The United States and Mexico have been having an ongoing policy regarding trade with one another. There have been many concerns about whether having a trade policy with Mexico has been beneficial to the United States or not. NAFTA (North American Free Trade Agreement) is one of the most dominant agreement not only between the United States and Mexico but also Canada (Ito 15).
NAFTA was initially planned to help balance the economic development in the three-member countries whom this agreement applies to. NAFTA was used in cutting down on trade tariffs between both countries and helped deal with issues regarding Transportation, Border Issues, and Environmental Issues between these two countries. Although, not only did NAFTA have positive effects, it also had negative effects. NAFTA not only had negative effects on Mexico but also the United States. NAFTA received a lot of backlash for taking many United States jobs, outing Mexico farmers out of business, deteriorating Mexico’s environment, and suppressing United States wages (Rabe 571). The impact of NAFTA has sparked much controversy, which has made it very difficult to determine the actual impact NAFTA has had on these countries.
NAFTA was signed in 1994, twenty years ago, into law. With many changes in United States history and with new presidents being elected, support towards NAFTA is constantly changing as well (Rabe 571). The election of Donald Trump to presidency has called for the renewed attention to the United States’ international Trade Agreements. During Trump’s campaigning he suggested some changes for NAFTA but also threatened to terminate NAFTA entirely (Bradley 1616). The United States, which is the most vocal advocate for NAFTA, planned to seek a new NAFTA which might throw the current free trade agreement into uncertainty. Trump blames NAFTA for wiping out United States manufacturing jobs since it allowed companies to move to Mexico where labor is cheaper which is the prime reason for initiating changes towards the current free trade agreement. Mexico has been most benefited by NAFTA mainly due to the reason that before NAFTA it was a really poorly under developed country with wages being much lower than the United States and after being signed to NAFTA, Mexico’s economy increased rapidly due to the advantage of manufacturing jobs which required intensive labor moving to Mexico for a more cost-effective advantage for offshoring production (Ito 16). Mexico under NAFTA had an initial rough start because of the currency crash but Mexico has grown into one of the most increasing economies, ten times more than what they were two decades ago (Ito 16-17).
Due to mentioned reasons, Donald Trump believes that NAFTA is not benefitting the United States the way it was planned for, therefore with him being the President of the United States, he has the executive decision to either withdraw the United States from NAFTA or terminate the deal as a whole, with consent from all three participating countries (Bradley 1616).
As of July 2018, there has been no official statement released on any updates on the future of NAFTA, but criticized changes are still undergoing review. Donald Trump primarily believes that since Mexico is the only country who has gained increased profit from NAFTA with imports and Foreign Direct Investment rising rapidly the only way to stop that is to have a NAFTA without Mexico to create more of a fair work field on both sides rather than just one (Ito 16). Changes for a new and updated NAFTA include competitive market access for U.S agricultural goods, improvement to the U.S trade balance, increased investment and stronger negotiations. Trump’s point for a new and improved Free Trade Agreement is to have a sole purpose to help America only. He believes that NAFTA has done more than enough to help Mexico recover its economy from poverty and now it was time for the United States to regain the favors it had done back. All in all, possible policy alternatives are having options that will help improve trade for America.
To every alternative, there are going to be pros and cons and similarities to the original plan. If there are chances of NAFTA being officially terminated, America, Mexico, and Canada can all face doom in the near future. NAFTA essentially helped reduced trade tariffs between the three participating countries to almost nothing.
Terminating NAFTA will affect each country differently based on how they were affected by NAFTA in the first place since Mexico was most benefitted by NAFTA after its signing, it is going to be hurt by the termination as well. The Mexican economy would face significant damage because of how heavily it relied on NAFTA and the United States for economic recovery. Based on how dependent Mexico’s economy is on the U.S, sudden proposal to ‘kill’ the NAFTA deal would call for new trade hurdles which would greatly cause a decrease in Mexico’s consumerism (T. Payosova, G. Hufbauer, E. Jung 1). Mexico could be on the verge to fall into an economic recession by the near future. Of course, once Mexico is starting to experience the downfall of not having NAFTA, it will have many other free-trade agreements with countries other than the United States. Mexico is not dependent fully on the United States and Canada, Mexico has ties with Australia and Japan which are sting competitors of the U.S. Mexico has such a strong economy which would take decades to completely flourish and once it starts trading with other countries, it can jeopardize the United States status of being a strong trade country (T. Payosova, G. Hufbauer, E. Jung 2).
Although the termination of NAFTA would temporally hurt Mexico, it will in turn help Canada. The ending of NAFTA would not necessarily hurt Canada the way it was looked at. Canada would be returned the jobs it had lost to outsourcing, Canada will be able to freely export oil to the United States at a much higher price, instead of having a string trade relationship with the United States, Canada would be able to increase trade with Mexico, and Canada would have an increase in trade with Europe at the same price it did with the United States.
It was planned that NAFTA would greatly hurt Canada and Mexico more than the United States but in reality, the United States is going to be more hurt as the other two countries have stronger ties with many other countries. The termination of NAFTA would hurt the United States the most (T. Payosova, G. Hufbauer, E. Jung 2). The United States will no longer be able to trade at a discounted price, instead it would have to pay double the price for cheap oil it would get form Canada, the U.S will lose a lot of the cheap labor jobs it had in countries where wages were cheap like Mexico, and lastly, the termination of NAFTA can put the United States’ foreign relations with other countries at risk (M. Villarreal, I. Ferguson 27). Based on how a person understands this issue, it can be perceived as a pro or a con.
The best and overall decision for the United States foreign policy regarding trade with Mexico is to leave the North American Free Trade Agreement alone and the way it has been for years. It has been in action for so long and there was not much opposition but with presidents and opinions changing, people think that it would help to just terminate the deal and maybe something better would happen to the United States just as NAFTA has affected the United States and Mexico. A lot of people look at the disadvantages NAFTA has brought but only a few look at the important advantages. NAFTA created the world’s largest free trade agreement. NAFTA is also one of the most successful FTA’s as well, grossing with almost $20 trillion in Gross Domestic Product.
Though NAFTA is very much controversial is today’s world, its many advantages outweigh its very few disadvantages.
If NAFTA were to be fully terminated, economic output would greatly decrease, they many jobs created for people of very low wages countries would be gone, foreign direct investment would decrease, and most importantly it would cost a lot of money to trade within countries. NAFTA is one of the important goods in the world that keeps many countries have strong relationships and without it, it’s just calling for expected doom.
In conclusion, the foreign policy regarding trade between the United States and Mexico is good the way it is. There is no need for any changes in the trade world which would call for more hurdles, which there are so many in the world already. After the signing of NAFTA, the world saw so much improvement.
NAFTA had many specific goals it needed to fulfill to be successful, and after many years it has served its purpose.
Post NAFTA years include a strong economic growth in the United States and Mexico. Opinions towards whether NAFTA has strengthened the foreign policy relation between the United States and Mexico is left for the government to decide.