NAFTA also had six disadvantages.
First, it led to the loss of 500,000-750,000 jobs in the United States. Most were manufacturing employment in California, New York, Michigan and Texas. Companies in some industries moved to Mexico because labor was cheap. These industries were motor vehicles, textiles, computers, and electrical appliances.
Second, job migration suppressed wages. Sixty-five percent of companies in the affected industries threatened to move to Mexico. The U.S. workers remaining in those industries could not bargain for higher wages. Between 1993 and 1995, 50% of all companies in the industries that were moving to Mexico used the threat of closing the factory. By 1999, that rate had grown to 65%.
Third, NAFTA put Mexican farmers out of business. It allowed government-subsidized U.S. farm products into Mexico. Local farmers could not compete with the artificially low prices.
Fourth, as Mexicans lost their farms, they went to work in sub-standard conditions in the maquiladora program. Fifth, U.S. companies degraded the Mexican environment to keep costs low.
Sixth, NAFTA allowed Mexican trucks access into the United States. That would have caused dangerous conditions since they are not held up to the same safety standards. Therefore, Congress prohibited this provision. For more, see NAFTA Disadvantages.
NAFTA has six advantages:
First, it quadrupled trade between Canada, Mexico, and the United States. That's because the agreement eliminated tariffs.
Second, it lowered prices. Mexican oil is imported for less than before the agreement. That reduces U.S. gas costs.
Third, economic output in the trade area grew. It boosted U.S. growth by as much as .5% a year.
Fourth, NAFTA created jobs. Increased exports led to nearly 5 million new U.S. jobs.
Fifth, foreign investment more than tripled. U.S. businesses invested $452 billion in Mexico and Canada.
Sixth, NAFTA reduced government spending. That's because contracts became available to suppliers in all three member countries.
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