Comments due April 15, 2016 "It's shipping jobs out of the country!" "No, it's creating jobs in the U.S.!" "It's the reason we have a trade deficit with Mexico!" "No, the deficit is plunging because of our exports there!" And so go the arguments about continuing the North American Free Trade Agreement (NAFTA), and extending it to include Latin America and the Caribbean in a Free Trade Area of the Americas (FTAA).We all have a stake in this issue, whether we're involved with a manufacturing or service industry. If jobs are moving out of the country, traditional thinking is that unemployment should increase and fewer people will buy goods or services, which will eliminate even more jobs in an ever-increasing downward spiral. But are jobs really being eliminated, or are they actually increasing because of NAFTA? Organized labor, some environmental groups and many politicians are very much opposed to NAFTA and any extension of it. They say that global trade shifts manufacturing jobs out of the U.S. to lower wage countries. They have a point. However, with NAFTA or without it, low wage jobs are going to migrate to the place of least cost, and for many industries that may not be in the U.S. The fact is, labor in the U.S. is significantly more costly than in most third world countries -- especially low-end labor for manufacturing. Companies that don't understand this and act accordingly, won't be in business long. For many, there are two choices: move low wage jobs to least cost countries, or find ways to automate. Either way, these jobs will be eliminated. Some argue that by moving these jobs, U.S. companies are supporting poverty level wages and living conditions abroad. Consider the recent flap over Nike paying what are called sub-subsistence wages in Asia. But in these locations, such wages are reasonable, given the cost of living there. They buy the necessities of life and in many cases quite a bit more. These workers are beginning to improve their lives, albeit bit by bit. As with Mexico, the population is starting to save and is now buying more goods and services from the U.S.! Life without these jobs would be much harder, economic and living conditions might never improve, and we would have fewer exports. Many economists credit NAFTA with reversing the devastating effects of the recent Mexican currency devaluation and recession. With little hard currency, Mexicans couldn't afford to buy much. With capital now flowing back into their country, in part due to jobs moving there, they are able to buy more imports -- from the U.S. For example, recent increased Mexican demand for U.S. autos, specialized heavy machinery, telecommunications and other high-tech equipment has sharply decreased our previous $1-billion average monthly Mexican trade deficit. Mexico's economy has grown steadily for the past several years, in part due to NAFTA, which means even more U.S. exports. Of course, along with gaining the advantage of low-wage manufacturing costs, it is also the responsibility of global companies to provide decent housing and living conditions for their workers -- and many are doing so. They also are improving the local infrastructure, such as roads and communication systems, in order to get raw materials to production facilities and finished goods to shipping points. We must realize that the world economy is changing, whether we like it or not. U.S. companies must be able to compete on the world stage, which means we must understand that our competitive advantage is not in low-end manufacturing. It is in "knowledge work" -- producing goods and services which require a high degree of skill and training. Therefore, we must let these low-level jobs go elsewhere. However, we must also fund training programs for our displaced workers. We must move these people into the better paying jobs of high-tech manufacturing, as well as other functions that are not subject to export, such as administration, sales/marketing, research, accounting, human resources, etc. Many socially conscious and responsible organizations are sponsoring such training programs. Former Labor Secretary Robert Reich has suggested tax incentives for companies investing in worker skill training -- a good idea. But for workers finding themselves out of work and with no "knowledge" skills, we must urge the public sector to provide this training and a path to better jobs. Some estimate that since 1992, nearly 20 million new jobs have been created in the U.S., in part due to the 1994 NAFTA agreement. Total trade between the NAFTA partners -- the U.S., Canada and Mexico -- rose from $293 billion in 1993 to more than $475 billion in 1997, and has increased since. That spells sales and profits for U.S. companies and high paying jobs for American workers.If such increases within NAFTA are possible, think what might happen if we extend the partnership to include Latin America and the Caribbean, with the Free Trade Area of the Americas (FTAA). Our "knowledge work" industries would thrive. |
The primary advantage and purpose of NAFTA is the reduction or possible elimination of taxes on imported goods between the U.S, Canada and Mexico. Since 2008, all tariffs on agricultural exports between the US and Mexico, and Canada and Mexico don't exist, only tax on sugar, eggs and poultry between Canada and Mexico. A major con of NAFTA is the low demand on Mexican farmers because of the high amount of American agriculture output, as a result, over 1 million Mexican farmers have lost their jobs because of the agreement. The major pro to the NAFTA agreement are the decreased trade restrictions allowing Americans to purchase Canadian and Mexican goods at a low price that gives people a higher purchasing power. Outweighing the benefits and costs of the NAFTA agreement will help the government decide the best way to approach trading relationships.
