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About Trade Agreements

April 12, 2016
Plain English Version
The new Honda car factory in Celaya, Guanajuato state, Mexico. OMAR TORRES/AFP/Getty Images

The new Honda car factory in Celaya, Guanajuato state, Mexico. OMAR TORRES/AFP/Getty Images

Trade agreements affect economies. They may make the cost of running a business in another country lower. Companies will move to  nations where labor is cheaper. It increases their profits.

When companies move out of the U.S. workers in America lose jobs. Workers in other places get jobs. In countries such as Bangladesh, millions move out of poverty.

American consumers enjoy lower prices. The big reason is the lower cost of making things in less developed nations.

American unions do not like trade agreements. Their main interest is jobs for their workers in the U.S.

One important trade deal is the North American Free Trade Agreement (Nafta). The United States, Canada, and Mexico signed the Nafta agreement in 1993.

Everybody knows that jobs and parts of industries moved to Mexico. Mexican labor cost less. It especially affected the auto industry.

Some experts are taking a new look. It is true that many auto jobs left Detroit. But the entire auto industry is still a big part of manufacturing in the United States. The parts of cars come from many places.

For example, Honda assembles the CR-V in Mexico. But it has an American-made motor and transmission. About 70 percent of the car’s parts comes from the U.S. or Canada. Shipping and selling the cars in Ameria add to the U.S. economy.

What would have happened without Mexico? The entire auto industry might have gone to China or other Asian countries. An expert said, “Maybe Nafta saved us from that.”

The Mexican economy went into near collapse in the 1990s. Young Mexicans migrated to the U.S. in search of jobs. By 2005,  migration was beginning to go the other way.

Donald Trump says he will “break” the Nafta agreement. An expert said, “It is exactly the wrong time to blow up Nafta. We would be doing China an enormous favor.”

Trade agreements or no trade agreements it is in the interests of companies to go global in seeking the best place to build their products. For example, Japanese and German automakers opened factories in the U.S.

Source: The New York Times March 30, 2016

Send us email at editor@newsinplainenglish.com 

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