ADM 477 Indiana Wesleyan University Constitutionality of Tariffs Under NAFTA Discussion

Description

In 1993, the North American Free Trade Agreement (NAFTA) was enacted to promote economic growth and development among the United States, Canada, and Mexico. The trade agreement’s goal was to reduce and/or eliminate tariffs and other trade barriers. This in turn would eliminate excessive waste, expense, and other inefficiencies associated with the rules of trade in place at that time. Under NAFTA, workers in all three countries would benefit from the economic growth spurred on by free trade. Proponents of NAFTA stated that workers would enjoy higher wages and benefit from the uniform enforcement of their labor rights. In response to critics who argued that NAFTA would result in cheap labor and abusive labor practices, side agreements were made to prevent labor abuse and promote worker labor rights.

Upon successful completion of the course material, you will be able to:

Describe the regional international organizations affecting global business .

Resources

  • Textbook: The Legal Environment of Business

Video: North American Free Trade Agreement (NAFTA) Basics – Video #8

Background Information

In the 20-plus years since its enactment, critics of NAFTA argue that is has not lived up to expectations. One prime example is the United States’ trade deficit with Mexico. Although it was projected that NAFTA would result in lucrative trade surpluses with Mexico, the exact opposite has occurred. In addition, a 2013 study by Mexico’s tax administration found that, rather than increasing, Mexican worker wages actually were falling far below the pre-NAFTA levels.

In the United States, the trade deficit has caused an enormous displacement of workers and is a major contributor to the economic downturn in the manufacturing industry. As U.S. companies have moved factories across the border, communities have experienced economic instability because of the loss of their tax bases. Displaced workers find it very hard to maintain or recover their standard of living. In 2012, the U.S. Bureau of Labor Statistics determined that, on average, two out of three displaced workers who found other work could do so only at much lower pay. Needless to say, NAFTA is not exactly popular with the U.S. manufacturing industry. As domestic goods lose market share to cheap imports, manufacturing plants will continue to close. Sadly, the remaining plants are often unable to retool to offer new, better job opportunities for displaced workers.