ReplyDeleteHopefully the expansion of trade agreements allows the opportunity for mutual participants to benefit. I think a lot of the negativity stemmed from the job loss of 692,000 people in the US back in 2010 and there is certainly place for concern. Samuelson writes of this where one party always looses in trade and it is up to the government to enhance and help those who lost in the trade transaction. I don't think that is a role of government but if we follow his guidance and think about moving these affected workers into "knowledge work" type jobs, is that cost effective? Is it economical for a factory worker, espcially those who lost their jobs in Pennsylvania, Ohio, Indiana and Michigan, to relocate and develop a new skill set across a long period of time to keep up with the changing market environment? People in these jobs are usually supporting a family and cannot afford the time off to develop new skills and leverage themselves more heavily in the new market environment. I think the costs associated with this idea may need more development and a better understanding of the costs involved and who the people are that are directly impacted. Moving jobs overseas is not the cause of job loss but an effect of poor policies that led to these job losses. Trade is important as we have seen in the past from the post world war two era of great expansion in Europe but manipulated trade has dire consequences.
ReplyDeleteNAFTA has been a victim of great scrutiny since it was introduced in 1994. While it is true that our jobs are being outsourced to lesser developed countries, it is with good reason and benefit. With most arrangements, both parties must mutually benefit in some degree. Where the US is ‘losing jobs’, we are gaining elsewhere. NAFTA has allowed the elimination of trade barriers and therefore increasing our exports and GDP. As a global leader, it is important for the US to sacrifice some, to improve the planet as a whole. This means helping to rebuild foreign economies, stabilize currencies, assist in the building of infrastructure, etc. It is true, that in the United States we have the competitive advantage in high skilled labor, and that must be our focus to continue economic growth. Higher education is prominent in the United States, and our jobs are in professional work rather than low-level manufacturing. When we allow other countries to improve their economies, at our expense, we reap the reward of their growing economy demanding more goods and services to be imported from the US. Through expanding NAFTA it is possible that the benefits we have already seen with Mexico and Canada to migrate to other countries and further improve the global economy.
ReplyDeleteI feel like that for the most part, NAFTA is beneficial for the growth of all countries involved, however, I feel like this article is overlooking a major concern within our country. This major concern is that there really are not nearly enough support systems in place to eliminated low skill labor within our country. The article preaches that our competitive advantage is in "knowledge work", and that we must fund more training for jobs under this category. However, there is not enough being done within our country to try and say that additional funding is all we have to do. Training the population to all have high skill jobs is not easy and it is not being done at an efficient rate whatsoever. I truthfully feel like there will always be a designated percentage of low skill labor within a country that we must allocate jobs toward, because not all people have the mental capacity for such jobs.
ReplyDeleteJack Salisbury | ECO-360
ReplyDeleteNAFTA has been one of the most heavily scrutinized trade agreement by politicians and others. This isn’t without good cause, though I find many of the arguments against NAFTA to be outweighed by the benefits.
The most prominent argument against NAFTA is that it has caused outsourcing of US jobs with nothing in return. To this I would hold that these jobs were always going to go where they could be done most cheaply and to offset this loss NAFTA has allowed the US to increase exports by eliminating trade barriers. Additionally, the US benefits substantially by reducing the taxes on goods between the US, Canada, and Mexico. The US is going to be forced to truly deal with the loss of manufacturing and if anything NAFTA will make the nation realize that inevitability just a little bit earlier. Without the US in mind, the rest of the nations party to this agreement have all benefited in ways that I am sure they are satisfied with.
Over 20 years after its introduction there are still discussions on NAFTA's benefits to the U.S. economy, discussions hindering the successful introduction of the FTAA (Free Trade Agreement of the Americas) an agreement involving not only the NAFTA signatories but the rest of South American countries.
ReplyDeleteIn our economy for a company to remain competitive it must outsource its labor to lesser developed (cheaper labor) countries, eliminating therefore job positions in the U.S. One factor that is not usually kept in consideration is how this outsource can benefit the country. By outsourcing U.S. jobs to Mexico, Mexico's economy, infrastructure and general wealth fare is increased creating more buyers for U.S. products. Therefore outsourcing jobs in lesser developed country in the long run supports the U.S. economy.
But what about the people who loose their jobs in the U.S.? Since lower level jobs are taken by lesser developed countries there are more requests in the U.S. for skilled jobs and jobs not subject to exports (such as: administration, research, sales/marketing, accounting, etc..).
Since NAFTA about 20 million new job opportunities have been given to displaced workers, highlighting the importance of these trade agreements to our economy.
While NAFTA has many benefits for each country involved in the agreement, the US needs a way to protect its affected markets against trade shocks, such as the influx of Chinese imports in 2001. NAFTA has been scrutinized for many reasons, but I think this is one major concern that is valid, however it is aside from NAFTA itself. This issue is an internal problem that needs to be resolved by the US alone. NAFTA allows for the economy to grow, but in order to see the proper growth to the markets that have a high demand from exports we will need to shift our labor market from the most competitive to the highest demand. This issue can be found through private national policies enacted by the US government, not through international trade agreements that may ban US companies from buying the supplies needed to run their businesses at the cheapest cost possible in order to gain higher returns to scale.
