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Laura Daly

on 28 April 2016

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Transcript of NAFTA

north american free trade agreement
September 23, 2013
Global Environment of Business
Rachel Berg
Laura Daly
Sarah Montes
Dave Mosteter
Mike Podrazik
What is it?
Agreement into a trilateral trade bloc between the United States, Mexico and Canada.
A trade bloc is the reduction or elimination of trade barriers between governments
Discussions began in 1986 between country leaders:
U.S. President George H.W. Bush
Mexican President Carlos Salinas
Canadian Prime Minister Brian Mulroney
Signed by these leaders on December 17, 1992
President Bill Clinton took office in 1993, overtaking the completion
After all provisions and negotiations, Clinton signed the agreement into law on December 8, 1993
Law went into effect on January 1, 1994
2 Parts
NAAEC: The North American Agreement on Environmental Cooperation
Commission for Environmental Cooperation
NAALC: The North American Agreement on Labor Cooperation
Commission on Labor Cooperation
Environmental Factors:
cultural, political, technological, financial, economic, legal
Tax that governments put on imported/exported goods & services
eliminated barriers to commerce
opened new consumer-driven supply & demand markets
greater selection of goods in marketplace with competitive pricing
reduces inflation
U.S. to Canada/Mexico
$142 billion (1994)
$452 billion (2007)
Canada/Mexico to U.S.
$151 billion (1994)
$568 billion (2007)
Manufacturing & agriculture increased to meet demand
Oil prices decreased
Foreign direct investment in business
U.S. to Canada/Mexico
$357 billion (2009)
Canada/Mexico to U.S.
$237 billion (2009)
566K manufacturing jobs moved to Mexico
most affected: CA, NY, MI, TX
1965 Maquiladora program expanded
border "free zones" to import parts (tariff-free)
and export finished product back
Shift in agriculture
Mexico lost 1.3 million farm jobs
Mexico's farmers were put out of business
regulatory variation between nations
U.S. wages were suppressed
not all companies in these industries moved to Mexico
workers chose keeping factory over union
workers bargaining power reduced without union
wage growth suppressed
pay less / work more: companies
fair way: unions
Exploitation of Maquiladora workers
Free access for Mexican trucks
allowed trucks to travel inside the U.S. beyond the current 20-mile commercial zone limit
Is NAFTA the biggest threat to the economy and jobs in the United States?
Is there a threat to the strengths of NAFTA?
Machines can do things man simply can't do or for lower cost
CAN'T: Doppler radar 2,632 ft off the ground
Manufacturing more things than history has ever produced
No need for:
AC, Heat, Windows, Lights, Insurance, Labor
NAFTA or Technology
Jobs lost or in jeopardy, thanks to technology
companies with 3000 employees to 100
checkouts at supermarkets
symphonies without conductors
diagnostic machines for mechanics
postal workers
elevator attendant
taken over farming jobs
planes without pilots
auto manufacturing
electronics manufacturing
medical/surgical techs
automatic parking lots
automated online customer service
"Harp against foreigners, but don't rage against machines"
Freaky with Fembots
trade time-out, why not a technology time-out
Political & Economic Challenges
legislation originally presented by Republicans
signed into law by Bill Clinton, a Democrat
opinion has been split on the impact
criticism of Mexico and the cost of labor
Canadian labor costs are more equitable
Maquiladoras and the Mexican middle class
rise of Asian manufacturing
effects on the American economy
U.S. and Mexico agricultural change
free trade of commodities
effect of U.S. subsidies on price
impact to Mexican farmers
change in land provisions and the rise of agribusiness
NAFTA legislation and Mexican job growth
Political & Economic Strengths
positive effects of NAFTA
positive impact to GDP
increased investment in Mexican economy
opportunity for highly skilled manufacturing
auto manufacturing
Cultural Challenges
cross-cultural indifference
blaming Mexico
discrepancies of labor costs and the price of unions
job loss
regulation of consumer product pricing
business profitability and alternatives to domestic manufacturing
Legal Challenges
disposal of harmful waste
consistency on environmental regulations with participating countries
NAFTA commission to ensure environmental standards
legislation, investment protection and challenges
Transportation accountability
long haul transportation pilot program
safety, compliance and accountability violations
criticism from James Hoffa and the teamsters
FMCSA is acting the in interests of big business and not it's citizens
Transport of goods streamlined through elimination
of tariffs
eliminates the costs of exports/imports, allowing partner countries to sell their goods to a new market that may have been less attractive prior due to incurred import/export costs
Increase in GDP of all 3 countries allows for government
investment elsewhere
trade surpluses
Who benefited? Where?
U.S. manufacturing moves to Mexico
Canadian service industry moves to U.S.
Mexican manufacturing jobs continually lower wages and working conditions due to huge influx of competition between manufacturers
Weak Standards
if standards (environmental, transportation, financing, investment) change in one country each country must follow suit but this doesn't happen
Improved standards
if standards outside of trade are the same between all 3 countries, competition between them will establish economies that best suit each country
Bring economic allies into previously closed economies
enter new world markets with the backing of other NAFTA countries
Other trade blocks
European Union
Emerging economies
Key Issues
Full transcript