NAFTA-Global Economy

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NAFTANorth American Free Trade Agreement : 

NAFTANorth American Free Trade Agreement


NAFTA Presented By: Arun Kumar (07030243005) Kaushik Majumder (07030243012) Narendra Kumar (07030243016) Shitij Bhatia (07030243026) North American Free Trade Agreement

Road Map : 

Road Map

NAFTA Overviews : 

NAFTA Overviews A trilateral trade bloc in North America created by the governments of the United States, Canada, and Mexico. The agreements were signed in December 1993 by the leaders of the three countries: Brian Mulroney of Canada. Carlos Salinas de Gortari of Mexico. Bill Clinton of the United States. Did not come into effect until January 1, 1994. As of 2008 the trade bloc is the largest in the world and second largest by nominal GDP comparison. One of the most powerful, wide-reaching treaties in the world.

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NAFTA Overviews (conti…) Fully implemented on January 1, 2008. Most successful trade agreements in history. Contributed to significant increases in agricultural trade and investment between threes. Benefited farmers, ranchers and consumers throughout North America.

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COMPARATIVE ADVANTAGE: Countries do not have trade at the intersecting point on this graph because each is producing less than if they had a “comparative advantage” - producing a good or service at the lowest cost. IN THIS SIMPLIFIED ECONOMY: The new line shows the number of goods and/or services that can be produced if the two countries specialize in those goods and/or services that they have comparative advantage --- consumers can have more of two goods at a cheap price.

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Why NAFTA is Important ? Eliminates tariffs. Everyone benefits because goods are at a lower cost. The most underdeveloped country/partner gains the most - we help them develop. Economic liberalization. Effects :Privatization, less governmental control; Increased competitiveness; Higher specialization resulting in a shifting of Sectors (example: Corn in Mexico); Lower costs to consumers Believes in freedom from governmental controls and the role of the state in protecting those rights. Believes that natural market forces should determine economic activity.

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In 1998, Mexico replaced Japan (which has an economy 11 times its size) as the No. 2 trading partner with America. In less than 10 years it will be número uno, replacing Canada. However, 40% of its population lives on less than $2 a day.

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MEXICO PRIOR TO 9/11 Fox met with President Bush on Sept. 4th and proposed a very broad agenda: legalizing anywhere from 3 to 7 million illegal immigrants, expanding temporary migration from Mexico, increasing cooperation in law enforcement, especially against drug trafficking, and organizing a binational committee to promote development in the poorer regions in Mexico. MEXICO AFTER 9/11 A week prior to 9/11, the discussion focused on ways to facilitate integration and the movement of people and of goods. On 9/11, the borders were virtually shut down. In the immediate term, 9/11 has had a profound effect on both Mexico and Canada. Both countries had come to rely on freer trade with the United States, with U.S. exports and imports approximately 85% of their total trade, and thus any impediments introduced at the borders had a very deleterious effect on the two coutries’ economies.

The following is a listing of goals as set forth in NAFTA’s preamble: : 

The following is a listing of goals as set forth in NAFTA’s preamble: · To strengthen bonds of friendship and cooperation To act as a catalyst to international cooperation · To create, expand, and secure future markets , To establish fair rules of trade · To ensure a predictable framework for business planning , To enhance firms competitiveness in foreign markets · To foster creativity and innovation ,create new employment opportunities · To promote development & strengthen environmental regulations


NAFTA IN PERSPECTIVE U.S. two-way trade with Canada and Mexico exceeds U.S. trade with the European Union and Japan combined. In fact, US trade more in a month to Mexico than with all the other countries in a year. US export more to Mexico in a day than with Paraguay in a year. US export more in a week with Canada than with Central America in a year



Top Ten Countries with which the U.S. Trades : 

Top Ten Countries with which the U.S. Trades

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U.S. imports are very labor intensive because it is cheaper to import from a country with lower wages than producing it internally. And since Canada is our greatest trading partner and Mexico is our third, these import statistics are greatly affected by their activity. U.S. exports are more technologically based and require a better educated population to produce - a fact that gives the U.S. a comparative advantage for these types of industries. [Source: 1994 Census Information] U.S. TOP Exports & Imports.


EFFECTS OF NAFTA BENEFITS NAFTA eliminates trade barrier Benefit’s the importers by reduced or duty free goods. Can make the exporter more competitive then other non-participating countries 200% increase in trade among the 3 countries. Increase market access within each country.


