Impact of NAFTA on the US economy - Term Paper Example

economy over a period of time with respect to U.S. trade balance, employments, jobs, and wages. NAFTA and its impact of United States Economy According to Teslik (2009) NAFTA, implemented in January 1994, and signed by Democratic President Bill Clinton, is a trilateral free trade deal between United States, Canada, and Mexico. The primary objective of the agreement is to eliminate several tariffs on products traded among the United States, Mexico, and Canada. Terms of the agreement were aimed to eliminate these tariffs in a gradual manner.

The agreement was not fully implemented before 1 January, 2008. The deal phased out export tariffs in several industries, in particular, agriculture, and reduced taxes on textiles and automobiles. NAFTA implemented intellectual property protection, instituted a dispute regulation system, and established regional labor and environmental safeguard. However there is some criticism and lobbying when it comes to establishing regional labor and environmental safeguards (What is NATA? para. 2). NAFTA’s impact on trade Since NAFTA’s implementation, trade relation between United States, Mexico, and Canada have diversified substantially.

However, there is expert’s disagreement on the extent of such expansion which is directly associated with NAFTA (Teslik, 2009, para.6).According to the data from the office of the U.S. Trade Representative (USTR) as Teslik (2009) states: The United States chief negotiator in foreign trade and major booster of NAFTA and other free trade accords, the overall value of intra-North American trade has more than tripled since the agreement inception. The USTR adds that regional business investment in the United States rose 117 percent between 1993 and 2007, as compared to a 45 percent rise in the fourteen years prior period.

Trade with NAFTA partners now accounts for more than 80 percent of Canadian and Mexican trade, and more than a third of U.S. trade. (para.6) Trade deficit and unemployment NAFTA’s impact on U.S. economy has been subjected to the “boom-and-bust” cycle that directed domestic consumption, investment, and speculation in the mid- and late 1990s.Between 1994 and 2000, there was rapid increase in employments in the United States which caused substantial decrease in an overall unemployment rate.

However, unemployment rise in 2001 resulted in the loss of 2.4 million jobs in domestic economy during March 2001 and October 2003(Bureau of Labor Statistics, 2003 as cited in Scott, 2003, p.3).The primary sector of these job losses was manufacturing which underwent a total decline of 2.4 million jobs since early 2001.With the dried job growth in the economy, other underlying issues stemming from U.S. trade deficit became more evident, particularly in manufacturing sector (Scott, 2003, p.3). After three decades of steadily growing global trade deficit, United States experienced rapid increase in these deficit after the implementation of NAFTA in1996.

In 2002,foreign exports constitute 11.6 percent of total U.S. exports to Mexico and Canada(Scott,2003,p.3).Though, U.S. domestic exports to NAFTA partners experienced a dramatic increase(95.2 percent to Mexico, and 41 percent to Canada), increase in imports of 195.3 percent from Mexico and 61.1 percent from Canada exceeds the exports growth overwhelmingly(EPI analysis of BSL and Census Bureau as cited in Scott,2003,p.3).As a result,$30 billion U.S. net export deficit with Mexico and Canada increased by 281 percent