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There have been a lot of arguments that support and oppose the proficiency of free trade agreements (FTAs) such as the North American Free Trade Agreement (NAFTA) (Cooper, 425). Just like many trading regimes, the NAFTA was crafted to entrench global trade policies that approve intercontinental institutions over anything else. To achieve trading objectives, NAFTA hides behind the smokescreen of democracy, national independence as well as the public good. This paper argues that free trade agreements such as NAFTA do not provide an effective mechanism for defending worker rights in a global economy.
Although it would complex to imagine the NAFTA effect, it has been the basis of serious negative outcomes for many workers in a global economy. The underlying rationale of the negative effects stems from the fact the U.S. and Mexico have low-wage economic approaches that have not only curtailed both nations’ output but have also caused a ripple effect of wages in other countries to devolve toward the Mexican level (Cooper, 427). Certainly, NAFTA is a natural appendage of a low-wage approach that leads to lower and skewed wages but also deters the growth throughput and income levels.
Those that support NAFTA draw their motivation from the theory of competitive advantage, which proposes that in competitive markets, trade leads to ‘plus sum’ or mutually beneficial outcomes. That concentrating on the core activities generated higher returns. In this respect, the U.S. for instance may lose low wage jobs but gain when it comes to the highly paid jobs that Mexicans cannot undertake. Moreover, this school of thought stems from the fact that because of low productivity in Mexico, wages tend to get much lower in comparison to U.S. where productivity is comparatively high. In short, when production is exponential in Mexico, wages tend to skyrocket, an aspect that increases the buying power of U.S. manufactured goods and services.
On the other hand, those opposed to NAFTA are doubtful of these opinions; they hold the view that accelerated trade and investment in Mexico can be disastrous not just to the environment but may result in the misuse of workers, lower wages and enormous job losses in the U.S. and other developed economies. Contrary to what supporters of NAFTA suggest in terms of improving conditions of workers, history demonstrates that dwindling wages will almost certainly lead to the intensification of workers’ rights amidst increased trade (Robinson, 210).
While the discussion surrounding NAFTA revolves around its effect on jobs, freeing up trade and investment has a negative impact wages, incomes, and tenure. In reality, most wage review projects losses for unskilled U.S. workers and gains for those with expertise. The most candid respond would be that no one understands NAFTA’s net effect. Conditions in developed economies may be proficiently exceptional in a manner that is complex to predict. In this regard, it makes it hard to detach the effects of NAFTA’s profound economic patterns. Evidently, competitive edge, as opposed to the comparative edge, should form the right framework where multinational establishments transfer technology and production across borders.
Whereas NAFTA supporters boost of employment gains, they often get their incorrect data from statistical findings that are anchored on restrictive assumptions and static econometric methods for what would be termed as dynamic processes. Trading regimes are mainly for advancing multilateral business concessions, which are somewhat challenging. When more members become subscribed to the World Trade Organization (WTO), this simply means that more nations ought to reach an accord in every conciliation. Nonetheless, member countries can agree to eradicate sensitive business hindrances while leaving most susceptible ones for succeeding rounds, which may in retrospect make these rounds somewhat complex.
Although, this is implemented to cushion firms, workers and stakeholders, the EU rigid stance against the agricultural policy, and the opposition by the U.S. to anti-dumping policy framework have impacted the anticipation of the timely assumption of such negotiations. In reality, free trade agreements offer a scaffold that allows free business development to continue, especially in countries where this anomaly is not prohibited (Robinson, 210). In reality, NAFTA is simply a platform for American workforce in the neoliberal international labor market. Again, NAFTA allowed the US organizations to relocate production facilities to other regions, but greatly reduced the bargaining power of American employees, which contributed to the development of middle class since the Second World War. In turn, this resulted in two decades of constant wages and upward redistribution of political power as well as income.
Moreover, NAFTA is not an effective strategy for defending employees’ rights in the international economy by virtue of the fact that it contributed to the loss of more than 700,000 employment opportunities when the US moved its production facility in Mexico. The most affected states were Michigan, California, and Texas. Even though the changes created jobs in service and retail industries along the border from a remarkable increase in trucking activities, the gains are very small compared to the losses. A number of employees affected by NAFTA suffer a long-term loss of income.
Nonetheless, NAFTA reinforced the capacity of American employers to force employees to access lower income, as soon as it becomes a law firm managers started alleging that they were shifting to Mexico if they do not accept low wages. During collective bargaining agreements with particular organizations would begin loading machines to a truck bound for Mexico. These threats were utilized to prevent workers’ unions from advocating for their rights. Companies used NAFTA to blackmail governments into offering them reduced taxes.
Again, NAFTA’s considerable impact on small business industries is immense. For instance, it affected the Mexican small business and agricultural sector while dislocating millions of employees. In fact, NAFTA was the primary cause of a significant increase of undocumented employees in the American job market, a move that adversely affected American wages, particularly lower-income occupations for less skilled workers (Robinson, 212). NAFTA is a guideline of regulations of the developing global economy, where benefits flow to capital while costs to labor (Mander, 24). The American ruling class in collaboration with financial privileged used NAFTA to WTO, World Bank (WB) policies to use cheap labor from China and allowed US multinationals to invest in China.
NAFTA’s policies of free market and socialism dragged Asia into an economic slump of 1997; Mexican peso issue; and the 2008 global economic meltdown. In every scenario, the American government protected corporate investors and the WB, and not the workers. Another interesting scenario is that apart from its main purpose, NAFTA does not have a keen interest when it comes to advancing business activities. Largely, this is because, Mexico, Canada and United States have been doing business for a long time. As such, NAFTA’s main objective is about freeing US organizations from Americans laws while protecting workers’ rights as well as the environment. Furthermore, NAFTA presents a platform for neoliberal initiative including privatizing public service, destroying the autonomy of the trade unions and regulating finance. The NAFTA effect has been notable in terms dwindling workers living standards, especially in North America. Additionally, it resulted in the undercut of wages, which is below their productivity in all the member states. In spite of the reducing wages in US, the gap between Mexican and American workers in manufacturing sector is same (Mander, 29). After modifying living expenses, Mexican employees continue to make roughly 30% of income in US. For that reason, NAFTA is not only a symbol but also a substance of workers in the global economy.
In the end, it becomes evident that free trade agreements such as NAFTA do not represent the aspirations of workers in a free global market economy. Even though the trading regimes represent best policies in terms of economic growth, the motive that underlies the creation of NAFTA remain skeptical and thus fails to serve the rights of workers in a globalized economy. In reality, it works around the theory of expanding the U.S. economy at the expense of trading partners such as Mexico. Ultimately, the fact that NAFTA has not been effective does not mean free trade agreements are not significant, particularly when they resist the temptation to result in many trade diversions.
Cooper, William H. “Free trade agreements: Impact on US trade and implications for US trade policy.” Current Politics and Economics of the United States, Canada and Mexico 16.3 (2014): 425. Big Database of Free Essay Samples for College Students.
Mander, Jerry. The case against the global economy: and for a turn towards localization. Routledge, 2014.
Robinson, Ian. “What the NAFTA Fight Teaches about Trade Policy Politicization and Legitimation.” The Legitimacy of Regional Integration in Europe and the Americas. Palgrave Macmillan UK, 2015. 209-228.