EFFECTS OF NAFTA LIMITATONS It has negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from U.S. agribusiness It has negative impacts on U.S. workers in manufacturing and assembly industries who lost jobs. Critics also argue that NAFTA has contributed to the rising levels of inequality in both the U.S. and Mexico. Some economists believe that NAFTA has not been enough (or worked fast enough) to produce an economic convergence, nor to substantially reduce poverty rates


KEY NAFTA PROVISIONS Export Subsidies Internal Support Grade and Quality Standards Rules of Origin

Impact on Employment : 

Impact on Employment The study's indicates that the reduction in net exports to Mexico has eliminated 2,27,663 U.S. job opportunities since 1993, and the reduction in net exports to Canada has eliminated 1,67,172 job opportunities in the same period. In total, NAFTA resulted in a net loss of 3,94,835 jobs in its first three years. The analysis finds that NAFTA has eliminated significant numbers of jobs for women and members of minority groups, as well as white males. Between 1993 and 1996, women lost 1,41,454 jobs to NAFTA, blacks lost 36,890 jobs, and Hispanics lost 22,520 jobs, numbers closely reflecting these groups shares in manufacturing industries

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Impact on Immigration

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Equivalent of 6 million min. wage jobs That money - the nation's third largest source of income, behind oil and tourism - has not only provided relatives money for food, clothing and medicine MISSOURI From 1990 to 2000, Missouri’s Latino population increased by 92.2%. 40% of this population lives in the West Central region, with 30% living in Jackson County 40 percent of Missouri’s Latino population lives in the West Central region, with 30 percent living in Jackson County Impact on Immigration

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Two agreements. One was the North American Agreement on Environmental Cooperation (NAAEC), which created a commission to enforce environmental law. But the commission was not fully staffed until 1995 and has had a slow start. The other agreement created the Border Environment Cooperation Commission and the North American Development Bank to address pollution problems along the U.S.-Mexican border. Currently, NAFTA trade contributes significantly to air pollution in all the corridors. Truck idling associated with border crossing delay contributes significantly to CO emissions, particularly in corridors where border delay is problematic. As much as 6% of all trade-related CO emissions in the corridors are caused by truck idling. Impact on Environment

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According to 1999 report: 1. NAFTA has led to a dramatic increase in exports of Missouri products to Canada and Mexico since it was implemented in 1994. State exports to NAFTA partners grew 10.4% from 1998-1999. Missouri’s exports to Canada reached $2.7 billion and exports to Mexico totaled $608.0 million in 1999. Missouri’s farm sector benefited from agricultural exports to Mexico in 1999. In 1999, agricultural crops ranked as the state’s second-largest export to Mexico, accounting for 17.2% of total exports. NAFTA Trade PartnerShip Case Study

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Exports to NAFTA partners have increased 63.4% since the trade agreement was implemented, representing a 65.5% growth of state exports to Canada and a 54.4% growth of state exports to Mexico. In 1999, Canada and Mexico were Missouri’s first- and second-largest export markets, respectively, accounting for 50.5% of Missouri’s total exports. Case Study

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Mid-Continent International Trade Corridor 1. A trade pattern 2.A system of connecting highways and rail routes 3. An opportunity to strengthen economic development in a region

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Monterrey, Guadalajara, and Mexico City form the “Golden Triangle”. State of Nuevo Leon is wealthiest. Again, Mexico is Missouri’s second largest trading partner. The Mexico Trade Office is headquartered in Monterrey and maintains a branch office in Guadalajara. Monterrey, the capital of the state of Nuevo Leon and the industrial center of the country. Case Study

Missouri and Employment : 

Missouri and Employment

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Much like the Canadian FTA was expanded to NAFTA... The negotiation with Central America will complement the goal of completing a Free Trade with the Americas (FTAA) by Jan. 2005. The U.S. exported $9 billion in goods to the five Central American countries in 2001, up 42% since 1996. The U.S. is the main supplier of goods and services to Central American economies: 40% of total goods imports by CA come from the U.S. U.S. products face a competitive disadvantage in the region, because CA countries have been very active in negotiating free trade agreements that do not include the U.S. More than 20 trade agreements grant preferences in CA to products from Mexico, Canada, Chile, and several South American nations. NAFTA FUTURE


NAFTA SUPPLEMENTS The North American Agreement on Environmental Cooperation (NAAEC) The North American Agreement on Labour Cooperation (NAALC)


PUBLIC OPINION Public opinion toward NAFTA in the United States, Canada, and Mexico is mixed. A survey conducted by CIDE and COMEXI in Mexico showed that 64 percent of the Mexican public favored NAFTA. The Program on International Policy Attitudes reported in a poll that 47 percent of Americans thought that NAFTA has been good for the United States, while 39 percent thought it had been bad for the country .


CONCLUSION NAFTA is one of the most successful treaties of the times in terms of growth in trade i.e. imports & exports , G.D.P etc. but on the other hand it is also responsible for causalities like loss of jobs, migration, rising level of inequality and many others. Thus it is important that the treaty should be carried forward concerning about taking steps for the problems originated due to NAFTA ,otherwise it will create inequality in many terms which can lead to bad conditions in future for all the three countries.

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