Katy HaasCoordinator, Alianzas

www.alianzas.us

Index

• Why Enter a Free Trade Agreement?

• What is NAFTA?

• Background of NAFTA

• Reaction after Implementation

• The Mexican Peso Crisis

• What about America’s Farmers?

• Impact on:– Employment

– Immigration

– Environment

• Trucking industry• Missouri’s role• NAFTA’s future• Conclusion

“Mexico is the most important country to the United States in the 21st

century”

--President George W. Bush Sept. 5, 2001

Why Enter a Free Trade Agreement?

0

3

6

9

3 5 7 9United States production

(in tons)

Mexic

o p

rod

ucti

on

(i

n t

on

s)

Corn

Sugar

Levels of Economic Integration

*If the policies are not just harmonized by separate governments, but have a unified government with binding commitments on all members, then you reach political integration and have “full economic integration”.

Type of BlocFree Tradeamong theMembers

CommonExternalTariffs

Free Movement of Factorsof Production (Example:

free labor movementbetween countries)

Harmonization* of AllEconomic Policies - Fiscal,Monetary, etc. (Example:

common currency)Free-trade

area

Customsunion

Commonmarket

Economicunion

What is NAFTA?

Effective as of January 1, 1994

A trade agreement between CANADA, MEXICO, and the

UNITED STATES which provides for the elimination of

tariffs on North American goods shipped among the three

countries.

Background of NAFTA

An Introduction

ZedilloClintonSalinas Marcos

UNITED STATES: Would solidify an expanding trade relationship, which would spur job creation at home and help to continue the revolutionary shift throughout Latin America away from state controlled markets toward freer markets.

MEXICO: Lower inflation and foreign debt; create more well-paying jobs for Mexicans, thus producing less incentive for Mexicans to work illegally in the U.S.; Mexico would become a richer market for American exporters.

Would exert presidential authority, improve inter-American relations and advance the cause of global trade liberalization.

Expectations and Goals

Reaction After Implementation

How the Countries Were Affected Immediately

How They Are

Affected Now

Top U.S.

1. Aircraft 2. Electronic Computing Equipment 3. Motor Vehicle Parts 4. Motor Vehicles 5. Semiconductors 6. Aircraft/Space/Missile Parts 7. Chemicals 8. Plastics 9. Airplane Engines/Parts 10. Refined Petroleum Products

1. Motor Vehicles 2. Oil/Natural Gas 3. Motor Vehicle Parts 4. Semiconductors 5. Electronic Parts

and

NAFTA Pros

+ Goods/Services at lower cost

+ Most underdeveloped countries gain the most (i.e. standards of trade increased)

+ Tariffs reduced

+ Jobs created

+ Mexico’s economy is growing again

NAFTA Cons

– Fuel for peso crisis

– Benefits Mexico more than the U.S.

– U.S. deficit with trading partners

– Loss of low-wage American jobs to Mexico

– Environmental problems

– Traffic congestion and delays along the borders

The Mexican Peso Crisis

Was NAFTA to Blame?

Wages in United States and Mexico

What about America’s Farmers?

BENEFITS: More export opportunities. Since NAFTA was approved in 1993, U.S. agricultural exports to Mexico have nearly doubled.

DISADVANTAGES: Face regulations that increase the costs of production while foreign competitors gain from cheap production and labor.

Impact on:Employment

• Was U.S. workers’ loss Mexican workers’ gain?

• Maquiladora - Primarily foreign-owned assembly plants

• Jobs lost to Mexico vs. Jobs supported by exports to Mexico and Canada

Impact on:Immigration

• In the 1990s, U.S. population grew 13.2%, with 60% growth of Mexican immigrants.

• Among Latinos nationwide, 26% are between the ages of 25-40.

• Remittances from Mexicans working in the U.S.: $6.65 billion (for 2001 through 3rd quarter)

• Increase in Mexican migrants led to increase in Border Patrol staff

Impact on:Environment

NAFTA Environmental Agreements:

North American Agreement on Environmental Cooperation (NAAEC) - commission to enforce

environmental law.

Border Environment Cooperation Commission and the North American Development Bank -

commission to address pollution problems along the U.S.-Mexican border

Trucking Industry

The areas of concern include: vehicle safety,

driver training, environmental issues and

possible illegal drug trafficking.

A recent investigation determined that the average 18-wheeler in Mexico is 40% overloaded, carrying a gross vehicle weight of

more than 120,000 pounds. If U.S. truckers operated at a similar overcapacity, interstate highways would have a life span

of 14 years, as opposed to their 40-year design life.

Missouri’s Role

0500

100015002000250030003500

Mill

ion

s o

f D

olla

rs

1993 1994 1995 1996 1997 1998 1999

Missouri's Exports Under NAFTA

Mexico Canada

Canada and Mexico are Missouri’s first- and second-largest export markets, respectively, accounting for

50.5% of Missouri’s total exports 1999.

Between 1994 and 1999, Missouri exports to NAFTA partners increased 63.4%.

Missouri’s Role (continued)

Mid-Continent

International

Trade Corridor

1. A trade pattern2. A system of connecting highways and rail routes3. An opportunity to strengthen economic development in a region

Missouri and Employment

6.5

4.9 4.8 4.6 4.2 4.23.4

012345678

Pe

rce

nt

1993 1994 1995 1996 1997 1998 1999

Unemployment Rate in Missouri, 1993-1999

The Missouri-Mexico Partnership

• The Missouri Department of Economic Development moved its hub to Monterrey

• Branch office in Guadalajara

• For the past 12 years, the Missouri Department of Agriculture’s headquarters has been in Guadalajara

NAFTA’s Future

Where is it going and what effects will it have?

U.S.-Central American Free Trade Agreement

Free Trade Area of the Americas (FTAA)

Conclusion

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