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Negative Impact Of NAFTA On The US Economy

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3. Automotive industry impacts and specialization in one activity

U.S. imports from Mexico in 2016 were led by motor vehicles ($49.7 billion) and motor vehicle parts ($46.3 billion). Leading U.S. exports to Mexico in 2016 also consisted of motor vehicle parts ($22.5 billion), in exhibit 20 we can see the share of US exports in vehicle. This means that the automobile industry accounted for 27% of Mexico’s exports. Values that would not be so high if the NAFTA had not been signed.
Many economists say that NAFTA has helped U.S. manufacturing industries, especially the U.S. auto industry, to become more globally competitive through the development of supply chains. Moreover, they defend that the increase in U.S.-Mexico trade can be attributed …show more content…

Some experts argue that the agreement has resulted in outsourcing and lower wages that have had negative effects on the U.S. …show more content…

However, if policymakers decide to extinguish it, the consequences will be severe for both countries. Indeed, an important outcome of NAFTA is the vertical integration that has been taking place and would be compromised if the agreements were to be terminated. Nevertheless, we agree that NAFTA could use modernisation and renegotiation to improve its current reach. Given that NAFTA is more than 20 years old, renegotiation may provide opportunities to address issues not currently covered in the agreement. “21st Century” issues may be need to be considered; those could include service trade, rules of origin, government procurement, intellectual property rights protection, labour issues, and the environmental concerns.
There is no doubt that any policy entails advantages and drawbacks. According to our International Trade course, a decrease in trade barriers is always something positive in the economy as a whole. This may be easily proved by the models studied and the real facts stated before. However, some groups become losers due to free trade since abundant factors of production such as unskilled labour (in USA) or high-tech machinery & equipment (Mexico) are relatively scarce with regard to the other country. Which means that they are not as competitive

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