CORAL GABLES, FL / ACCESSWIRE / October 3, 2018 / Remember, remember the 8th of December 1993. This was the fateful day that President Bill Clinton signed the North American Free Trade Agreement (NAFTA) Bill into a law. For all you psych majors who searched Amazon.com, Inc. (AMZN) during Intro to US History, allow me to briefly enlighten you…
NAFTA was a trilateral agreement between the United States, Canada, and Mexico, which, upon enactment, would allow all importing and exporting of goods between the three nations to be free. Typically, when a company imports or exports a product to another country, they pay a tax, or "tariff" on that product. Enter NAFTA stage right, no tariff.
The logic behind the passing of NAFTA, at the time, seemed clear. Free trade makes it cheaper and easier for companies in one country to sell their product in another country which, in turn, benefits all countries involved. NAFTA, like a 3-year-old chess prodigy, was destined for greatness, but alas, the agreement was far from perfect.
With the financial burden of tariffs removed from the manufacturing and import/export process, companies were able to catch their breath. Prominent economists at the time predicted that NAFTA would create bountiful trade surpluses with Mexico and thousands of job opportunities would be created, however this was not the case. On the contrary, NAFTA led to U.S. trade deficits, not trade surpluses. This deficit continued through the decade following NAFTA's enactment, taking a snack break in 2007, when the U.S. economy collapsed into the recession and demand for imports dropped off.
In addition to trade deficits, manufacturers recognize that cheap labor could be found in Mexico, rather than the U.S., and nearly 750,000 U.S. jobs are lost, mostly from the automotive companies such as Honda Motor Co., Ltd. (HMC) and Ford Motor Company (NYSE:F), textile, and tech industries. Subsequently, the massive job migration suppressed wages. Companies used the Mexican labor shift as a threat to deter their employees from unionizing.
So, you get the picture, NAFTA was severely flawed. Like my bedroom in my pubescent years, the agreement left the U.S. with "schmutz" everywhere.
1.21 gigawatts and 88mph later, we find ourselves 25 years in the future.
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