Nafta is the North American Free Trade Agreement. The parties to it are the United States, Mexico, and Canada.
The goal of the agreement was to increase trade among the parties. Nafta got rid of barriers, such as most tariffs. Nafta is more than twenty years old. Donald Trump wants to end the program.
He says Mexicans got jobs. Americans lost jobs. He is right about that. The owners of American firms could not wait to use the lower-wage workers in Mexico. Their U.S. stockholders care most about profits. Profits make their shares worth more money.
The investors include people, union and business pension funds. They include the pension funds of state and local governments. In other words, they are ‘us.’ We all want a high return on our investments.
In Mexico, the goal of Nafta was to invest in building a stronger Mexican economy. How did the Mexican workers do? Not so well. Their wages have not gone up. In fact, most people in Mexico say Nafta was a failure. They blame the Mexican government. They say the government was corrupt. That it was not well run. That it did not do its job.
Some thought Mexico would grow like China. It has not.
American consumers did well. Prices on cars, appliances, and clothing are lower than they might have been.
The way Nafta works makes it hard to end the program. For example, automobile parts are made in all the Nafta countries. They go back and forth among Mexico, the U.S. and Canada. They are finally assembled into a car somewhere. Where and how could you tax these moving parts? Stopping the flow of parts and commerce will not help workers or buyers.
The economy in Mexico is not in good shape. Gas prices are rising. People are protesting and demonstrating.
Nafta made it easier to do business in North America. Ending the program is not smart. But starting to look at what works and what does not work is smart. It also makes sense to look at the impact of Mexican migration. Mexicans come to the U.S. for a better life. They come for the same reasons people always came to America. They come for our way of life.
The new U.S. government could make a fresh start on these issues.
Source: The New York Times January 4, 2017