Negative effects of NAFTA

NAFTA or the North American free trade agreement came into effect from January 1st, 1994. And while certain aspects of the trade agreement certainly did provide an impetus to the US economy, the negatives have stated to outweigh some of the positive outcomes of the trade agreement over the last few years, vis-à-vis Mexico. Some of the negatives of NAFTA are listed below,

  • Job loss: Since labor is cheaper in Mexico, many US-based companies simply relocated their companies across the border, thereby causing a large enough loss of jobs. If that was not enough, other companies threatened workers with plant closure and relocation to Mexico to prevent their workers from forming unions. The sector which was hit the most by this move to Mexico happened to be manufacturing with massive job losses being reported in states like CA, NY, Michigan and Texas. The industries that stood to be most affected by this was textiles, computer hardware as well as electrical appliances
  • Wage suppression: Given the fact that there is an increase in illegal immigration which translates to cheap labor for most of these companies, it is not exactly surprising to learn that these same companies used the threat of low labor to suppress wages. In fact, a high proportion of companies, especially in the manufacturing sector did just that. And the fact that most of the affected workers were prevented from joining any union effectively meant that they were unable to better protect their rights.
  • Trade tariffs: While NAFTA did away with trade tariffs and while that’s essentially a good thing, it had disastrous results right across the border. While the US government subsidized nearly 40% of farm income, it meant that US farmers could now export their products to markets like Mexico and Canada at very little cost. As a result, most of the small farmers in Mexico were unable to compete effectively with US farm products and as a result, most of these farmers have shut their farms for good.
  • Environmental degradation: In order to compete more effectively with cheap farm products from US, as a result of NAFTA, Mexican farmers started rampant deforestation and excess usage of fertilizer to increase their yield. As a result, Mexico’s environment has taken a hit and it’s all thanks to NAFTA.
  • Maquiladora exploitation: One of the unforeseen impacts of NAFTA happens to be Maquiladora exploitation. Maquiladora is basically where US-based companies are located close to the border and are allowed to employ Mexican workers. As a result of NAFTA and removal of tariffs, these companies pay less and exploit these workers. With working hours extending to more than 12 hours per day, it has become obvious that NAFTA has resulted in human exploitation.

These are some of the associated negative effects of the NAFTA agreement. While the agreement in both necessary and essential, it still needs to be tweaked to protect both the worker rights and the environment.

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