What is NAFTA- NAFTA and Rise of Donald Trump (Download PDF)

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Trade agreement between Canada, Mexico, and the United States signed into law in 1994 under President Bill Clinton. The framework of the deal was drafted under President Ronald Reagan in 1987.

NAFTA essentially eliminates all tariffs among the three nations, allowing for the seamless flow of goods and supplies across borders. Today, approximately $ 1.4 billion goods cross the U. S. -Mexico border every day.

NAFTA however, also makes it easy for companies to move operations from the U. S. to Mexico.

NAFTA is considered a primary reasons for loss of Hillary Clinton the Democratic Presidential Candidate in the recent US elections.

Who Wins from NAFTA?

  • U. S. companies, especially automakers, are clear winners because they get the benefit of cheap labor in Mexico.
  • Ford and General Motors (GM) have major operations in Mexico, but both employ far more people in the United States.
  • Trump has heavily lambasted Ford for announcing that it will move some of its production from Michigan to Mexico.
  • Ford has emphasized that the move will not lead to any lost jobs at its Michigan plant because it is going to produce different car models there.
  • Because it is cheaper to produce in Mexico, Americans benefit by paying lower prices for food, clothes, cars, and electronics that come from Mexico.
  • Trade between all three nations has increased significantly, and particularly between America and Mexico.
  • U. S. exports to Mexico last year were up nearly 470 % compared to 1993, the year before NAFTA became law.
NAFTA Pros and Cons

Canada is a Bigger Thorn

  • There are more NAFTA dispute cases between Canada and the U. S. than between Mexico and the U. S.
  • In recent years, there have had more trade tensions with the country north of the border than south.

Why Trump Hates NAFTA

  • Top of Trump՚s wish list is to renegotiate or “terminate” NAFTA - the North American Free Trade Agreement. He also wants to slap a 35 % tax on goods, such as Ford (F) cars, that are made in Mexico and sold in the U. S.
  • NAFTA agreement is the “worst trade deal in history,” Trump blames it for the loss of manufacturing jobs in America՚s Rust Belt states.
  • Trump has the authority to withdraw from NAFTA under the rules of the agreement. He just has to give Canada and Mexico six months՚ notice.

- Published/Last Modified on: November 15, 2016

International Relations/Organizations

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