ReplyDeleteIt's clear that jobs have been created due to NAFTA but also understandable why there is a fear of extending it. There's this fear of unemployment increasing and fewer people buying goods or services but the truth of the matter is labor in the U.S is significantly more costly. Specifically when it comes to low-end labor for manufacturing, it will cost less in a third world country or developing countries like Mexico. Mexico has improved economically due to NAFTA, which creates jobs in the Maquiladora Industry; thus giving Mexicans a chance to save their money and spend it on U.S goods. This then creates more exports for the U.S which a positive aspect of this trade agreement.
ReplyDeleteEven long after the establishment of NAFTA, there are disagreements regarding whether NAFTA is beneficial to the American economy. NAFTA is set in place in order to reduce taxes that countries would have to pay on goods, which are imported between the countries of Canada, the U.S. and Mexico. As outputs are different within the different countries, there are many down sides to how NAFTA impacts each country individually. The upside to NAFTA is that the purchasing price for goods that are imported are priced at a deducted amount compared to the prices that countries not involved with NAFTA have to pay.
ReplyDeleteAs NAFTA has been in place for 20+ years, many feel as though there should be a better way to support all economies. When countries such as the US outsource their jobs to areas that are less developed, they are increasing their profits and the profits of the lesser developed countries. The opposing side to that is the fact that the US workers that would be employed if American companies did not outsource their work, are now without a job.
I largely agree with some of the points mentioned in this blog post, mainly the point about the United States needing to focus its manufacturing on high-tech and luxury goods rather than cheap or simple goods. The primary way to offset any negative consequences of a trade agreement is to focus on what skills are unique to our country. Many of the third world countries where low-skill manufacturing jobs have been outsourced to do not have the capability to produce high tech or luxury goods. This area is where the United States excels. We as a country have been known for our high quality products, and although we do not have labor rates that can compete with third world countries, some of the products we manufacture and export can only be adequately produced at a large scale within the United States. With NAFTA and any other future trade agreements, the United States should focus its bargaining efforts on finding ways to maintain its dominance of high-tech exports, while allowing for employment growth both domestically and in other countries like Mexico, where money can be reinjected into the US economy by renewed spending.
ReplyDeleteThe heart of this article goes to the notion that America has become the leading importer of labor in this rapidly consumption-based economy. The tricky part in this is the inherent need to balance ideals for the American economy and our cultural role in the economy as experts on knowledge based goods that require highly educated and highly skilled people.
ReplyDeleteBy becoming even more innovative and dependent on that consistent output of innovation, Americans become more and more focused on how we affect other countries, especially our own. Given the tradeoffs of producing these knowledge based goods and sourcing our need for mass labor to other countries, it becomes apparent that American companies must become much more socially conscious and the US government much more responsive to this change, to preserve an economy based on the ideals of capitalism and equity.
There are multiple considerations that are factored into many of these corporate decisions, and it becomes increasingly difficult as corporations are now accountable for their actions both domestically and abroad. How Apple for example responded to change is elucidative of the cultural capital America has built their economy upon and the difficulties faced with the negative externalities that are sometimes faced due to the need to remain competitive in globally competitive marketplace.
The North American Free Trade Agreement is an assention marked by Canada, Mexico, and the United States, making a trilateral exchange coalition in North America. The understanding came into power on January 1, 1994. It is one of the world's biggest facilitated commerce zones and establishing the frameworks for solid monetary development and rising flourishing between the three nations. From that point forward, NAFTA has exhibited how facilitated commerce builds riches and aggressiveness, conveying genuine advantages to families, ranchers, specialists, makers, and shoppers.
ReplyDeleteI think that the Negative side of the focus on NAFTA, should be more conscious in their judgment towards NAFTA, as so much good has come from it. Helping impoverished countries, by sending jobs to other countries, has only proven to benefit us in that we have the ability to afford significantly cheaper labor, as discussed in the article, which leaves lead way for growth. I agree with the idea that the displaced workers should then be trained with specialized training programs to be able to do other jobs. Although, realistically if the goal is to save money and make a profit, not all of those displaced workers are going to find work within the same companies or even industry. Maybe the training can be provided to develop skills in low skill employees, which can be applied to a different area of the economy where employees are in fact needed.
ReplyDeleteFurthermore, the investment in other countries, has a second effect; creating jobs and giving decent wages, per their living costs in their respective countries, it creates more spending power, which creates more demand for supply from other countries. In this case, the Unites States. I think that NAFTA is steadily serving it’ purpose, even if not successful in all areas of criticism. This is more the case of the lesser of 2 evils, versus just simply right or wrong.