NAFTA and Mexico

The North American Free Trade Agreement between Mexico, the United States, and Canada was signed on January 1, 1994. NAFTA is the world’s largest free trade area. The agreement removed trade and investment barriers between the three nations, allowing for easier trade. Ideally, the trade agreement was signed by Mexico to bring the economy to the forefront of international trade and standing.

There are some major issues, however.

NAFTA encouraged US companies to develop in Mexico, putting  Mexican farmers and businesses at a disadvantage. Many farmers lost their jobs and Maquiladora workers exploited. While NAFTA expanded the labor force of these factories near the border, working conditions, labor rights, and wages were disregarded. Those who lost their jobs often try to find labor work in the US, taking away jobs from US citizens. Mexican truck drivers hauling goods to the US are not granted access to transport goods through the US itself thus cutting wages and diminishing the effectiveness of NAFTA to Mexico.

To put in perspective the impact of NAFTA and the US business in Mexico  is that Walmart is the largest employer in Mexico. The US company, Coca Cola, is a huge business in Mexico. Former President of Mexico, Vicente Fox, was once president of Coca-Cola Mexico. The US is Mexico’s largest trading partner whereas Mexico is the third largest trading partner to the US behind Canada and China.

Mexico also suffered from NAFTA as the US began to turn to other countries like China and India for cheaper labor. Since China joined the World Trade Organization, it led to a dramatic shift in the trade between the US and Mexico. Even factories in Mexico were at a disadvantage as they assembled imported Chinese parts, sent products to the US, by which the US would pay majority fees to China for the parts. Also as a result, US and foreign investment in Mexico has driven down the value of the peso, Mexico’s currency. The economy growth of Mexico has not been growing as it had expected when it signed NAFTA.

An unforeseen effect of the creation of NAFTA would be its impact on the drug wars in Mexico. While the drug wars was largely a creation of the change of government in Mexico and the huge demand for drugs in the US, US policies towards Mexico and its economy also played a role. The replacement of Mexican business with US businesses, forced many people to become unemployed. Some had no other choice but to turn to drug gangs for money to survive. The opening of the borders also allowed easier passage to carry drugs into the US for major profit. On the other side, the US supplies these cartels with guns and weapons through the border.

In 1996, the US and Mexico saw a problem with the increase in drug trafficking and crime and began to train soldiers against the “war on drugs.” These soldiers were called “Los Zetas,” a drug gang we know today as one of the more vicious cartels in Mexico. This is just one of several examples of how the US and NAFTA protect and fund these cartels.

After the terrorist attacks on the US on September 11, 2001, the US increased security on its southern border with Mexico as part of the counter-terrorism agenda of the US. However, tightened security on the border and tougher restrictions to enter the US caused tension with Mexico as it greatly affected economic activity and trade. Connections between increased security and increased violence in Mexico have also been made. Another lasting effect of the terrorists attacks is the immigration reform between the two countries. Presidents George W. Bush and Vicente Fox were very close to coming to an agreement however, talks came to a halt on 9/11 and little progress has since been made.

http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta

http://www.nytimes.com/2009/03/24/business/worldbusiness/24peso.html?pagewanted=all&_r=0

http://www.greenleft.org.au/node/45890

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