernard appeals for compensatory financing to alleviate this issue, which allows for resources to be transferred from the winners to the losers, and she goes on to say that “upward harmonization is impossible without some form of upward financing” (Bernard, E. (n. d. )).
This idea of compensatory financing can be achieved through a more proactive government instead of a reactionary government, allowing for investment in socially beneficial industries and activities (Bernard, E. (n. d. )). Bernard mentions the idea of a social charter for labor, environmental, and consumer standards versus the laissez faire approach in the U. S. , but adds a qualifier that rules are only as good the enforcement of those rules (Bernard, E. (n. d. )). Lastly, Bernard argues for easier mobility of citizens in the U. S. Canada, and Mexico trade alliance, considering that the Mexican labor force has been moving north for quite some time and those workers are being criminalized instead of legitimized for attempting to cross the border with the intention of finding work (Bernard, E. (n. d. )). A new trade agreement would allow for the ease of capital, goods, services, and labor instead of excluding the latter as is the present case under NAFTA. Recommendations and Conclusions In terms of NAFTA as a policy, it is evident the agreement has not lived up to promises and projections that were outlined before its implementation.
While there have been some benefits, there have been many more shortcomings to the economy of the United States and the other countries involved as well. Alternatives or modifications to the current agreement are needed. Of the options proposed, the most logical would be to renegotiate the policy in terms of tariff modification, basic and specific rules of origin, and customs provisions. While the other alternatives are viable, this option would be the easiest to implement. As for theory, the limitations of the Elite Theory are evident when using it as a lens to view NAFTA.
The very premise of the Elite Theory excludes from consideration the very ones hurt most by this policy’s implementation and the repercussions of it. The groups that installed this theory may very well have benefited from it, but the shortcomings of this federal trade agreement have affected those who were left out of the consideration to begin with, the average American factory worker. Directly opposite this theory, a more inclusive theory that considers a wider range of social sectors is a better mindset to use when considering policies that impact on so large a scale and across so many lines of society.