NAFTA, the North American Free Trade Agreement, has eliminated many tariffs and other trade barriers between the United States, Mexico and Canada. Since then, trade between the three countries has increased severalfold. But not everyone celebrated this development. Let`s look at the pros and cons of NAFTA. An important conclusion of this research is that a 20% increase in tariffs would not cause significant absolute economic losses in the three countries: the U.S. economy, with about $3.4 billion per year, has the most to lose in terms of GDP and about $5 billion in welfare losses. (The concept of well-being is an aggregation of the gains and losses of producers and consumers. Free trade promotes consumer well-being by making products cheaper, resulting in losses for the consumer.) This relocation of the industrial centre of gravity in each country naturally leads to job losses on all sides. As each country shifts its demand for a particular product from domestic purchase to imports, the industry in question loses its activity in the importing country, leaving many people unemployed. Entire industries can weaken and perhaps disappear as a result of free trade agreements such as NAFTA. The impact of the trade agreement on Mexican small farmers, many of whom have been unable to comply with the agreement with large farms, has been criticized against nafta. Some of the world`s family farms have been cut back and farmers have worked in factories where workers have less wages, less flexibility and poorer working conditions, according to critics.
Sixth, the agreement contributed to government spending. Government contracts for each country have been made available to suppliers in the three member countries. This has increased competition and reduced costs. Increased trade barriers would result in the loss of 600,000 U.S. energy jobs, 120,000 jobs in Canada and 260,000 jobs in Mexico. In the gas sector, the United States would lose more than 100,000 jobs, compared to 26,000 in Mexico and 10,000 in Canada. Nearly 460,000 people are believed to be displaced in the steel industry in the United States, 240,000 in Mexico and nearly 75,000 in Canada. In the cement industry, nearly 2 million people are estimated to be displaced in the United States, followed by more than 200,000 in Canada and another 200,000 in Mexico.