Alwaght – The US President-elect Donald Trump eyes taking tough measures against NAFTA, the North American Free Trade Agreement that was signed in 1994.
Trump during his election campaign said that he will push through negotiations for amendment of the free-trade deal, and even could pull the US out of it.
He called the agreement “worst trade deal ever”, blaming many job losses in his country on it. Trump believes that the tripartite trade agreement destroyed the job opportunities across the Rust Belt that stretches from the industrial states of New York, Pennsylvania, West Virginia, and Ohio to Indiana, Michigan, Illinois, Iowa, Wisconsin, and parts of New England region.
Actually people of these states voted Trump to see him creating jobs for them.
Trump said there was no compromise on his aim at reviewing— or even killing— NAFTA. He attacked Bill and Hillary Clinton, saying that they betrayed the US workers by signing such a deal. Trump during his campaign said that he was to take the step against NAFTA to improve working conditions for the American workers.
What is NAFTA?
Signed in 1994 between the US, Canada, and Mexico and during the presidency of Bill Clinton, NAFTA eliminated any customs hurdles, majorly duties and taxes, between the three North American countries. It authorized them to buy and sell an unlimited amount of goods without need to pay any taxes or customs duties. Currently, $1.4 billion in worth of different goods are exchanged between the US and Mexico every day. The free-trade agreement also facilitates easy transfer of companies from the US to Mexico.
Some frequently asked questions about NAFTA
Can Trump revoke NAFTA without permission from the Congress?
Yes, he can. He can pull the US out of the agreement but he needs to inform Canada and Mexico some six months earlier.
Has the US really lost domestic job opportunities because of NAFTA?
Yes, with NAFTA signed and taken into effect, the US job creation saw a sharp drop. It is actually complicated because on the other side many jobs owe their existence to NAFTA.
The Economic Policy Institute suggested that nearly 800,000 jobs were moved from the US to Mexico between 1997 and 2013. However, the Congress argues that the deal caused no big job losses in the country.
Who are the winners of NAFTA?
American companies, particularly car manufacturers, are the real beneficiaries of the agreement because they enjoy cheap labor force in Mexico.
For example, Ford and GMC moved a lot of their assembly lines to Mexico, drawing Trump’s criticism. However they argue that they have larger number of workers in the US than in Mexico. Trump’s win prompted new assembly lines transfers to Mexico by Ford. The carmaker, however, says that transfer of parts of its factories will not reduce jobs in the US because it is eyeing making different car models in Mexico plants.
Can killing NAFTA increase job opportunities in the US?
This is possible. When production cost of any NAFTA members rises, the companies move to a country with lower production expenses. This country could be in Latin America or even in Asia.
For example, linen manufacturers need NAFTA. They export large amounts of their fabrics from which clothes are produced and sent to the US. All these shipments are duty-free thanks to NAFTA.